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Intel issues response to AMD antitrust complaint

Intel Corp. filed its formal response to an antitrust complaint lodged by Advanced Micro Devices Inc. (AMD), denying that it violated any laws and accusing AMD of trying to shield itself from competition, Intel said in a statement released Thursday.

In late June, AMD charged that Intel was illegally using its position as a dominant supplier in the processor industry to exclude AMD from PCs and servers sold by companies like Dell Inc., Hewlett-Packard Co., and Gateway Inc. Intel executives had previously denied the charges of wrong-doing, but filed its formal response to AMD’s complaint with the U.S. District Court for the District of Delaware on Thursday.

“Innovation, investment, customer focus, and great products have led to Intel’s success over the years,” said Bruce Sewell, Intel’s general counsel, in a prepared statement distributed Thursday. “Under the cover of competition law, AMD seeks to shield itself from competition. AMD seeks to impede Intel’s ability to lower prices and thereby to allow AMD to charge higher prices,” the statement goes on to say.

In its 63-page answer, Intel laid out its legal strategy for a case that is expected to drag on for months, or even years. The world’s largest chipmaker intends to argue that AMD’s business decisions, not Intel’s conduct, are responsible for its market share in the processor industry. According to data from Mercury Research Inc., Intel ships a little over 80 percent of all desktop, notebook and server processors with the x86 instruction set, while AMD ships around 17 percent of those chips.

AMD’s complaint stated that Intel selectively distributes rebates to PC and server manufacturers who agree to cap their usage of AMD processors at a certain level or exclude AMD entirely from their products. The Sunnyvale, California, company believes it can produce documents to back up its allegations, and has begun to subpoena numerous PC industry companies for documents related to processor purchasing.

Intel admitted that it distributes so-called “market development funds” to PC manufacturers to help market their products, and that it does offer discounts to customers such as Dell in order to stimulate demand, but denied that it made payments to PC vendors based on a certain level of purchasing activity.

“The decision whether to purchase from AMD, and in what quantity, is made by these customers without coercion or anticompetitive conditions,” Intel said in its answer.

Intel specifically denied that it made payments to Gateway, Sony Corp., NEC Corp., and a number of other PC vendors and also denied allegations by AMD that Intel executives threatened PC companies, distributors, and retailers with retribution for using AMD chips.

“AMD’s colorful language and fanciful claims cannot obscure AMD’s goal of shielding AMD from price competition,” Intel said in the answer.

Intel’s lawyers wove a common thread through many of the denials that AMD’s market share can be attributed to its manufacturing capacity. Intel operates over a dozen separate chip fabrication plants (known as fabs), while AMD has just one processor fab in Germany and a flash memory fab in Austin, Texas. AMD is scheduled to begin production at a new facility in Germany next year.

As might be expected, Intel also denied that AMD’s chips have a technology advantage over Intel’s. It pointed to the Pentium M processor and the 333 systems on the Top 500 list of supercomputers that use Intel chips.

However, chip analysts and third-party reviews have consistently given higher grades to AMD’s Athlon 64 and Opteron chips, which use an integrated memory controller to boost performance in desktops and servers and were the first processors to add 64-bit instructions to the 32-bit x86 instruction set. Intel’s Pentium M is generally seen as having an edge in the fast-growing notebook market over AMD’s new Turion processor.

According to Intel, PC companies have chosen Intel’s chips because of the company’s manufacturing leadership, price considerations, and strong future road map, it said in its answer. Intel announced last week that it plans to build future processors using a new design that emphasizes high performance at low levels of power consumption.

“The filing that was made today was the next step in the process,” said Tom Beermann, an Intel spokesman. The next step in the case will be a hearing to settle on the venue for the case, currently slated for Delaware, after which the discovery process will begin. Intel is based in Santa Clara, California.

AMD has said it wants to reach a trial by the end of next year.

“Intel’s response is not surprising considering what they are trying to hide, but the facts of illegal monopoly abuse are clear and undeniable,” said Thomas McCoy, AMD executive vice president, legal affairs and chief administrative officer, in a statement distributed by the company Thursday. “We look forward to presenting our evidence in front of the entire industry and the entire world. Let’s put the truth on the table and let the court decide.”

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