Rumors indicating that Intel could receive a massive penalty had finally come true with European Commission slapping a record 1.45 billion dollar fine. Commissioner Neelie Kroes was especially harsh in her comments, and we had ideas what the tone of Intel’s answer will be.
Paul Otellini, Intel’s President and CEO had no other choice but to strongly reply to the EC statements: "Intel takes strong exception to this decision. We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace – characterized by constant innovation, improved product performance and lower prices. There has been absolutely zero harm to consumers. Intel will appeal."
"We do not believe our practices violated European law. The natural result of a competitive market with only two major suppliers is that when one company wins sales, the other does not. The Directorate General for Competition of the Commission ignored or refused to obtain significant evidence that contradicts the assertions in this decision. We believe this evidence shows that when companies perform well the market rewards them, when they don’t perform the market acts accordingly."
Reading these two quotes got me thinking. You can read it from two views – one is "Intel is right", second one is "Intel has the right to pay system integrators if they don’t use competitors products". Claiming that EC’s The Directorate General for Competition "ignored or refused to take evidence" when the past couple of years were flooded with received news about raids on Intel’s offices around the world and especially multiple raids on the EMEA-based offices [UK, Germany, France, Denmark etc. etc] is a contradictory statement by itself. Evidence provided to the European Commission was the direct result of these raids and seized documentation, not invented by a guy sitting in a corner of a room somewhere in Bruxelles. The statement continued with following:
"Intel never sells products below cost. We have however, consistently invested in innovation, in manufacturing and in developing leadership technology. The result is that we can discount our products to compete in a highly competitive marketplace, passing along to consumers everywhere the efficiencies of being the world’s leading volume manufacturer of microprocessors."
In our previous stories, we alluded that this statement is just plain wrong. Intel did not offer discounts if Intel CPUs were used. We are aware of cases where Intel offered a free Intel motherboard if Intel CPU was used – and the values were ranging from $47-59, and this caused quite a fuss from top tier motherboard manufacturers. We heard about this "bundling" from ASUS, MSI and GigaByte – so sorry Intel, we don’t buy that.
Nobody disputes that Intel can offer a discount on a CPU. But to offer a free motherboard is something completely different. The first sentence is correct – Intel does not sell products below cost. It gives a latter product away to sell the former product at a full price.
Intel’s reaction is a paper "Competition in the Innovation Economy".
Our take is that the Intel of today isn’t the same Intel of yesterday. After Otellini took over the reigns, a lot of things changed – Intel was a company that used to sue system integrators who would offer overclcocked computers, yet today Intel is even selling overclocking processors for notebooks and desktops. Core i7 and Xeon processors now even come with an overclocking mode called "Turbo Mode", thus – it is not the same beast than the company we knew during yesteryears.
Intel also used to sue left and right for companies and even private persons that would use the name "Intel" somewhere, even though the term "intel" is short for intelligence and is widely used by security agencies world-wide. Also note that Intel’s name didn’t belong to Intel, but rather to the hotel chain somewhere in mid-west USA, as I wrote in this story.
But not admitting that the company "flexed the law" on more than one occassion will come back to haunt the company, because lawyers will slow down the progress. Intel dominates the CPU market, and we simply do not understand why the company did such actions – AMD could not supply more than 25% of world-wide CPU shipments even when given a chance to do so… and now, Intel has to dole out 1.45 billion in cash that gave them an additional 5% of CPU market. In our view – a pretty stupid judgement call made by previous management.