FTC Presses On with Intel Probe

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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 Competition

In 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.

Hesseldahl is a reporter for BusinessWeek.com.

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