UPGRADE
Intel insight
By Hiawatha Bray, Globe Columnist, 03/04/99
icrosoft Corp.'s antitrust trial has gone into recess, and already I miss
the sheer entertainment value of it. Antitrust trials aren't supposed to
be fun. But then, the leaders of the world's most feared corporation aren't
supposed to seem like gibbering half-wits, either. But that's how they looked
after Justice Department hired gun David Boies cross-examined them.
What will the feds do for an encore? Well, the Federal Trade Commission
will square off against chip maker Intel Corp. next week, in an effort to
prove Intel has abused its power in the microchip market. Another amusing
fiasco? I doubt it. Intel will go into its trial with advantages that should allow
the firm to avoid utter humiliation, and to perhaps even prevail.
For one thing, the witness list features Andrew Grove, Intel's chairman and
former chief executive. You don't know how smart a move this is unless
you've met both Gates and Grove.
Eventually, we'll all have computers that are capable of transmitting
conversation. When that day arrives, everybody will know what it's like to
question Bill Gates. For all his incandescent smarts, Gates radiates an eerie
sense of disconnection from the world of flesh and blood.
This may have been one reason why Gates testified in a video deposition for
the Microsoft trial, rather than in person. If so, it didn't work. The man's
creepy detachment was in full effect, made worse by answers that must have
seemed sly to Gates but appeared arrogant and evasive to everybody else.
Grove, on the other hand, is easily the most engaging and likable computer
industry executive I've met. I think it's because he's a grown-up - a
Hungarian refugee from communism who worked as a busboy to pay his
way through City College of New York. Grove had a fully-formed adult life
before he'd ever heard of a PC, and it shows. He won't make Intel look
bad, and as the Microsoft experience proves, that counts for a lot.
In addition, Intel has some decent arguments on its side. Remember what the
FTC case is all about. Computer companies that build Intel chips into their
machines need detailed technical information on those chips. In the midst of
intellectual property disputes with Digital Equipment Corp., Intergraph
Corp., and Compaq Computer Corp., Intel cut off access to this technical
information. The FTC charges that Intel could harm rivals by withholding this
information.
But only one of the companies - Digital, now owned by Compaq - made a
competing chip. The others weren't direct Intel competitors. Can Intel
engage in unfair competition with noncompetitors? That's a tricky new
excursion in antitrust law.
Intel's biggest advantage in the case becomes apparent by reading the latest
computer sales figures. The case against the company ultimately rests on the
idea that Intel has monopolized the microprocessor market, just as
Microsoft monopolizes desktop operating systems with its Windows
software. Microsoft says that despite its 90 percent market share, it's not a
monopoly - a silly claim that has undermined Microsoft's credibility.
For years, Intel's share of the processor chip market has also hovered in the
90 percent range. But last week, Intel got a timely bit of bad news. In
January, 43 percent of all PCs sold in retail stores used K6 chips from Intel's
rival, Advanced Micro Devices Inc., according to PC Data Inc. Only 40
percent of the machines had Intel inside.
According to International Data Corp., Intel's still far in front of the overall
chip market, with 75 percent of all PCs sold in the fourth quarter. But that's
down from 87 percent the year before.
Intel may have had a monopoly when the FTC began filing its papers June 8,
but it's begun to dissolve even before the trial starts. Last month, the FTC
amended its complaint to attack Intel's dominance in computer
motherboards, which suggests the government's case looks a lot weaker
than it did a few months ago.
The FTC may still beat Intel, but it won't be a Microsoft-style
carpet-bombing. Intel has good arguments on its side, a dwindling market
share, and a legal team that's had a chance to learn from Microsoft's
disasters. I expect a traditional antitrust case - orderly, workmanlike, and
dull. Too bad. |
