Computers

FTC Presses On with Intel Probe


The U.S. Federal Trade Commission is pressing ahead with efforts to build an antitrust case against Intel (INTC), the world's largest maker of semiconductors, according to an attorney at rival Advanced Micro Devices and other people who have been contacted as part of the investigation. The FTC inquiry goes beyond issues raised in a now-resolved clash with AMD and involves Intel's relationship with rival Nvidia (NVDA) in the $12 billion market for graphics chips, which handle computerized images, the people say. Regulators' efforts show Intel remains dogged by allegations of anticompetitive behavior despite the resolution in November of a long-standing antitrust lawsuit by AMD (AMD). In court papers filed in 2005, AMD accused Intel of bribing computer makers not to use its chips. Intel said on Nov. 12 it would pay $1.25 billion in exchange for AMD's agreement to drop pending litigation. The commission is looking at a broader range of issues related to Intel's conduct in the marketplace, say executives who have been contacted by the FTC. "The FTC continues to investigate and we are still getting requests for information," Thomas McCoy, AMD's executive vice-president for legal affairs, says in an interview. "The investigation is broader than the issues we complained about to the commission and have since settled." Nvidia LawsuitThe FTC, which announced its investigation in 2008, is homing in on a pair of dueling lawsuits between Intel and Nvidia, says a person at a company contacted by the FTC. The FTC wants to determine whether a lawsuit filed by Intel earlier this year amounts to an effort to slow Nvidia's advance in the graphics chip market and intimidate computer makers from doing business with Nvidia, the person says. "The FTC is looking at how Intel uses various levers at its disposal to stop competition against it," the person says. Intel says it has met with officials in recent weeks to persuade the FTC any lawsuit is no longer necessary, given the settlement of AMD's lawsuit. "We continue to meet with the FTC and to explain our views on the settlement and our views on other related matters," says Intel spokesman Chuck Mulloy. The FTC could still decide not to bring a case, or Intel could reach a settlement with the commission before a case is brought. FTC spokesman Mitchell Katz declined to comment. Chief among FTC concerns is the outstanding legal dispute between Nvidia and Intel, both based in Santa Clara, Calif. Intel sued Nvidia in February after negotiations broke down over terms of a 2004 agreement that gave Nvidia access to some of Intel's technology. Besides graphics chips, Nvidia also makes chipsets, or groups of chips that act as the connecting tissue between a PC's main microprocessor and other chips in the computer. The cross-licensing agreement let Nvidia make chipsets that were compatible with Intel microprocessors. Graphics Chip Dispute?When Intel released its latest generation of PC chips in 2008, widely known by the code name Nehalem, it and Nvidia disagreed on the scope of the agreement. Intel said the pact didn't give Nvidia the right to make Nehalem-compatible chipsets. Nvidia argued the opposite. Intel sued in the Delaware Court of Chancery. Nvidia countersued in the same court in March, alleging breach of contract, accusing Intel of unfair dealing, and asking a judge to terminate Intel's rights to Nvidia patents covered in the agreement. The cases are pending. Investigators are probing whether Intel brought the lawsuit to fend off a growing threat from Nvidia in certain high-performance computing applications, says a person familiar with the matter. Graphics chips, known as GPUs, cannot fully replace general purpose PC chips such as those made by Intel because they aren't designed to run with a computer operating system—for instance, Microsoft's (MSFT) Windows. Yet, GPUs are superior to Intel chips at certain demanding number-crunching tasks, including those used in financial modeling and oil and gas exploration. "GPUs are optimized for taking huge batches of data and performing the same operation over and over very quickly, unlike PC microprocessors, which tend to skip all over the place," says Nathan Brookwood, head of Insight64, a chip research firm. Mulloy says Intel's February lawsuit is a "pure contract dispute." For its part, Intel is working on a GPU product of its own, code-named Larrabee, that is expected to be released in 2010. Numerous Nvidia patents, such as those covered by the 2004 cross-license agreement, would likely apply to Larrabee, Brookwood says. So, without the right to use those patents, Intel may have difficulty getting Larrabee out the door. "Nvidia has a lot of fundamental intellectual property for that kind of hardware and I'm not sure that Intel can work around it," he says. Preserving CompetitionIn announcing its settlement with Intel, Sunnyvale (Calif.)-based AMD said it would withdraw complaints against Intel filed with the FTC. That alone isn't enough to derail the FTC's probe, says David Balto, a former policy director with the FTC who led the agency's case against Intel in the late 1990s. "I'm sure Intel is coming up with every argument imaginable about why the FTC should not go forward, but I think the number of arrows in their quiver grows fewer and fewer," Balto says. The FTC's overarching concern is preserving competition in the technology industry. "Usually antitrust enforcement is focused on lower prices for consumers, but in the high-tech economy the commission is concerned about something more important: creating the ability and incentive for firms to innovate, and protecting dynamic competition," Balto says.
Arik_hesseldahl
Hesseldahl is a reporter for BusinessWeek.com
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