Intel answers AMD in court

Intel answered Advanced Micro Devices' latest antitrust complaint on Thursday, denying AMD's allegations and offering what it said are factual tidbits that will likely keep Silicon Valley buzzing for days.

In a 63-page document filed in U.S. District Court in Delaware, Intel emphatically denied having a monopoly on PC microprocessors and locking out AMD from deals with computer manufacturers through threats and targeted rebates. In its lawsuit filed in June, AMD claimed that Intel imposed scare tactics and coercion on 38 companies, including large-scale computer makers, small system builders, wholesale distributors and retailers.

But Santa Clara, Calif.-based Intel asserted that it has achieved its larger market share through sustained investments in research and manufacturing. Intel's discounts and marketing deals with PC makers, the company added, help consumers by keeping PC prices low.

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What's new:
In a legal response to AMD's antitrust charges, Intel emphatically denies having a monopoly on PC microprocessors.

Bottom line:
Intel went a little beyond the minimum in its legal reply and tossed in allegations it hopes will hurt AMD's credibility. If history and the current allegations are any indication, it will be an ugly fight.

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Intel said it also benefitted from AMD's strategic errors. AMD didn't invest as heavily as it should have in manufacturing capacity in the early part of the decade, whereas Intel did, the company said, and is reaping the benefits. AMD didn't pursue notebooks as aggressively as Intel, and thus missed out on the current surge in sales, Intel alleged.

In a jab at AMD CEO Hector Ruiz, Intel noted that Ruiz recently said his company "is in the strongest position that we've ever been in." AMD's complaint, however, stated that AMD is at risk of becoming "nonviable" because of Intel's conduct.

In its answer, Intel refuted that claim. "AMD seeks to impede Intel's ability to lower prices and thereby allow AMD to charge higher prices," the company said. "AMD's colorful language and fanciful claims cannot obscure AMD's goal of shielding AMD from price competition."

Tom McCoy, executive vice president of legal affairs at AMD, scoffed. "Intel uses its abusive practices to lock in artificially high prices. They don't want to talk about the fact that they have a gun to the head of the industry," he said. "Our potential customers are not free to choose on the basis of price and performance. That is why we are not far more successful."

But the parts of the document that will likely draw the most attention are nuggets that shed light on how the PC business operates and that seem calculated to undermine AMD's credibility. The he said/she said nature of the lawsuit, as well as questions about which side can provide evidence to prove their points, have become pivotal to the case.

Intel and AMD's long history of competing for microprocessor dominance has landed them in court before.

In its answer to the latest antitrust allegations, Intel referenced a 1992 ruling in which an arbitrator awarded AMD $10 million.

Intel admitted that it paid the $10 million, but added that the amount paid was less than 1 percent of the original claim. The answer also stated that the arbitrator in that case wrote that AMD was "victimized by its own inability to adjust what it knew to be in reality."

"AMD assumes a somewhat romanticized factual situation which, like Camelot, never existed," the arbitrator wrote, according to Intel's response to the most recent complaint.

The transcript from the 1992 arbitration remains under seal, an Intel spokesman said. Intel quoted from it because AMD has made the 1992 arbitration an issue in the case.

Later, in a 1995 legal settlement between the two companies, Intel noted that AMD left out the terms of the settlement in its complaint. In the settlement, AMD paid $58 million to Intel in licensing fees. Overall, Intel netted $19 million from that settlement, an Intel spokesman said.

In another section of the answer, Intel said Sony dropped AMD processors from its PC lineup in 2003 in an effort to reduce the number of component suppliers and not, as the complaint asserted, in a contract that demanded Sony exclusively use Intel chips.

McCoy said it was Intel's choice to ?walk down memory lane? and that he wouldn?t follow.

In the complaint, AMD asserted that Intel intimidated MSI and Atipa and Fujitsu-Siemens from participating in the launch of AMD's Opteron Chip on April 22, 2003. Intel said in its answer that Atipa and MSI put out press releases outlining their support for Opteron on or around the same day and that Fujitsu-Siemens sells Opteron servers.

The complaint asserted that then-Intel CEO Craig Barrett said Acer would suffer "severe consequences" if the company participated in the launch of AMD's Athlon 64 chip, according to Acer founder Stan Shih. The answer said that Shih has refuted the assertions, stating that the conversation with Barrett only dealt with industry trends. The answer also noted that Acer continues to use AMD chips.

In its complaint, AMD asserted that Intel prevented it from joining the Advanced DRAM Technology group, a group working on a new memory standard, in a meaningful way. Intel said the organization invited AMD to join as a "co-developer," the highest level of membership. Intel further added that the ADT fell apart without producing a standard.

These sorts of complex claims and counterclaims often arise in legal complaints and responses. Many dissolve after the discovery process, which has not yet started in this case.

Perhaps the biggest omission in the answer was that Intel did not directly refute AMD's allegations that got the most attention when the complaint was filed--that some PC executives said Intel "had a gun to (their) head" and that Intel threatened to pound them into "guacamole." Instead, Intel said it couldn't determine the factual basis of those allegations at the time and denied them on that basis.

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