Distributors Smack In The Middle Of AMD Vs. Intel Suit

In the complaint filed June 27 in U.S. District Court in Delaware, AMD alleges that the six distributors received financial or other pressure from Intel, including one claim that a high-ranking Tech Data executive "turned down $1 million to stop doing business with AMD, which caused the Intel representatives to ask 'How much would it take?' "

Other allegations in the lawsuit include Ingram Micro backing out of an AMD distribution deal in China because Intel offered very aggressive loyalty rebates, Synnex signing an exclusive deal to only carry Intel processors, Intel reducing ASI's market development funds after achieving master distributor status with AMD, Intel threatening to cut off Avnet if it sold AMD Opteron server chips, and Intel pressuring Supercom customers to switch to another distributor.

Seventeen manufacturers and nine retailers also have been subpoenaed, according to the filing.

Executives from AMD, Intel and the six distributors declined to comment on the lawsuit.

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On the condition of anonymity, several distribution executives did tell CRN that strong-arm tactics between vendors fighting for market share can be a regular practice, but they were surprised by some of the allegations in the complaint.

"There's always jousting that goes on. If ViewSonic is walking in the door, Sony is walking out the door. This industry is relatively close. Most of us are friends. I think there's more of an interest in making the industry stronger than trying to beat down the competitor," said one executive.

Another distribution executive who did not want to be named said exclusive deals are not unusual and many times distributors request exclusivity because of the high cost of taking on a new vendor and getting solution providers trained.

Intel, Santa Clara., Calif., should have the freedom to offer incentives that do not restrict choice, said David Chang, CEO of Agama Systems, a Houston system builder that uses a 50/50 mix of Intel and AMD chips.

"If Intel threatens to shut off your supply, then I see a problem. If they're only offering an incentive to not use AMD, I don't see any wrongdoing," Chang said. "If Intel can offer you more to increase your revenue, increase your margins, to not use AMD, your logical answer is, 'I take that.' "

AMD, Sunnyvale, Calif., may be using the lawsuit to help kick-start an investigation by the U.S. Federal Trade Commission into Intel's practices, according to some channel observers. It wouldn't be the first time for Intel. During the 1990s, then-rival Intergraph sued Intel charging it with violating patents on its Clipper processor and then unfairly retaliating by shutting off Intergraph's access to a series of industry product development programs and information.

As the lawsuit proceeded, the U.S. Federal Trade Commission looked into Intergraph's charges and filed its own antitrust lawsuit against Intel, leading to an out-of-court settlement between the chip maker and regulators.

This is not the first time that AMD has complained about Intel's business practices. AMD Chairman, CEO and President Hector Ruiz has called Intel's activities into question repeatedly over the past year in interviews and statements to analysts.

And while AMD has also repeatedly told Wall Street it has made record shipments of its microprocessors for the past few quarters, AMD has also been losing money—the result, it says, of a flash memory business that has faced steep pricing pressure. AMD has plans to spin off its flash business and focus solely on chips going forward.

Ruiz posted the complaint on AMD's Web site, along with a letter explaining the suit. "These serious allegations deserve serious attention. Earned success is one thing. Illegal maintenance of a monopoly is quite another," Ruiz wrote in the letter.

Intel President and CEO Paul Otellini addressed the lawsuit in a statement that read, "Intel has always respected the laws of the countries in which we operate. We compete aggressively and fairly to deliver the best value to consumers. This will not change. Over the years, Intel has been involved in other antitrust suits and faced similar issues. Every one of those matters has been resolved to our satisfaction. We unequivocally disagree with AMD's claims and firmly believe this latest suit will be resolved favorably, like the others."

EDWARD F. MOLTZEN contributed to this story.