AMD’s Hector Ruiz is going at it completely wrong

July 9th, 2005

AMD has recently filed a complaint against Intel because Intel is abusing its monopoly position in the chip market. AMD’s CEO, Hector Ruiz, posted an open letter on the AMD website, explaining why AMD was forced to take action against Intel. But in his letter, he’s making a serious mistake, in the following part:

We have filed a 48-page, detailed Complaint in federal district court. Because, as our Complaint explains exhaustively, Intel’s actions include:

Forcing major customers to accept exclusive deals,

Withholding rebates and marketing subsidies as a means of punishing customers who buy more than prescribed quantities of processors from AMD,

Threatening retaliation against customers doing business with AMD,

Establishing quotas keeping retailers from selling the computers they want, and

Forcing PC makers to boycott AMD product launches.

For most competitive situations, this is just business. But from a monopolist, this is illegal.

I have a problem with the last line. Does Ruiz want me to believe that all those points he listed as being “serious allegations”, “illegal”, “hurting customers”, “causing less innovation” etc. would be OK and “just business” if they were used in other “competitive situations”, but not if Intel is using them? So in other words, he is saying that AMD, or any other small chipmaker, using such illegal tactics would be totally acceptable and would be business as usual, but Intel using them is wrong.

Mr. Ruiz should realize how hypocritical this sounds. This is encouraging double standards. If AMD is allowed to use such tactics because they do not have a monopoly, they may hurt companies like Transmeta, in the same way that they are now claiming Intel is hurting them. What would stop AMD to force OEMs to use AMD chips instead of products from Transmeta? What would stop AMD from paying those OEMs to not use Transmeta chips?

So, Mr. Ruiz, you should probably think about that last line. If you think what Intel is doing is illegal or evil, don’t try to make those same tactics look good in other situations, which probably would be in your advantage, and say that then it would be “just business”. If it is “just business” then, it is “just business” now.

And then you should stop whining, and accept that Intel is bigger and more powerful, and is able to do certain things relative to you, just like you are able to do certain things relative to other smaller chipmakers. As I explained in a previous post regarding this same type of issue, you may want to focus your efforts on something more productive and more creative.

AMD’s current legal efforts against Intel, especially with an open letter like that, are doomed to failure, or minimal results at most, if they are lucky.

Having said that, AMD has come a long way in the last few years with regard to delivering high quality and innovative products. They’ve recently been in a position where they were the ones having the really innovative and unique products on the market, and the results were there. Even I, who’d been a die-hard Intel fan, bought my first AMD64 based CPU 2 years ago, because I was finally convinced of the quality of AMD’s CPU’s.
Intel was scrambling to catch up, and the market was beginning to take AMD seriously. What AMD needs is more of that, more innovation and more unique and good products. If they have that, the market will react. That is the only thing that will give them a chance against Intel. And that is what they should be focusing their efforts on.

Update: Please check the comments for more details.

Comments

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John July 10th, 2005 at 7:10 pm

I think you’re taking things too literally. Manufacturers cut exclusivity deals with distributors all the time. What Intel is doing is strong-arming companies because they control the market, not to effectively compete with AMD, but to force them out of the market entirely. There is a difference. And that entire Transmeta tangent is not even comparable because Transmeta does not have a competitive product. They aren’t on the same level as Intel and AMD or even Via. Intel is doing exactly what Microsoft used to do. The rules change when a company becomes a monopoly, whether you’re aware of it or not

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Randy July 10th, 2005 at 7:26 pm

Karen, You need to learn a WHOLE lot more about Biz before you post such misinformed commentary. I’m not blasting you for your views, I’m just stateing that you need to do a lot more research on this subject to comprehend the numerous violations of anti-trust law Intel has been guilty of for years if not decades. The facts have been known for a long time but because most PC vendors relied on Intel for their livelihood, they would not dare stand up in a court of law and tell how Intel violated law. Now that AMD has superior products, better technology and they have executed flawlessly for the past 6 years, PC vendors know they can stand up and disclose the violations of anit-trust laws Intel has used for years to try and break AMD and to maintain an ILLEGAL monopoly. When you know the entire story you’ll be as outraged as the PC vendors and consumers who have been blackmailed for decades by Intel.

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Chris July 10th, 2005 at 8:11 pm

Ms. Donk,

You obviously have no grasp of the current IT market. The government stepped in following the Telecommunications Act of 1996 to break up monopolies in the telecom world. The government needs to step in on Intels’ illegal “strategy” to dominate the market.

Why would the Japanese government find Intel was producing illegal business? I think that’s a very good question to ask when looking at the situation. Just because the location is different doesn’t make it any different from here. At one time I worked for an OEM. We were promised discounts to keep Intel on the web and in our servers. You may say well that’s just business but when you strong arm competitors out of the market it’s bad for consumers.

