From today's WSJ concerning the upcoming trial. Martha M. of CNBC just made comments that Intel is 'relatively weak today' due to 'negative comments about the PIII launch'. No specifics...
John
Intel Forges Antitrust Strategy:
Above All, Don't Dispute the Facts
By DEAN TAKAHASHI
Staff Reporter of THE WALL STREET JOURNAL
Intel Corp. is determined to avoid the public-relations gaffes of
partner Microsoft Corp. as it comes to Washington, D.C., for its
own antitrust trial next week. So the chip maker has come up with
a sharply different strategy: Don't argue about the facts.
Competitors and customers who will be witnesses for the Federal
Trade Commission will have a golden opportunity to sling mud at
Intel, which the FTC accuses of illegally cutting off vital technical
information to Compaq Computer Corp., Intergraph Corp. and
Digital Equipment Corp. during legal disputes.
But unlike Microsoft, which has disputed one government account
of bullying behavior after another, Intel doesn't deny using its
information as a weapon at times. It simply says that tactic is
within the law.
"We'll let our actions speak for themselves and let the case unfold
in the court," says Paul Otellini, an Intel executive vice president
who will testify in the trial. "If we put a press release out saying
we're nice guys, who would believe us?"
'Very Brutal Company'
While Intel's alleged improprieties have been overshadowed by
Microsoft's, the trial is likely to illuminate a culture that is every bit
as aggressive as the software giant's. "Intel has an image of
being in a different league than Microsoft," says James
Meadlock, chief executive officer of Intergraph, in Huntsville, Ala.,
and one of the first witnesses against Intel. "I think when the dust
clears, everybody will see that they are a very brutal company."
Consider this incident, as described in Intergraph's own pending
antitrust lawsuit against Intel: Mr. Meadlock showed up at a
graphics-industry conference in August 1997 in Los Angeles with
40 computer workstations ready to display in Intel's booth, to
show off the power of Intel's latest chips. But Intel representatives
told him they wouldn't be showing Intergraph machines that day.
Infuriated, Mr. Meadlock demanded to see the top Intel executive
on site, a hard-charging vice president named Patrick Gelsinger.
Things would get better for Intergraph, Mr. Gelsinger reportedly
said, if Intergraph would just sign over its patents to Intel at no
cost. The conversation melted down, and Mr. Meadlock closed by
yelling, "What you've done is illegal and unethical, and I'm not
going to stand for it."
A week later, Intel formally asked Intergraph to return all
confidential materials to Intel. Within a few months, the
companies were in a state of legal warfare, with Intergraph
alleging that Intel used its monopoly power to engage in a pattern
of incidents like the encounter at the trade show in hopes of
forcing Intergraph to give up its patents.
Mr. Gelsinger declined to comment specifically on the incident.
But he insisted that Intel's business practices are honorable.
"We're an aggressive company, and we're very competitive. But
there are things other people would do that I won't," he says,
adding that as a born-again Christian, he abides by high ethical
standards. "I'm disappointed in how things turned out with
Intergraph, and there were things that might have been done
differently," he says. "But we operate with the highest integrity
and honor."
Testimony by some Compaq executives also may be combative.
The FTC alleges that in the fourth quarter of 1995, Intel cut off the
flow of prototype chips and product information to Compaq
because the big computer maker had sued Packard Bell
Electronics Inc. (now Packard Bell NEC) for patent infringement.
Intel had indemnified Packard Bell, another major customer,
against litigation. According to the FTC, the chip maker insisted
that Compaq license its patents to Intel to resume getting
advance information, which was crucial to designing its products.
Soon enough, Compaq gave in. In January 1996, Compaq and
Intel announced a 10-year cross-license agreement, and
Compaq rejoined the Intel Inside program, taking advantage of
Intel subsidies for its PC advertisements. And it later settled its
suit against Packard Bell.
Intel doesn't dispute the general facts regarding Compaq, though
it may quibble with some details. But the company contends that
its actions in each case were legal, particularly because it was
acting in self-defense against threats of litigation. Intel also is
challenging the FTC's contention that it is a monopoly, and
disputes that its behavior hurt competition in any case.
Stephen Calkins, a former FTC litigator and professor of law at
Wayne State University in Detroit, who participated in a mock
trial staged by attorneys representing Intel and Intergraph, agrees
that tough behavior isn't necessarily illegal. "They have to be
shown to have behaved in an anticompetitive manner, where
there is a measurable harm to competition," he says.
'Enlightened Self-Interest'
Independently of the trial, Intel is taking steps to combat its image
as an industry Godfather that makes customers offers they can't
refuse. In what Intel Chairman Andrew Grove calls "enlightened
self-interest," the company has been giving away some of its
research in order to expand the overall market. It has also been
slower to sue new entrants in the chip market and has loosened
its patent-licensing practices. Mr. Grove has even stepped up his
travels to Washington to lobby politicians, whom he once called
"those people who flunked freshman calculus."
Intel's legal strategy may be aided by the fact that FTC lawyers
are likely to find less of an e-mail trail than Justice Department
lawyers did tracking Microsoft. Intel General Counsel Thomas
Dunlap has been honing an antitrust-compliance program at the
chip maker for 12 years. It includes periodic practice raids on
executives' offices during which attorneys try to find any
incriminating electronic mail or memos.
"You won't find any e-mails about us 'cutting off someone's air
supply,' " says Peter Detkin, vice president of litigation at Intel, in
reference to an e-mail sent by a Microsoft executive.
Intergraph's Mr. Meadlock contends that Intel has successfully
kept many facts from the public by "trying to make everything
embarrassing into a trade secret" and getting the court to redact
most information about the company's dealings with customers.
His company has filed a motion in its own suit against Intel to
compel the release of more information.
Chuck Mulloy, an Intel spokesman, says Intel's policy is to request
that evidence be sealed only if there is a legitimate trade secret,
such as information about future products.
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