News EU Re-Imposes $400 Million Fine on Intel

[Admin]

EU fines Intel for rebates it made to PC makers between 2002 – 2006.

EU Re-Imposes $400 Million Fine on Intel : Read more

 

[-Fran-]

And, from what I remember, AMD in the US settled outside of court and this gives Intel free reign to do it again (or so I recall) without AMD (or any other as part of the settlement) to object.

At least it seems like in the EU this won't be forgotten so easily... Although this feels (and looks) like "too little, too late".

Still, I'd say this is the worst time for this to hit Intel. The timing seems... Unfortunate for them.

Regards.

 

[punkncat]

Lol, I giggle a bit when there is mention of how "Intel is hurting", "it's a bad time for them"

On the worst projection they are sitting near a 70% market share. That is a LONG LONG way from hurting. Maybe they aren't as dominant as they once were, and that has been nothing but good for the market as well as pushing them to innovate as well. Intel isn't going anywhere.

 

[bit_user]

Lol, I giggle a bit when there is mention of how "Intel is hurting", "it's a bad time for them"

Well, they only posted a net profit in 2 of the last 5 quarters. The most recent quarter was the best of the lot, suggesting they might've turned a corner.

On the worst projection they are sitting near a 70% market share. That is a LONG LONG way from hurting. Maybe they aren't as dominant as they once were, and that has been nothing but good for the market as well as pushing them to innovate as well. Intel isn't going anywhere.

It's certainly not as if they'll go out of business. The issue would just be that they might have to cancel more products/projects or exit/spin-off more product lines. It also costs money "innovate" (i.e. to invest in future products). Less $$$ means they might have to scale back some features, optimizations, redesigns, etc.

I'm not saying the fine will break them. It seems like a manageable expense, but it could impact their operations and (more importantly) hurt their financial performance - and that's something the execs care about, a great deal.

I'd add that I'm currently annoyed not to be hearing about Alchemist+. I was thinking about buying one, if it delivers a measurable improvement over the current A770. I hope it didn't get cancelled, but it would probably make sense for them to have killed it.

 

[punkncat]

Well, they only posted a net profit in 2 of the last 5 quarters. The most recent quarter was the best of the lot, suggesting they might've turned a corner.

I am just going to drop this here:

Intel Net Income/Loss 2010-2024 | INTC

Intel annual/quarterly net income/loss history and growth rate from 2010 to 2024. Net income/loss can be defined as the company's total income or loss before preferred stock dividends, taken from the Income Statement <ul style='margin-top:10px;'> <li>Intel net income/loss for...

www.macrotrends.net

Look at the years leading up to 2017. Look at '18-20. All this is a market correction back to what has been the average for years. They had exceptionally good years three years running, well above (nearly double) their traditional income.

This is like the little hen crying about how bad things are with a country ham under her arm.

 

[bit_user]

This is like the little hen crying about how bad things are with a country ham under her arm.

The quarter before the last one was their worst in like 20 years. I get that Intel's performance had been abnormally strong since 2017, but that doesn't make it any easier, when you're losing so much money. Right now, their profitability still seems a bit precarious.

And I can't emphasize this point enough: the investors want profitability and they want the execs to do whatever it takes to achieve that. So, execs will do dumb things like canceling important investments the company is making into R&D. Gelsinger has to fight to keep those, which is why he sacrificed so many other activities @ Intel that he deems to be not absolutely essential to the company's long-term strategy.

BTW, I'm neither defending Intel nor condemning the finding or the fine (other than how comically late they are). Just agreeing with @-Fran- that the timing is not great, for them.

 

[JarredWaltonGPU]

The quarter before the last one was their worst in like 20 years. I get that Intel's performance had been abnormally strong since 2017, but that doesn't make it any easier, when you're losing so much money. Right now, their profitability still seems a bit precarious.

And I can't emphasize this point enough: the investors want profitability and they want the execs to do whatever it takes to achieve that. So, execs will do dumb things like canceling important investments the company is making into R&D. Gelsinger has to fight to keep those, which is why he sacrificed so many other activities @ Intel that he deems to be not absolutely essential to the company's long-term strategy.