I don’t think you remember when 66mhz Intel chips and 100 mhz Intel chips came out and the premium that came along with them. Why would customers and companies pay the price for the chips? Because they HAD to, they didn’t have a choice to not pay. Intel was the standard. The only time I’ve ever seen whole computer systems as low as 400 dollars is NOW. Why? Because of competetion. Imagine if 50% was AMD and 50% was Intel. Prices would be great.

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Edward July 10th, 2005 at 9:23 pm

You put wrong emphesis on Mr. Ruiz’s words. The right emphesis should be on “monopolist”, and yes, it is illegal for monopolists to do such actions to maintain monopoly.
In some situations, such actions are okay because they encourage competition and benefit consumers. In a monopoly market, on the other hand, such actions decrease competition to a minimum.
At least this is what I was taught in my ECON101 class. 🙂

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Caroline July 10th, 2005 at 11:00 pm

“Intel was scrambling to catch up, and the market was beginning to take AMD seriously. What AMD needs is more of that, more innovation and more unique and good products.”

Hmm if that were the case and AMD was the innovator and not the follower wouldn’t you think you’d see more of AMD in the shops? I know the local shops around here Staples, Futureshop are carrying PC’s that are 8/10 Intel based.

I know AMD has had the better more innovative product for a few years now not some, how you put it whimsical change (X86-64, which Intel copied finally). They were on the HyperTransport board with other companies, have an onboard memory controller (another feature Intel is supposed to follow on). Had a 133(266) bus while Intel had 100(400), broke the 1GHz barrier 1st while Intel couldn’t without major changes to thier architecture (underperforming ones I might add) Just look at this one piece of Intel’s past. RAMBUS. Who was tied to DDR? AMD (1st again I might add). If RAMBUS had been as big of a sucess as RAMBUS/Intel had intended that would of hurt AMD big time. DDR would of been more expensive than RDRAM, AMD would of been scrambling for a RDRAM lisence for their chipset. Most of their partners would of dropped DDR support due to higher prices. It basically would of been enough of a jolt to kil AMD since back then they were selling CPU’s at a lose.

Business as usual though

Now ya think Intel’s innocent?

p.s. About the Transmeta processor. Who? They were a newcomer yes, but they had no high performing CPU. Who wants to leave a laptop on for 5 days straight? “well it’s goin’ on 5 days now, I can’t surf and check email at the same time on it but i dont’ have to charge the batteries as much”

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Karel Donk July 11th, 2005 at 5:26 am

John:
First, I’m aware of US law on monopolies. I also know that it is not fair. I wrote more here: http://blog.kareldonk.com/?p=24
Basically, it is telling a company that it can’t become too big, otherwise it’ll lose more and more of its rights and freedom. The freedom to have the exact same business tactics as the smaller companies, the freedom to be able to innovate as much as the smaller companies. That all gets restricted once you get too big. You can see that with Intel now, and we saw that with Microsoft before in the US and EU. And that’s stupid. For example, why would Microsoft not be allowed to add certain features to its OS, while Linux distributors can? You might as well restrict Microsoft for selling their OS for a whole year then, to give their competitors a chance.
By using those same business tactics AMD is complaining of against Intel, nothing would stop AMD to also force smaller chipmakers out of the market. I don’t see what stops AMD from getting exclusive deals relative to their smaller competitors. Transmeta was just an example, not saying that they have a competitive product. But what Intel is doing to AMD today, as they claim, AMD can do to smaller competitors too. And then, it’s “just business”, as Ruiz says. Perhaps the only reason why they are not doing it is because it’s not very interesting for them.

Randy:
First, it’s Karel, Mr. Karel 🙂 Not Ms.
I’m not misinformed. I also read the whole case AMD filed against Intel, all the complaints. I understand what you’re saying, and my answer to you can be the same as above.
Also, I don’t think PC vendors have been trying hard to disclose any anti-trust law violations against Intel, because quite frankly, they have been getting a lot of cash from Intel, and benefiting a lot from it. It’s not a matter of being afraid of Intel. At least, not with the major OEMs. It’s a matter of cash. Plus, they willingly allow it to happen. Even if Intel demands exclusivity from them now, they can deny it, if they want. But they won’t, not because they are afraid, after all, AMD is a good alternative now, but because of the cash they get from the deal. They are far from outraged. They are willingly working with Intel, and if Intel is guilty, they should be too. Do you think those OEMs are eagerly waiting for Intel to lose the case against AMD, making them lose all the ‘market development funds’ they get from Intel?

