"Despite losing considerable market share to AMD, Intel held on to a commanding lead by exerting its influence on computer manufacturers. Most famous was the “Intel Inside” co-branding program, in which Intel gave “market-development funds” to computer manufacturers if they highlighted the Intel brand on their products. But “Intel Inside” was not nearly as controversial as Intel’s practice of paying “loyalty rebates” to computer manufacturers for not using AMD chips. On the surface, Intel’s loyalty rebate programs appeared to be innocent volume or bundled discounts. Courts had struggled to apply section 2 of the Sherman Antitrust Act to the issue of bundled discounts, as it was hard to distinguish harmless discounts from loyalty rebates provided for the sole purpose of acquiring or maintaining monopoly power. But by taking into consideration the market conditions at the time and the nature of Intel’s relationship with the computer manufacturers, the monopolistic intent underlying Intel’s actions is noticeable. The commoditization of the PC market had severely impacted the profit margins of computer manufacturers, leaving their hopes of meeting quarterly earnings targets at the mercy of Intel’s loyalty rebates. In internal emails at major computer manufacturers, company executives were clearly distressed by the risk of losing such rebates, and most importantly, profitability, if they adopted AMD chips—or, as one Dell executive poignantly put it, Intel was “prepared for ‘jihad’ if Dell joins the AMD exodus.” Indeed, AMD’s biggest barrier in breaking 25% in overall x86 market share was its failure to court Dell, the biggest U.S. computer manufacturer. Dell was for a long time an exclusive Intel customer, but actually had been quite eager to use AMD’s chips. In an e-mail to Intel’s CEO in 2005, Michael Dell wrote, “None of the current benchmarks and reviews say that Intel based systems are better than AMD. We are losing the hearts, minds and wallets of our best customers.” Intel was quick to address Dell’s concerns. Intel’s CEO, Paul Otellini, replied, “[W]e are transferring over $1B per year to Dell for meet comp efforts. This [should be] more than sufficient to compensate for the competitive issues.” Soon after, Dell’s CEO Kevin Rollins announced that Dell had “made no plans to begin using” AMD chips, which Otellini described as “the best friend money can buy.” "(1)
(1) [See Subheading: Intel Gets Sneaky]
"Intel and the x86 Architecture: A Legal Perspective
Written by Greg Tang
January 04, 2011"
"Despite losing considerable market share to AMD, Intel held on to a commanding lead by exerting its influence on computer manufacturers. Most famous was the “Intel Inside” co-branding program, in which Intel gave “market-development funds” to computer manufacturers if they highlighted the Intel brand on their products. But “Intel Inside” was not nearly as controversial as Intel’s practice of paying “loyalty rebates” to computer manufacturers for not using AMD chips. On the surface, Intel’s loyalty rebate programs appeared to be innocent volume or bundled discounts. Courts had struggled to apply section 2 of the Sherman Antitrust Act to the issue of bundled discounts, as it was hard to distinguish harmless discounts from loyalty rebates provided for the sole purpose of acquiring or maintaining monopoly power. But by taking into consideration the market conditions at the time and the nature of Intel’s relationship with the computer manufacturers, the monopolistic intent underlying Intel’s actions is noticeable. The commoditization of the PC market had severely impacted the profit margins of computer manufacturers, leaving their hopes of meeting quarterly earnings targets at the mercy of Intel’s loyalty rebates. In internal emails at major computer manufacturers, company executives were clearly distressed by the risk of losing such rebates, and most importantly, profitability, if they adopted AMD chips—or, as one Dell executive poignantly put it, Intel was “prepared for ‘jihad’ if Dell joins the AMD exodus.” Indeed, AMD’s biggest barrier in breaking 25% in overall x86 market share was its failure to court Dell, the biggest U.S. computer manufacturer. Dell was for a long time an exclusive Intel customer, but actually had been quite eager to use AMD’s chips. In an e-mail to Intel’s CEO in 2005, Michael Dell wrote, “None of the current benchmarks and reviews say that Intel based systems are better than AMD. We are losing the hearts, minds and wallets of our best customers.” Intel was quick to address Dell’s concerns. Intel’s CEO, Paul Otellini, replied, “[W]e are transferring over $1B per year to Dell for meet comp efforts. This [should be] more than sufficient to compensate for the competitive issues.” Soon after, Dell’s CEO Kevin Rollins announced that Dell had “made no plans to begin using” AMD chips, which Otellini described as “the best friend money can buy.” "(1)
(1) [See Subheading: Intel Gets Sneaky]
"Intel and the x86 Architecture: A Legal Perspective Written by Greg Tang January 04, 2011"
http://jolt.law.harvard.edu/digest/intel-and-the-x86-archite...