May 13th, 2009
AMD: Intel's Otellini 'doesn't get' his consumer disrespect, has 'no remorse'
After listening to Intel CEO Paul Otellini speak in a brief conference call this morning about the $1.45 billion fine Europe levied against the company this morning, AMD CMO Nigel Dessau has strong words for the chief executive of the world’s largest chip maker:
“I think he doesn’t get, or has no remorse about, what they’ve been doing: disrespecting the consumer,”
Dessau said.
Otellini says the EU decision is wrong. Meanwhile, AMD is pitching its side of the story.
In a passionate chat about the European Commission’s decision (Techmeme) to fine Intel after a nine-year investigation for “abusing” its “dominant position” in the market, Dessau emphasized the plight of the consumer — in Europe, Asia and America.
“The decision isn’t about AMD, it’s about consumers of Europe,” Dessau said. “The [EC] is saying monopolistic behavior harms consumers and should be stopped. We believe that if Intel complies, we’ll get a level playing field to compete.”
When asked how this affects AMD’s presence on computer manufacturers’ websites and brick-and-mortar retail stores, Dessau said the company only wants a fair game, and intends to rely on its portfolio of products to meet consumers’ needs for success.
“The reality is, it’s not about the AMD is known or not known or the Intel name is known or not known,” Dessau said. “It’s about whether the consumer can pick from a range of things that their suit their needs. This isn’t about us versus Intel. We will compete on the merits of our products that will give our consumers the best experience.”
Part of the difficulty of that strategy is working with vendors such as Dell, Hewlett-Packard and Lenovo, which Dessau said “are as much victims of this as the consumer.”
“Their careers and businesses are being lorded over by one of their suppliers,” Dessau said. “In a free market, [Intel's] ability to innovate and grow consumers will grow even more.”
Dessau elaborated in a blog post on AMD’s site this morning:
What the Commission is forcing Intel to do is to stop making what Intel innocently calls “rebates” but what are actually conditioned loyalty payments – or as Don Corleone in The Godfather put it, “I’m gonna make them an offer they can’t refuse.”
These payments are conditioned solely on the PC makers doing what Intel tells them to do. Or else. Where is the choice in that? What the EC is saying is, loyalty payments: “no”; volume discounts: “yes.” Intel is still free to provide volume discounts without any change to the “end price”. But they can no longer condition payments with loyalty in order to control the supply chain and block AMD’s ― or anyone else’s ― access to the open market.
Intel’s control of access to the IT market has effectively kept prices artificially higher than they would otherwise be. And remember, AMD has always – always – offered equal or better performance for less money. If you look at the data, you will see that our prices are generally 30-to-50 percent less than the competition’s. So, the “end price” to consumers most definitely will not go up at the end of this – if anything, prices will go down because Intel will be forced to compete more directly on price.
Removing Intel’s leverage helps level the playing field, Dessau said.
“Seventy-one percent of people in a large retailer couldn’t tell you one processor from another. They don’t have a bias, they have a need,” he said. “When we don’t get access to those markets, [consumers] don’t get that choice.”
When asked about whether this will affect consumers at the cash register, Dessau said it was unlikely.
“The end price to the consumer should be the same,” he said. “It’s [just] the way that Intel has used rebates to control decisions within channels.
“When more choice emerges, prices tend to go down. The same behavior goes on in the U.S. The FTC will discover that Intel did the same thing they did in Europe, the same thing they did in Japan, they same thing they did in Korea.
“If you look at Intel’s processor range, it’s a response to competition. At the end of the day, what’s astonishing is with them controlling the market, think of the choice [consumers would have otherwise].
“There is no democratic country in the world hat will except the way that Intel is operating is legal.”
The EC spent nine years on this case; previous cases in Japan and Korea resolved more quickly. In the U.S., the Federal Trade Commission has Intel under investigation for similar antitrust complains.
“Intel’s done a great job of trying not to have this be a conversation,” Dessau said. “They know that we know what a challenge it’s been.”
Responding to criticism on the Web that AMD and the EC had poor timing with the decision given the global economic downturn, Dessau said that enforcing the law is valid 24 hours a day, 365 days a year.
“Oh, so there’s a good time to break the law and there’s a good time not to break the law?” Dessau asked with exasperation.
Dessau said the decision was a milestone in the making for the consumer electronics industry.
“This is the next generation of the PC market,” he said. “This heralds a change we’ll look back on in a few years, a turning point the way the first IBM PC was, the first multi-core processor, these seminal moments. We’re watching one of them unfold.”
Andrew J. Nusca is an associate editor for ZDNet and SmartPlanet.
See his full profile and disclosure of his industry affiliations.