Chris:
All of the above, plus:
The government stepping in will not work in the AMD vs Intel case, unless drastic measures come out of it against Intel as a result. By that I mean, severely restricting Intel or breaking the company up or something similar. And I doubt that will happen. This case will only serve to make Intel stronger and AMD weaker. We’ve seen this twice with Microsoft. Just look at what happened in the EU. Sure, Real and their supporters “won”, but all Microsoft did was give the EU some pocket change, and release a version of Windows nobody in the EU and not even their dog wants. If the EU, Real etc. think they “won” I seriously question their intelligence.
Do you think Real got any better out of it? Where?s Netscape today? More here:
http://blog.kareldonk.com/?p=18

Edward:
All of the above.

Caroline:
AMD is selling more than before. The market takes AMD more seriously now. It?s not yet what AMD is hoping for, but they will get there if they continue to innovate. It will take time and a lot of effort. Lawsuits won?t help them. At most they will probably cause Intel some minor inconvenience when they win the case. Then it?ll be business as usual again.
I never said Intel is innocent. Personally I am against exclusive deals preventing customers to be able to have a choice. However, when AMD?s CEO wants me to believe that the “evil” things Intel is doing would be OK if AMD were doing it, then it makes me want to throw up.

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Targon July 11th, 2005 at 7:46 am

Ms. Donk, here is another way to look at the situation between Intel, AMD, and Transmeta….

Transmeta came in late, and didn’t have a product that could seriously compete in mainstream computer systems. As a result, not many people looked at their products except for low-power parts.

AMD in no way had paid or tried to push companies not to use Transmeta products. To AMD, Intel is the competition, Transmeta wasn’t a concern.

Intel could use their position FAIRLY and without violating any fair-trade rules by doing the following:
Dropping their prices across the board in a way AMD can’t match. Rebates for not using/selling AMD processors and AMD based systems isn’t considered fair trade, it’s called, “Use only our products or pay a lot more”.

Intel can require if they help pay for advertising that a company not advertise AMD based products in the advertisements that Intel has paid for. That’s fair and people don’t disagree with that policy.

It’s not fair for Intel to threaten to halt supplies of their parts to a company that also would sell AMD products. If a company would be forced to sell 100% AMD based systems because Intel wouldn’t sell to them if they sell more than 10% of their systems with AMD processors, that’s not fair.

Providing discounts on the basis of volume is considered fair. So if Intel had dropped the whole rebate thing and just sold their chips at the discounted price regardless of how many AMD processors are purchased, that would also be fair.

If AMD were trying to apply pressure unfairly, that’s one thing, but do you have any information to indicate that AMD did more than show that their products are better than Transmeta’s? Did they tell companies they wouldn’t provide parts because Transmeta based machines were also being sold? How do you come up with AMD not being fair?

If a product is better, and comparisons show a product is better, it makes sense that people will go with the better product. If a product is notably worse in almost all areas, how much hope would there be for the lesser product to sell well?

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bbbl67 July 11th, 2005 at 7:57 am

I’m not sure why you’re attacking AMD for something that Intel is doing. Some of the tactics that Intel is using is not illegal — if Intel weren’t a monopoly. But since Intel [b]is[/b] a monopoly, the tactics used are illegal.

Yes, it’s a double standard, because a monopoly is a walking double standard itself. A monopoly controls so much of a market that it is capable of inflicting serious harm if it were allowed to use standard business techniques available to non-monopolies. Not only could it easily harm its customers, it can kill its competitors and kill any chance of ever having any further competitors. A monopoly is allowed to exist at the pleasure of the people of a country, therefore they must abide by extra laws put upon them by the people. If they cannot live within these laws then their monopoly must be broken up.

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Targon July 11th, 2005 at 8:01 am

As a follow-up to my last post(sorry about the Ms.), there are some differences between what’s been going on with AMD vs. Intel and Microsoft.

Microsoft not only has a monopoly, but also has a better environment from an end-user perspective. If Apple were to release MacOS X for x86 type systems and managed to get product support from all the major software manufacturers, or if Linux were to become a bit more bulletproof, then things might be different. Linux has it’s place, but from the perspective of an end-user who isn’t very technical, Linux isn’t quite ready yet. That will change eventually, but…. Anyway, the thing about Microsoft is that they DID act to stop other companies who wern’t even trying to compete with Microsoft. That’s where Microsoft was in the wrong. It’s like hearing there is a new start-up company down in Mexico and having a big company start to bribe the Mexican government to shut them down. It’s not fair, so there are rules to stop that sort of behavior.

There also arn’t problems with exclusive deals, and in general those are considered fair. The problem is when companies who don’t want exclusive deals are threatened if they fairly put other products on the shelves.

If Dell wanted to sell SOME AMD based systems, and Intel adjusted the pricing because Dell were no longer Intel-only, that’s fair. If Intel cuts or limits delivery of parts or delays delivery of parts as a result, that’s NOT fair.

