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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (75975)	3/10/1999 12:37:00 AM
From: Ian Davidson	Read Replies (1) \| Respond to of 186894

From tomorrow's WSJ: March 10, 1999 Intel Still Faces a Broad Inquiry By FTC Into Business Practices By DEAN TAKAHASHI Staff Reporter of THE WALL STREET JOURNAL Intel Corp. isn't out of the woods yet. When the giant chip maker settled a narrow set of U.S. Federal Trade Commission antitrust charges earlier this week, it prompted speculation that the agency might drop or quickly settle its wider probe of Intel's business practices. But the broader investigation is alive and active, industry executives and other people familiar with the matter said Tuesday. FTC investigators are expected to press on a couple of key issues, including whether Intel is using its market power in microprocessor chips to muscle into ancillary markets, and whether Intel misuses its control over key technical standards to the detriment of competing makers of semiconductors and other personal-computer parts. The agency also is investigating whether Intel improperly punishes PC makers that use rival chips, or improperly manipulates chip pricing and its Intel Inside marketing program to stifle competition. New Charges Aren't Guaranteed It's far from clear that the FTC will muster enough evidence to file new charges. Some industry executives and analysts believe Intel has already modified some tactics in ways that will make it harder for the agency to make broad allegations of anticompetitive practices. "There is no question that the threat of FTC action has reined in Intel over the past year," said Michael Feibus, an analyst at Mercury Research Inc. in Scottsdale, Ariz. Intel Issues The Federal Trade Commission is still investigating these questions: Coercion Does Intel punish customers who buy alternative microprocessor chips? Intel Inside Do Intel's marketing subsidies to PC makers give it an unfair advantage over rivals? Leveraging Has Intel unfairly used its market power in microprocessor chips to move into markets for other PC components? Pricing Has Intel manipulated chip prices to keep customers in line? Standards Does Intel's control of technology standards give it an unfair advantage over other chip makers? Intel competitors, for example, have long complained about the way Intel controls access to information about how other PC parts connect to its microprocessors, including the central circuit boards known as motherboards and accessory products called chip sets. Intel's own business in chip sets gained market share in part because it had exclusive knowledge about technology called the P6 bus, a data pathway that links its Pentium Pro and Pentium II microprocessors to the rest of a computer. Intel initially refused to license the P6 technology to rival chip-set makers, which complained to the FTC. Intel later changed that stance, licensing the P6 bus technology to companies such as S3 Inc., a chip-set maker in Santa Clara, Calif. Ken Potashner, S3's newly appointed chief executive officer, said the patent-sharing agreement that his company reached with Intel last fall represents a "sea change" in the larger company's attitude. "We see that they are trying to be more accessible in terms of licensing," Mr. Potashner said. Chuck Mulloy, an Intel spokesman, denied that the company changed its behavior to suit the FTC. He said the company simply insisted on getting valuable technology in exchange for the P6. Mr. Mulloy added that the company ultimately believes the broad investigation will conclude that its behavior is lawful. The FTC and Intel agreed on Sunday to settle an FTC suit, filed last June, that accused Intel of improperly withholding technical information from customers during patent disputes. That settlement must be approved by the full commission. Obstacles for the FTC An FTC spokeswoman Tuesday declined to comment on details or the status of the broader investigation, which began in September 1997. But an agency statement issued on Monday said the "commission's staff is committed to working expeditiously" to resolve its remaining concerns about Intel. That phrasing contributed to speculation that FTC investigators would have to find some strong evidence to persuade the commission to file a new suit. One obstacle is that the settlement does not stipulate that Intel is a monopoly. Such a finding might have encouraged any possible victims of Intel's behavior to step forward with testimony, because they may have been more confident that the agency would pursue charges. The agency also isn't likely to intervene unless action on its part would make a difference in making markets more competitive. In some cases, Intel's behavior is only one of a number of factors that hurt competitors. Makers of motherboards, such as Micronics Computers Inc., complained several years ago that Intel swept into the No. 1 position in that market because it refused to share information about its Pentium chip. But some motherboard companies faded for other reasons, said Nathan Brookwood, an analyst at Insight 64 in Saratoga, Calif. "Intel has become a scapegoat for a lot of companies that failed on their own," Mr. Brookwood said. Complaints about Intel's tactics in the microprocessor market also may be hard to pin down. Rival Advanced Micro Devices Inc. has long contended that Intel has used improper pressure or inducements with customers that buy AMD chips, but has had trouble finding PC makers willing to back up that allegation. For example, an AMD executive suggested last year that Intel may have given an extra-large subsidy under the Intel Inside advertising program to a German computer maker, Vobis AG, in exchange for a promise to buy only Intel chips. But Vobis executives later said they dropped AMD because it didn't provide an adequate supply of chips. More recently, AMD has received orders from most big PC makers, further undermining the contention that Intel's tactics have hurt competition. AMD announced on Monday that it would report a first-quarter loss as a result of self-inflicted chip-design and manufacturing problems. Its stock plunged $1.4375, or 7.6%, to $17.50 in New York Stock Exchange composite trading Tuesday. Intel shares also fell, on the possibility of a first-quarter disappointment, closing at $115.3125, down $4.3125, in Nasdaq Stock Market trading.