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AMD Hits Intel With Antitrust Suit

UPDATED: AMD has filed an antitrust complaint against Intel in U.S. federal district court, accusing the company of unlawfully maintaining a monopoly in the x86 microprocessor market by shunting customers away from AMD.

AMD is claiming Intel paid companies like Dell and Toshiba not to do business with AMD, and paid Sony millions for exclusivity. AMD claims its share of Sony's business went from 23 percent in 2002 to 8 percent in 2003, to zero percent today.

In its case filing, AMD also alleged that Intel forced NEC, Acer and Fujitsu into partial exclusivity agreements by offering rebates to those who agreed to limit or forego AMD purchases. The chipmaker also said Intel paid NEC several million dollars for caps on NEC's purchases from AMD.

The Sunnyvale, Calif., company is seeking unspecified treble damages under the Clayton Act for losses it claims it has sustained, said Charles Diamond, partner with O'Melveny & Myers LLP and lead outside legal counsel for AMD, on a conference call.

AMD Chairman, President and CEO Hector Ruiz said on the call that AMD is using the respect it has garnered for its technology to remedy "the imbalance that has gone on in the microprocessor sector for far too long."

"History shows that monopolies limit choice, stifle innovation, and harm consumers," Ruiz said. "Monopolies do what is good for them not their customers. Intel is a monopoly, pure and simple. It is time the industry broke free from their chains."

Intel did not respond to a request for comment on the suit.

The most popular type of chip architecture for so-called volume servers is the x86 microprocessors running the Microsoft Windows, Solaris and Linux families of operating systems. Intel's share of this market currently counts for about 80 percent of worldwide sales by unit volume and 90 percent by revenue, AMD said in a statement.

AMD has traditionally run No. 2 to top chipmaker Intel. The company has been praised for its superior 64-bit architecture, but that won't necessarily help it win back enough market share from Intel to level the playing field.

Now AMD is pinning its victory hopes to a recent ruling from the Fair Trade Commission of Japan (JFTC), which found that Intel abused its monopoly power to exclude fair and open competition.

The JFTC decided that Intel deliberately engaged in illegal business practices to stop AMD's increasing market share by imposing limitations on Japanese PC manufacturers. Intel did not contest these charges.

Moreover, the European Commission is pursuing an investigation against Intel for similar possible antitrust violations and is cooperating with the Japanese authorities.

The JFTC's finding and Intel's lack of a challenge to that finding was a green light for AMD to press onward with the suit, said Thomas McCoy, AMD executive vice president, legal affairs and chief administrative officer. He said Intel harms its own customers to crush any competition, engaging in seven forms of illegality on three continents.

"It all adds up to one, massive global antitrust violation," McCoy said. "Intel is using illegal sales tactics and illegal pricing mechanisms to avoid a fair fight that might risk its monopoly margins."

McCoy pointed to the fact that though AMD is an acknowledged technology leader, Dell, Sony and Toshiba don't buy one single AMD chip. Intel's exclusive deals with Dell, Sony and Toshiba bar AMD from one-third of the world notebook market and half of the U.S. sales, he said.

Intel has stunted AMD's revenue growth, he said, noting that AMD's desktop business is no greater now than it was during the high-tech spending doldrums of 2002.

Redmonk analyst James Governor said that while antitrust regulation tends to be weak around the globe, AMD's allegations could be an interesting instrument to slow down Intel.

"If you're AMD and you're riding along on a bicycle and Intel is riding along on a motorbike and you've got a stick or a crowbar, you might as well try and throw it into the wheels," Governor said. "Certainly AMD is keen to ensure that it is negotiating on a level playing field."

On the flipside, Governor said: "Intel will not appreciate antitrust scrutiny. Any business is going to find that a real drag. Look at the levels of bureaucracy Microsoft has had to put in place in order to comply with some of its sanctions."

AMD filed its 48-page suit in a federal court in Delaware. Despite the fact that both AMD and Intel hail from Santa Clara County, Calif., Delaware has been a common venue for lawsuits for companies looking for the efficient resolution of high-tech issues, particularly with respect to antitrust cases, said Diamond.

Going forward, Diamond said AMD's next step is to find significant voluntary compliance and help from partners to build its case against Intel. Failing that, Diamond said AMD will use the court to get the evidence it needs.

"Even those who fear Intel's retaliation, we expect to crack open their files through the subpoena process," Diamond said. "We started that process this morning. We have asked 40 major industry majors around the world to undertake steps necessary to preserve their e-mail, correspondence and everything else that we'll need."

He also said he expects Intel to drag its feet to protract the proceedings as long as it can: AMD's goal is to get the case to trial before the end of 2006.

The full complaint may be viewed here.