It might be wise to look past both the economy and the altogether overrated concept of innovation when considering what the IT landscape will look like a few years down the road. Increasingly, it looks like antitrust lawyers and federal judges will play just as large a part as those traditional market forces. The European Commission is holding up Oracle’s purchase of Sun Microsystems amid concerns over the future of MySQL, and Intel – fresh off its record $1.45 billion fine by the European Union – just yesterday got served with an antitrust lawsuit being brought by the State of New York. How these situations play out could have vista-altering results in some major sectors.
Intel Taking Hits from All Directions
The Intel lawsuit, in particular, opens the doors to a variety of outcomes. Before considering the potential fallout, though, it is important to understand this latest complaint. New York’s complaint alleges attempts by Intel to further its monopoly in the x86 microprocessor market in violation of Section 2 of the Sherman Act and several New York state laws. If true, the allegations in New York’s complaint are damning:
- Not only does it allege rebate programs the likes of which earned Intel the whopping EU fine (at one point, it alleges, Intel actually was giving Dell hundreds of billions of dollars per quarter for using Intel chips), but it also points to flat-out threats and retaliatory conduct upon Dell finally releasing a line of AMD-based products. The allegations involving anticompetitive behavior in Intel’s dealing with Dell are numerous, likely due to Dell’s relatively small bottom line and, thus, weak bargaining power.
- HP was fearful of Intel retaliation, the complaint alleges, leading it to buffer a large desktop-focused AMD Athlon deal with a $75 million fund (paid into solely by AMD) in case Intel reacted poorly. According to the complaint, Intel reacted by threatening to all but pull the plug on the Itanium processor on which HP was hanging the hopes of its high-end server lines. The result: HP agreed to cap its sales of AMD-based desktop products. A few years later, another round of Intel threats and HP capitulations allegedly occurred.
- Even the mighty IBM faced significant pressure from Intel from 2003 through 2005. In the end, the complaint alleges, Intel was successful in persuading IBM to scale back production and marketing on certain high-end AMD-based systems, at one point paying IBM $130 million to not release an AMD-based 4-way server for which Intel had no competitive chip. When IBM sought to release an AMD-based blade server in 2005, Intel tied the future of a differentiating-technology agreement called “Hurricane” to IBM not releasing this product. Ultimately, IBM did release the product, but under crippling conditions imposed by Intel.