What company after company has reported is that Intel has limited and delayed chipset and processor deliveries to companies that designed and sold AMD based products. Remember when Asus first came out with the A7M for the original Athlon? They had to sell it in a white box without any markings to show it was an Asus board because they were afraid that Intel might get mad at them. Is that fair business where a company needs to be afraid their supplies will be cut?

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Karel Donk July 11th, 2005 at 8:27 am

Targon:
Please disregard my comments about Transmeta. It seems everyone is misunderstanding what I meant, this is probably my fault. I merely mentioned Transmeta as an EXAMPLE of another smaller chipmaker. Not that AMD is really hurting them, or causing them problems.

A lot of what you’re saying, I have already clarified in my answer to other posters above. I want to answer this question of yours: “How do you come up with AMD not being fair?”

AMD is not being fair, because their CEO is claiming that if he were doing those same things you mentioned in your post as being unfair, it would be OK and “just business”. Now, he may not have done so yet, but he’s being a hypocrite.

bbbl67:
See my posts above for more details on my opinion.
How is a monopoly a walking double standard? When a company gets such a big share of the market, it has its reasons. They’ve worked hard for it, and they probably earned it. I don’t see why there should be laws restricting them in any way from doing things that others CAN do. That is not fair towards them. And it further sends a message discouraging everyone to ever work hard to achieve truly big things, otherwise it may work against them eventually.
So unless it is something unethical or truly evil, there should be no restrictions. And as AMD’s CEO himself says, what Intel did could be considered “just business”. Apparently he’s just pissed because “just business” is now in his disadvantage.
And I haven’t even given my opinion on the case itself, the reason why I’m attacking AMD, as you say, is because of their CEO making a hypocritical statement.

Targon:
Microsoft did do some really evil things, like you say. They have been punished for those. And I agree about the things you mention as being unfair.
However, I’m going to repeat this: What bothers me is AMD’s CEO making a hypocritical statement saying that if other companies, including AMD, would be doing those unfair and evil things, it would be “just business”.

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John July 11th, 2005 at 4:57 pm

Being a monopoly does not stifle innovation. I don’t know where you got that idea. They just can’t use their size to lock out smaller companies. That stifles innovation.

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John July 11th, 2005 at 5:57 pm

Hector Ruiz is entirely correct in his statement. Between competitors, it is just business. But AMD does not compete with Intel. Intel prevents them from competing by controlling the market. If you can’t get anyone to buy your product, not because it’s inferior, but because a monopoly controls the market and abuses it’s size to bully resellers into NOT buying your product for fear of retaliation, then you can’t even compete. It’s not just business then, it’s illegal. Instead of using scale of economy to provide an equal or better product at lower cost, as a legal monopoly would do, Intel is flat out forcing retailers into not selling AMD products. Intel’s products are inferior and yet cost more than their AMD equivalents. The only reason for Intel’s continued monopoly is their anti-competitive actions. AMD never had a chance, no matter how good their product is. That’s illegal, and you’re just wrong. Intel no longer has a better product and is simply using their control of the market to maintain control.

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Caroline July 11th, 2005 at 11:03 pm

Actually Netscape is a live and well. I thought the newest version was 7.2 which was released by AOL maybe 4 months ago..guess I was wrong. So were you.

http://browser.netscape.com/ns8/

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Karel Donk July 12th, 2005 at 3:21 am

John:
“Being a monopoly does not stifle innovation. I don’t know where you got that idea.”
I got that idea from watching Microsoft and now Intel. If the companies are doing something illegal, unethical or evil, by all means, punish them. But don’t restrict them in terms of what they can, or cannot do or add, to their products, while others are allowed to do those things.

Also, I know Ruiz is correct with his statement based on US law. Notice that I never said he was not correct. All I said was that it was a hypocritical statement. I said earlier: “And as AMD’s CEO himself says, what Intel did could be considered ‘just business’. Apparently he’s just pissed because ‘just business’ is now in his disadvantage.”
So if he wants honest competition, he shouldn’t say it would be ok for AMD to have those same business practices as Intel has now. You know, walk the talk.
Ofcourse, being honest is not their motivation here, clearly shown by his statement that he is allowed to have such evil business tactics. Their motivation is just trying to play the legal system like a lotery now, out of desperation, to see how they can fight Intel from there. They don’t really care about honesty and ethics in business.
This is why their efforts are doomed to failure. Any result they get from the case against Intel will probably be very minimal and for the short term. For the long term, they will have to rely on the real value and power of their products in the market. And if they don’t continue to innovate, they are going down. The lawsuit is essentially a waste of time.

Caroline:
Caroline, if you want to call that live and well, OK. But as you can see, Netscape clearly gained nothing from the case against Microsoft. And that is my point. They’d probably be in a different position now if they focussed on making their product unique and innovative instead of wanting to sell a bloated and slow product to people at that time.

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Lauren November 22nd, 2005 at 8:54 am

:roll:hi :lol::lol::lol::lol:

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