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Chip maker Intel Corp (NASDAQ: INTC) had some embarrassing emails published today by the European Union that show the company may have been strong arming its customers into buying its products over competing chip makers.The emails were part of the evidence that led to a record EU fine set against the company last May of $1.45 billion, when it was determined that the company had used strong-arm sales tactics in its competition with Advanced Micro Designs (NYSE: AMD).
Intel is challenging the EU's ruling, insisting that the charges against it are not true, and is appealing the decision in EU courts.
While EU spokesman Jonathan Todd states that the decision was clear cut, Intel spokesman Robert Manetta states that his company has a much different opinion. Manetta states that regulators overlooked, or misinterpreted testimony from senior company executives that would have cleared the company of all charges against it.
Manetta insists that the EU decision was based on heavily on speculation derived from emails between low level employees that never were actually a part of any negotiations.
The EU points to evidence in emails between Dell (NASDAQ: DELL) executives in which they were warning each other that a decision to purchase more AMD chips would result in a significant back-lash to all lines of its business.
Dell was apparently not the only company that felt the pressure by Intel to use its chips, Hewlett Packard also felt bullied by Intel to use its chips in its computers.
Hewlett Packard (NYSE: HPQ) company emails from 2004 stated that the company was only to sell AMD based machines to small and medium companies directly, specifically warning against selling AMD based machines via distributors.
HPQ emails show that the company was so afraid of selling non-Intel based machines that it felt as if it got caught selling AMD commercial chips in any country that it would get caught, and would ultimately lose valuable money coming in from Intel.
There is no doubt that the computer industry is big business, and companies are always going to feel pressure to use one company's products over another, but did Intel cross the line in bullying its buyers? Without knowing all the facts it is impossible to know if Intel did break the law or not, but what is obvious is that its buyers definitely felt as though it would be corporate suicide to go against Intel.
What are your impressions on this whole situation?
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Reader Comments (Page 1 of 1)
9-22-2009 @ 8:47AM
FD Texas said...
There is nothing new about this and "Yes" I agree with the EUs decision. Intel can whine all they want but the facts of this case came out 2-3 years back when Dell Computer was caught by it's shareholders in a suit brought against it for the 1 Billion (yes with a 'B') dollars that Intel was giving it over and beyond the regular Intel Partners advertising funds.
A sample article is here:
http://news.cnet.com/Shareholders-file-expanded-Dell-lawsuit%2C-attack-Intel-rebates/2100-1014_3-6155898.html
The real fact comes out in their discovery:
"Intel secretly paid very large end-of-quarter cash rebates to PC (manufacturers), like Dell, that purchased all or virtually all of their microprocessor/chip requirements from Intel," the amended lawsuit states. "These rebates, which were, in fact, kickbacks, were not traditional volume-based discounts and the monies paid were separate and apart from and in addition to certain publicly known, co-marketing funds which Intel made available to certain of its customers to assist in product advertising."
"Dell allegedly received roughly $1 billion a year from the rebates, which accounted for approximately 10 percent of its gross profits, the lawsuit claims."
Just call it what it is...Bribery, Extortion, Racketeering.
What I want to know is why they get off with little to no punitive action by the SEC, FTC, and quite frankly the U.S. Judicial system, but then I guess if they can throw around a billion dollars to one vendor then buying a few Legislators is probably cheap by comparison.