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FTC Smacks Intel Hard With Featherduster


Intel Settles Anti-Trust Suit With FTC.

In December 2009, the Federal Trade Commission (FTC) sued Intel for anti-trust violations. At the time, I wrote “FTC’s contemplated relief for Intel’s alleged conduct shows the government mandating the most sweeping changes ever proposed as to how the Intel-compatible computer market works. No surprise that Intel would be hurt badly by these mandates and have to adjust. But these industry changes would also dramatically change the computer ecosystem, and the consequences would not be good for PC consumers.”

Today, Intel and the FTC settled their suit. While the FTC can claim it achieved sanctions against Intel in each of the key areas of dispute, my reading of the settlement agreement is that the remedies will be mild indeed for Intel. Sorta like getting hit by Monty Python with a featherduster. Result: no blood, no foul.

Here’s what the settlement calls for and my take:

  1. Intel has to provide a standard PCI bus interface (or PCI Express. The settlement language is ambiguous) in chips that allows graphics card makers (i.e., ATI and nVidia) to add graphics value to a PC or laptop. That’s not a heavy burden for Intel, which expects its increasing prowess in on-chip graphics will be good enough for the majority of business and home consumers.
  2. Intel competitors may disclose to their silicon foundry partners details about technology licensed from Intel in order to get the chips made and without fear of being sued by Intel, but while keeping Intel’s technology otherwise confidential. Since we now live in a soft-fab world today, the practical impact on Intel is nil.
  3. Via Technologies, a Taiwan maker of low-end X86 chips, is guaranteed the right to continue production.
  4. Intel can’t require exclusive deals, condition marketing funds on unit thresholds, or defines market segment or geographic benefits. This is the clause with the most teeth. However, my analysis is that the FTC is now proscribing conduct that has seldom or never been a common practice in the past five years.  Essentially, I view the settlement as cleaning up Intel’s practices in the early years of the decade, practices that had already been slammed by the EU and Japan, among other countries. While I do not have a crystal ball into Intel’s sales contracts, my sources in the industry indicate Intel will have little to change going forward (but with a fair amount of sales force retraining).
  5. Intel can’t design slow performance of competitor’s products into its own products.
  6. Intel must provide interface product road maps annually for five years.
  7. Intel must prominently tell its compiler customers that Intel compilers may not optimize code generated for non-Intel products. Really.  No kidding. I’d like to talk to the IT customer or developer who expects Intel to fully understand the micro-architecture of AMD’s chips in order to have Intel compilers generate optimized code for AMD chips. If you are a hoodwinked compiler buyer, apply for a piece of a $10 million compiler reimbursement fund.
  8. When Intel compares its microprocessor performance to a competitor’s, it must disclose that “software and workloads used in performance tests may have been optimized only for Intel microprocessors”. That’s because only a minority software products such as Microsoft Windows are optimized for both Intel and AMD microprocessors, typically by having one installer and two different versions.
  9. Intel has to pay for up to $2 million in technical consultants chosen by the FTC to monitor the settlement.

Recall that Intel was socked with 1.45 billion euros in fines by the European Union last year (and is appealing). The FTC settlement has noise levels of monetary costs to Intel, and I don’t foresee dramatic changes in current business practices. It looks to this analyst like Intel had a good trial case prepared, and the FTC blinked, accepting a settlement that will have minimal impact on Intel’s business going forward.

Given the changed nature of the industry and what gets done in which chip compared to the early-decade, I don’t see any redirection in industry trajectory or any practical changes at consumer point of sale either. The settlement news and minimal impact of the settlement will slip beneath the news-cycle waves in days. What I feared last December, a mis-guided jihad by the FTC that could mess up the industry and hurt consumers, is not going to happen.  And that is good news for the technology industry.

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