The latest litigation has Intel Inside.

The State of New York is going after Intel (NASDAQ: INTC) over antitrust allegations. State Attorney General Andrew Cuomo is accusing the largest chip manufacturer in the world that it is trying to secure a global monopoly for microprocessors.

For several years, Cuomo said that Intel has pushed the likes of Dell (NYSE: DELL) and Hewlett-Packard (NYSE: HPQ) to agree to the exclusive use of Intel's gear in exchange for billions of dollars in payments. The hefty cash outlays have given what Cuomo called a "stranglehold" on the market.

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).

On Thursday morning, European Union regulators announced the launch of an antitrust probe into U.S. software maker Oracle's (NASDAQ: ORCL) takeover of Sun Microsystems. The regulatory group believes that the deal could lead to higher prices and limited choice for database software. Approval from this group is considered the main stumbling block for the deal, which has cleared the Department of Justice in the United States.

The final decision has a deadline of 90 days, or January 19, 2009. By this date, the European Commission can decide to clear or to block the deal. More often than not, the Commission will force companies to make changes that would eliminate any concerns over antitrust regulations.

Christine A. Varney heads up antitrust at the Department of Justice, and she's going hunting. She is the point person for a group consisting of the presidential administration and some Congressional Democrats that is looking to put the breaks on large companies in several industries.

Already, airlines have run into roadblocks when requesting relief from antitrust regulations. Varney & Co. are digging into complaints by AT&T (NYSE: ATT) and Verizon (NYSE: VZ) that cable competitors – e.g., Cablevision (NYSE: CVC) – have locked them out of the market for cable company-produced programming.

(Imagine that, a phone company complaining! Usually, they're the objects of derision.)

Credit-card concerns Visa, Inc. (NYSE: V) and MasterCard, Inc. (NYSE: MA) will be shelling out up to $2.75 billion to settle an antitrust suit with Discover Financial Services (NYSE: DFS). Specifically, MasterCard will pay Discover $862.5 million in the fourth quarter, while Visa will fork over $1.89 billion over the course of 2009. Following the release of the settlement's details, an analyst at Keefe, Bruyette & Woods is weighing in favorably on all three firms.

Sanjay Sakhrani called the news "a big win for Discover, as it provides an additional cushion to contend with the implications of a weaker U.S. economy." He expects the payments will add about $1.75 to Discover's earnings per share. However, he also cited the report as an upside catalyst for MasterCard and Visa, as it eliminates an overhang on shares of both companies -- an assertion supported by analyst Julio C. Quinteros, Jr., of Goldman Sachs.

Unfortunately, though, it's not all sunshine and rainbows in the credit-card group today. Morgan Stanley (NYSE: MS) has filed its own suit against Discover in New York State Supreme Court, alleging that it's entitled to a chunk of the $2.75-billion settlement. DFS was spun off from Morgan Stanley last year, and the latter company claims that it should receive a portion of the award under the terms of a special dividend agreement.

Not so fast, says Discover, which alleges that its parent company is in violation of their spinoff agreement, and "the amount of Morgan Stanley's special dividend is a matter of dispute." Morgan fired back that "there is absolutely no basis for Discover's claim that the agreement was breached." Stay tuned to see how this credit-card drama plays out -- in early trading, shares of all three credit card companies were higher.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Since Apple (NASDAQ: AAPL)'s iTune virtually rules the music download business, it is not surprising that some people in the music industry would challenge its dominance from time to time. One of those times is now.

Artists are beginning to realize that the iTunes process of selling individual songs is hurting their album sales. According to The Wall Street Journal, "Label executives, managers and artists chafe against the iTunes policy that prevents them from selling an album only." Indeed, some artists like Kid Rock have stayed away from iTunes and their sales have done quite well.

The plan of selling music without iTunes is only likely to last so long. Apple's 99-cents-per-song format has proved irresistible to most customers. Bands that make a great deal of money may be able to risk staying off iTunes, but if they have one or two albums that do poorly, they will come back.

Perhaps the only way that labels and artists will break Apple's hold on music is to bring an antitrust suit. Apple does control enough of the market to make a case. Who knows?

Douglas A. McIntyre is an editor at 247wallst.com.

Advanced Micro Devices (NYSE: AMD) shares are trading higher today after rival Intel Corp. (NASADQ: INTC) posted a second-quarter profit of $1.6 billion, or 28 cents per share, ahead of analysts' estimates of 25 cents per share, reflecting strong demand for processors. AMD is also getting a boost into its earnings tomorrow from news that INTC may face new charges from European antitrust regulators, according to a report in The Wall Street Journal. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AMD.

