Intel to pay AMD $1.25billion

Discussion in 'The Clubhouse Bar' started by shazbooger, Nov 12, 2009.

  1. shazbooger

    shazbooger Guest

    Just reading through the details of the complaint against Intel and there is some pretty mad reading. A $1.25billion payment seems mickeymouse given the profits they have been posting over the years and those profits were posted on the back of poor practice. AMD's share price has jumped, but sure what Intels has done.

    Anyhoo some of the juicy details;
    • Intel paid hundreds of millions – in some cases billions – of dollars in “rebates (bribes).†to OEM manufacturers to incentivise their continued exclusinve use of Intel chips.
    • At the same time, Intel threatened OEMs with retaliation if they persisted in dealing with AMD
    One of the really facinating bits was the power that Intel had over the major PC manufacturers. Intel could subsidise one (Dell) over another (HP) and impact severly on their shareprice as a result.
    • The OEMs, struggling with narrow profit margins and fearing that Intel would retaliate by subsidizing their competitors to undersell them, often conformed to Intel’s demands. For example, in exchange for billions of dollars in rebate payments and other benefits, Dell agreed not to sell any AMD products from 2001 to 2006.
    • HP Agreed (in exchange for threats and money) to limit their AMD sales to 5%.
    • IBM agreed (in exchange for threats and money) to cancel one AMD branded project
    Michael Dell, founder and CEO of Dell, Intel’s largest customer, pointed out in a February 2004 internal email that not even Microsoft could exercise the pricing power which Intel has displayed: “[Intel] profits in the 2nd half of 2001 were $1.397B on revenues of $13.528B. In the 2nd half of 2003 they were $4.885B on revenues of $16.574B. In other words their sales went up 22.5% and their profits went up 350%! Or said another way their revenues went up $3.046B and their profits went up $3.488B!! Not even Microsoft can do that. In other words these guys have massive operating leverage.â€

    Intel’s customers are constantly reminded where their primary loyalty should lie. For example, in March 2006, Intel’s CEO Paul Otellini received a courtesy “heads-up†from an HP executive that HP was sponsoring an advertisement featuring HP’s relationship with AMD and the theme of customer choice. Otellini reacted: “So, … why did you feel compelled to do this? It is certainly insulting to us and I do not see how it helps you…. If we are your key partner, this is nothing but a slap at us … I really don’t want to get in a ******* contest over this … But running an ad touting 10 years with amd [sic] and ‘choice’ is not the behavior of someon who wants to bring our two companies together.â€
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  3. dullonien

    dullonien Guest

    I feel that 1.25bn is nowhere neer enough! Looking back, this was quite obviously the case, especailly in the Pentium 4 v Athlon 64 days. AMD reigned supreme for a number of years in terms of both performance and price. Yet everywhere you looked in mainstream retail stores, Intel was still being sold almost exclusively. Dell is the main example of this.

    Disgusting tactics used, and although this has now been found out, it won't undoo the damage it's already caused. I'd hazard a guess that AMD lost out on billions upon billions of revenue from 2000-2006ish. The small company had produced something Intel just couldn't directly compete against, so bribed their way through those difficult times. Unfortunately, were now in a situation where Intel can throw so much money into development, that I fear AMD can never quite compete on level terms. They're always a step behind Intel at the moment, and that's bad for the consumer. We can see that with the price of Core i5 & i7 processors. They simply have no competition, so remain out of reach of the majority.

    Luckily AMD can now claw some money back through their graphics department, where they have a very healthy rivalry against against nVidia which is both driving the technology forwards and keeping prices sensible. Pitty the same can't be said for the CPU market.
  4. bates

    bates Guest

    I call shenanigans ☺

    This reminds me a bit of the fraud case Siemens and Samsung went thru in 2008
  5. The one AMD I've had was a nightmare.
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