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From...
Intel responds to FTC complaint with aggressive price cuts
June 15, 1998Web posted at: 12:00 PM EDT
by Andy Santoni
PC buyers can expect more choices, lower prices, and faster implementation of new technologies as a result of the complaint filed against Intel by the Federal Trade Commission this week.
Users and analysts agreed that Intel, on its own or under FTC pressure, will speed the passing of technical information to its customers, and will be more aggressive in cutting prices.
In its complaint, the FTC alleged that Intel illegally used its market power when it denied three of its customers -- Compaq, Digital, and Intergraph -- continuing access to technical information, and took other steps to punish them for refusing to license key patents on Intel's terms.
In a related matter, Intel this week appealed a preliminary injunction that requires the company to provide confidential product and technology information to Intergraph. Intergraph sued Intel last November, alleging that Intel coerced it into handing over certain technology patents by cutting off advance product information.
"As a company which has been harmed to the point of having to sue Intel Corp., Intergraph certainly understands the circumstances which prompted the U.S. Federal Trade Commission to also file suit against Intel," Intergraph said in a statement. "It is reassuring that FTC investigators apparently believe our concerns reflect a broad threat to the computer industry."
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These legal wrangles should benefit PC buyers, industry observers agreed.
Intel is likely to cut prices more frequently than its traditional quarterly pace, said Doug Wilson, an independent systems integrator in Campbell, Calif. The company is also likely to introduce new technologies more quickly to keep ahead of the competition.
"They want to maintain a moving target," Wilson said.
Competition from other CPU vendors is growing, Wilson noted. Advanced Micro Devices, Integrated Device Technology, and National Semiconductor are even pushing ahead of Intel in some areas.
Buyers are looking at these alternatives to save money, said Marc Perl, business manager at Visa USA, in Foster City, Calif., and a member of InfoWorld's Corporate Advisory Board. He is looking at non-Intel systems where they offer enough performance and a lower price. "I really don't see the need to spend more money [for an Intel-based system]," he said.
As a result of the growing popularity of alternative systems, Intel's share of the CPU market will decline this year.
One way Intel is reacting to increased competition is to respond to its customers' demands more quickly, said Kelly Henry, senior analyst at International Data Corp., in Framingham, Mass. For example, instead of cutting prices every three months, price cuts on desktop and mobile CPUs now occur at different times, in sync with the different product-refresh cycles for desktop and mobile systems, according to Henry.
One result of this change in Intel's pricing policies is that OEMs will no longer delay buying chips at the end of each quarter and wait for prices to drop, Henry noted. This will improve availability of systems, she said.
By improving its treatment of its customers, Intel may sidestep the FTC's complaints, Henry said. The heart of the FTC's case against Intel is the company's treatment of its customers, not its competitors, as is usually the case in antitrust actions, she said.
Henry also doesn't see the FTC taking action that would delay introducing new technologies because Intel is so important in the computer industry.
"If you hobble Intel, you stymie the entire industry," Henry said.
The FTC action "will have relatively little impact," agreed Nathan Brookwood, principal analyst at Dataquest, in San Jose, Calif. The FTC is unlikely to demand that Intel stops integrating more functions on a chip, for example, he said.
Andy Santoni is a senior writer for InfoWorld.