After hitting a one-year high of $16.19 last July, the stock hit a one-year low of $4.53 yesterday. AMD opened this morning at $4.90. So far today the stock has hit a low of $4.68 and a high of $4.95. As of 1:55, AMD is trading at $4.93, up 21 cents (4.4%). The chart for AMD looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a January covered call at the $5 level. A covered call is an options position that combines the purchase of stock with the sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 30% return in just 6 months if AMD is above $5 at January expiration. AMD would have to fall by more than 21% before we would start to lose money.

AMD hasn't been below $3.90, which would be the break-even point, at all in the past year and has shown support around $4.50 recently. This trade could be risky if today's encouraging Intel results are a result of them taking even more market share from AMD, but even if that happens, this position could be protected by the 30% downside protection on this trade.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in AMD. He does control bullish hedged positions in INTC.

Intel (NASDAQ: INTC) delivered extremely good earnings, surpassing what most analysts thought the big chip company would deliver. Global notebook sales were the key source of the company's success.

With 80% of the world's PC and server chip sales, Intel has little to compete with but itself. That may prove to be its undoing. Late word is that Intel is about to be hit by major antitrust charges in Europe. According to The Wall Street Journal, "European regulators are preparing to file new antitrust charges against Intel."

The case against Intel -- the same as the ones being brought in the U.S. and South Korea -- is that the company took a number of actions to shut out sales of chips and computers with chips from smaller competitor AMD (NYSE: AMD).

Intel has begun to take on the role that Microsoft (NASDAQ: MSFT) has a decade ago. It has become so big that authorities are questioning how it got to its place of dominance. In essence, regulators are saying Intel cheated.

While Intel may suffer fines and other sanctions, the cases against the company may be the only chance AMD has of surviving. With over $5 billion in debt, operating losses, and falling gross margins, reparations from Intel's antitrust cases are probably its only life preserver.

Douglas A. McIntyre is an editor at 24/7 Wall St.

I love the long-term prospects of Visa (NYSE: V) and MasterCard (NYSE: MA), but I do have to concede that a pesky lawsuit by Discover (NYSE: DFS) is the one big fly in this story's soup. According to the following article, Discover wants both credit-card companies to pay $6 billion for perceived violations of antitrust regulations. Unfortunately, these damages could be tripled if Visa and MasterCard lose. One of the big problems here is that American Express (NYSE: AXP) already won a settlement of $2.1 billion from Visa late last year and the company established an escrow fund worth $3 billion for litigation payments.

I'll admit, this lawsuit does give me and my credit-card investment thesis a little case of the shivers. After all, tripling $6 billion to $18 billion means that a huge amount of money is in play here, and a successful outcome for Discover would hamper the stocks of the two big card entities. When you read through the litigation risks in Visa's SEC filings (out of MasterCard and Visa, the latter is my favorite since it is still relatively fresh off its IPO and MasterCard has already had a big run), they are pretty scary. And the fact that the $6 billion figure just came to light this week has probably soured the perception of some investors and analysts. Nevertheless, all the previous litigation talk didn't stop Visa's stock from taking off after its IPO earlier this year.

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When I go to a Barnes & Noble (NYSE: BKS) or a Borders (NYSE: BGP) store, I really can't tell much of a difference. That's not a bad thing – at least for me. Hey, I have lots of choices – and not just books.

But for investors, the situation is a problem. So, instead of fighting, why not B&N and Borders join forces?

Well, according to the Wall Street Journal [a paid publication], there are signs of a possible deal as B&N has put together a team to explore the option.

However, there is a big hurdle: antitrust regulators. The federal government will scrutinize the deal heavily given that Barnes & Noble is #1 and Borders is #2 in the US marketplace.

Barnes & Noble will argue that the market is much different now with online operators like Amazon.com (NASDAQ: AMZN).

And timing is another key. After all, if there's a change in the White House, antitrust enforcement is likely to get tougher.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Sirius Satellite Radio Inc.'s (NASDAQ: SIRI) $5 billion acquisition of XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) was cleared by the U.S. Department of Justice. Now, all eyes turn to Federal Communications Commission to determine if satellite radio lives or dies.

The acquisition -- not a merger -- has been held up for eons by phony arguments that combining these two floundering companies would limit choice. Terrestrial radio and consumer groups have been lobbying hard against the deal, arguing that anything that benefits Howard Stern can't be good for America.

I can't see how the FCC can block a deal that the DOJ approved after examining the deal under and electron microscope. The medium won't survive if the companies stay separate. Even fans of satellite radio admit that it is a niche medium. Then again, so is cable TV.

