Intel’s Monopoly Yielded $60B: Study

AMD will claim in its antitrust lawsuit that Intel has illegally pocketed more than $60 billion in monopoly profits between 1996 and 2006. The claim comes from a study conducted by a financial consultant and expert in antitrust cases. And it was funded by AMD.

Michael A. Williams, director of the ERS Group, also found that consumers and computer manufacturers could gain over $80 billion over the next decade if the microprocessor market were open to competition and that consumers would save at least $61 billion over that period. He also concluded that computer manufacturers could save another $20 billion.

The study’s calculations are based on the European Commission’s allegations of illegal discounting, below-cost pricing and payments to computer makers to not use AMD  products. It also relies on a Japanese antitrust case, which Intel settled in 2005.

“In light of the recent European Commission decision and prior Japan Fair Trade Commission actions, this analysis asks not whether Intel has engaged in anticompetitive conduct, but how much Intel has gained from the alleged conduct,” said Williams in a statement.

Given the ERS Group was retained by AMD’s outside counsel, O’Melveny & Myers LLP, Intel’s response was blunt and to the point.

“The only thing one can conclude from this study is that if you pay someone enough money you can get them to say almost anything,” said Chuck Mulloy, an Intel  spokesman.

“This study is wildly speculative and is based on flawed assumptions concerning Intel’s financials and the market. It also speculates concerning a confidential Statement of Objections, which AMD has not seen,” he added.

Semiconductor analyst Mike Feibus of TechKnowledge Strategies was a bit skeptical of the findings, as well. “It’s clearly a PR-induced press release. I don’t question anything about that. On the other hand, it’s clear the EU thinks there’s something to examine,” he told

The European Commission (EC) preliminarily charged Intel with antitrust behavior late last month. According to the EC, Intel conditioned rebates to original equipment manufacturers (OEM) on the OEM’s buying most of their chips from Intel and, in a number of instances, made direct payments to OEMs to either delay or cancel the launch of a new product line featuring AMD chips.

Williams may be a hired gun of AMD but he’s no rookie in the area of antitrust. He served as an economist in the antitrust division of the U.S. Department of Justice and served as a consultant to the DOJ and Federal Trade Commission in such matters as the proposed mergers of Exxon and Mobil, BP Amoco and ARCO, and in litigated matters such as FTC v. Rambus and U.S. et al. v. Oracle.

Some of his methodologies do seem like odd comparisons. He compared Intel to companies like Pfizer, Wyeth, ExxonMobil, and Target, which operate very different business models. He noted Intel reported losses in its non-microprocessor businesses when each unit faced a totally different competitive landscape, and he took into account negative average economic returns earned by other semiconductor companies.

Regardless of the lawsuit, Feibus thinks AMD has already won. “I think behind the scenes, one thing people do say is just the existence of this lawsuit has level the playing field,” he said. “It’s forcing Intel to be on its best behavior and document things. Whether there was any bullying going on in the past, no one is talking about it now.”

Feibus points to the fact that AMD has gained market share in recent years and gained its last two holdout OEMs, Dell and Toshiba. “I think it’s more like the Nvidia/ATI [now AMD] kind of situation now. The graphics chip makers both beat each other up on just price and performance, and that’s the way it should be,” he said.

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