The lawsuit filed by the Federal Trade Commission against Intel is “overblown” and won’t lead to much of anything beyond perhaps a settlement, argues one market analyst following the case.
The FTC’s case is multi-faceted, taking on Intel for alleged anticompetitive behavior, but also taking it to task for its x86 licensing terms and practices. The FTC’s suit came after Intel had fought and lost similar allegations in Japan, Korea and Europe, the latter hitting Intel with a $1.45 billion fine (Intel is appealing).
The FTC has already stated it has “no goal of breaking up Intel,” but the FTC does want Intel to simplify the licensing terms for its x86 instruction set. Broadpoint AmTech analyst Doug Freedman said there is little chance the courts will force Intel (NASDAQ: INTC) to license its x86 technology. At that point, Freeman said in a research note he believes the FTC will be forced to settle for something less.
“We believe attempts were made to resolve the issue non-publicly,” Freedman wrote, “but Intel balked at the FTC’s requirements to license its buses, as well as x86 processors, to [Nvidia].”
Intel has said just that; it tried to work things out quietly. “This case could have, and should have, been settled. Settlement talks had progressed very far but stalled when the FTC insisted on unprecedented remedies – including the restrictions on lawful price competition and enforcement of intellectual property rights set forth in the complaint – that would make it impossible for Intel to conduct business,” said Doug Melamed, Intel senior vice president and general counsel in a statement.
“The FTC’s rush to file this case will cost taxpayers tens of millions of dollars to litigate issues that the FTC has not fully investigated. It is the normal practice of antitrust enforcement agencies to investigate the facts before filing suit. The Commission did not do that in this case,” said Melamed.
Freedman added “We believe Intel has a much stronger case than people recognize, and that a favorable ruling (only after legal expenses) will surface before year-end 2010 for [Intel].”
When the FTC filed its suit earlier this month, industry reaction was mixed; AMD (NYSE: AMD), which had just settled a long-running feud with Intel to the tune of $1.25 billion, was very muted in its response.
By contrast, nVidia (NASDAQ: NVDA) was downright gleeful. It has a very public legal row with Intel over whether or not it can make chipsets for the Nehalem generation of motherboards and for now, has suspended development of such chipsets pending a legal ruling.
Some bloggers and pundits have thought that forcing Intel to license its x86 bus technology would allow nVidia to enter the CPU business, but nVidia has said repeatedly it has no interest in such a market.
Broadpoint AmTech also believes that even if Intel is forced to license the x86 bus technology to nVidia, it won’t benefit nVidia very much. The chipset business is rapidly evaporating, Freedman noted, as OEMs move toward either CPUs with an on-board graphics processor on the low-end and mid-range, like Intel’s forthcoming Westmere chips and AMD’s Fusion, or they use a discrete processor for the high end.
The result is nVidia, and for that matter AMD and Intel, losing their chipset market. Freedman is not the first analyst to point this out, either. Other industry watchers have said that nVidia is fighting for a business that is drying up. Freedman expects nVidia will compensate for the lost chipset business with GPU sales and increased mobile chip sales, such as Tegra.