For me satellite radio is a godsend, particularly on long road trips. I enjoy listening to Sirius while tapping out my blog posts. I particularly like the commercial-free music channels. Regular radio has annoyed music fans by piling on commercial after commercial between tiny slivers of music.

Satellite radio can avoid the fate of BetaMax by continuing to produce high-quality content that people want to buy. It's that simple and that complicated.

Freelance writer Jonathan Berr edits the blog Ketchup and Eggs.

Intel (NASDAQ: INTC) is finally making its case to European Union authorities, saying its practices in the region were not anti-competitive. It may be a hard sell.

The extent to which Intel has beaten rival AMD (NYSE: AMD) does not look good on paper. Intel has nearly 80% of the global chip market for PCs and servers. According to The Wall Street Journal: "The EU filed preliminary charges against Intel in July, alleging the company offered rebates to customers only if they didn't use AMD products; paid customers to delay the launch of AMD-based products; and sold its chips below cost to undercut AMD."

If Intel loses the case, it could face major fines and sanctions just as Microsoft (NASDAQ: MSFT) did recently when the EU ruled that its activity violated anti-trust laws.

There may be more riding on the outcome of the hearing for AMD than for Intel. The larger company can afford fines and probably live with some restrictions in the region. AMD may need chain on Intel to turn itself around. The company has over $5 billion in debt and recently took a huge write-off for the falling value of its purchase of graphic chip company ATI. The company's shares are down from over $36 less than two years ago to just above $6.

AMD may not be able to compete in an open marketplace. The courts may be its only refuge.

Douglas A. McIntyre is an editor at 247wallst.com.

MAJOR PAPERS:

• The Wall Street Journal reported that the FBI has opened criminal inquiries as part of an investigation over subprime mortgage issues. The probe into 14 companies will focus on accounting fraud, insider trading and securitization of loans.
• The Wall Street Journal also reported that Merck and Co Inc's (NYSE: MRK) osteoporosis treatment Fosamax is facing increasing scrutiny and lawsuits, as a growing number of patients allege the drug causes a condition called ONJ.
• According to a Federal judge, antitrust supervision of Microsoft Corporation (NASDAQ: MSFT) should be extended for two years longer than originally planned, until November 2009, the Financial Times said. The supervision was imposed as part of its landmark settlement in 2002, when Microsoft was accused of failing to produce an adequate licensing arrangement for certain protocols essential for rivals to work their own products through the Windows operating system.

OTHER PAPERS:

• The Economic Times reported that Ford Motor Company (NYSE: F) has decided not to retain any stakes in its Jaguar and Land Rover divisions after selling them to India's Tata Motors Limited (NYSE: TTM), according to sources.

Last month, Canadian regulators began an investigation into allegations of price-fixing involving Hershey Co. (NYSE: HSY), Cadbury Schweppes PLC (NYSE: CSG) Mars Inc. and Nestlé SA (VTX: NESN).

Now our own Justice Department is looking into the issue as well. Chocolatiers have been battling with surging dairy prices and there have been allegations that various firms colluded to fix prices. Ontario's Superior Court of Justice has granted search warrants for the above candy makers, but no charges have been filed.

According (subscription required) to the Wall Street Journal, "It isn't clear precisely what the Justice Department is looking into or whether the preliminary inquiry will become a formal criminal investigation. Price fixing can be a serious offense, leading to heavy fines and, in some cases, jail terms for executives."

The legal issues aside, does anyone really think that lack of access to affordable chocolate is a serious problem in the United States? Judging from The US of A's collective waistline, a little price fixing and consumer gouging could do our body mass indexes a bit of good.

The short interest in Sirius (NASDAQ: SIRI) spiked up between November 15 and November 30 by 14.4 million to 113.4 million.

Sirius shares have been down over the last few days, and perhaps the market thinks they will go lower.

Many analysts expected that the Sirius merger with XM Satellite Radio (NASDAQ: XMSR) would be approved by now. No such luck. The longer the approval drags on, the better the chance that it will get derailed by ranting congressmen of the Justice Department.

Then, there is the issue of the Sirius balance sheet. The company has long-term debt of about $1.3 billion and no way to repay it. With bad credit markets, it may not even be able to be refinanced. The company had an operating loss of $106 million last quarter on $242 million in revenue. And subscriber counts are not doubling year-over-year like they used to.

Sirius is in trouble. The market knows it. And it needs that merger and the savings it should bring to stay afloat.

Douglas A. McIntyre is an editor at 247wallst.com.