BTW, I'm neither defending Intel nor condemning the finding or the fine (other than how comically late they are). Just agreeing with @-Fran- that the timing is not great, for them.

I do wonder how much this even hurts, as this is related to actions that happened 15–20 years ago. It feels like the sort of thing that amounts to a slight slap on the wrist. The timing is potentially bad, but don't be surprised if this shows up as an "unexpected expense" in the future when there was otherwise a big jump in profits. Creative accounting practices.

I also wonder how much money has been spent on the lawyers fighting this stuff. There are probably people who have been working on basically nothing else other than fighting these fines for their entire lawyer careers! Someone's resume could probably be boiled down to: "Worked for [Last Names Acronym Law Firm] from 2010-present, fighting to overturn Intel's fines."


Related to this, I can't help but think of Nvidia and what it's doing with GPUs, not to mention DXR and DLSS. Someone, somewhere, is trying to figure out how to effectively bring an anti-competitive practices lawsuit / fine against Nvidia. Count on it. But Nvidia seems to have been a bit less direct in many areas, which makes it harder to prove. I'm sure there are plenty of similarities to Intel's past behavior.

 

[TechieTwo]

IMO Intel will always violate law for profit. It's their way of conducting business and they have enough lawyers to make it financially profitable.

 

[punkncat]

BTW, I'm neither defending Intel nor condemning the finding or the fine (other than how comically late they are). Just agreeing with @-Fran- that the timing is not great, for them.

No worries, I get it. To me this seems to be reminiscent of how bad Nvidia was crying a while back about how bad off they were from the slump after the shut ins and now are making record profits from all this AI stuff.

Intel has WAY too much going for them for this to last. They will move a few things around, make a couple of changes and the investors will be happy once more.

 

[mikewinddale]

Somehow, the EU is almost 70 years behind the consensus of economic research that predatory pricing is not a legitimate concern and should not be outlawed by antitrust law.

As economists have known since 1958, predatory pricing of the sort outlawed by antitrust law is not economically rational, and it would tend to hurt the perpetrator more than the victim.

McGee, John S. "Predatory price cutting: the Standard Oil (NJ) case." The Journal of Law and Economics 1 (1958): 137-169.

 

[ikjadoon]

I'll never forget that, in Intel's heyday of market abuse, Intel literally had Microsoft to throw PC OEMs under the bus on years & months of platform changes just so Intel could make quarterly earnings. That was all it took.

1. Intel's common 915 chipset doesn't meet sys requirements for Vista's new GPU driver model. Intel lobbies Microsoft to lower the Vista UI requirements so the 915 systems can use the new Vista UI.
2. HP makes a massive, expensive upgrade to its PC platforms, migrates to Intel's upgraded & compatible 945. Microsoft promises HP it won't cave to Intel's complaints; the 945 will be the minimum for Vista.
3. Intel complains more & tells Microsoft that one of Intel's quarterly earnings will allegedly miss market expectations because the 945 is in short supply and they would rather sell the cheaper 915 to OEMs.
4. Microsoft decides to throw HP (and other PC OEMs) under the bus. Within weeks of the upcoming Vista launch, Microsoft backtracks on all its commitments and says the 915 chipset as Vista "Capable".

A direct email quote from Microsoft General Manager John Kalkman on Feb 26, 2007:

In the end, we lowered the requirement to help Intel make their quarterly earnings so they could continue to sell motherboards with 915 graphics embedded.

These internal emails were released as part of a lawsuit discovery process that Ars Technica wrote about.

 

[helper800]

Somehow, the EU is almost 70 years behind the consensus of economic research that predatory pricing is not a legitimate concern and should not be outlawed by antitrust law.

As economists have known since 1958, predatory pricing of the sort outlawed by antitrust law is not economically rational, and it would tend to hurt the perpetrator more than the victim.

McGee, John S. "Predatory price cutting: the Standard Oil (NJ) case." The Journal of Law and Economics 1 (1958): 137-169.

Different circumstances in a different industry in a different century. Predatory pricing can and will net you massive profits if it helps you secure double the market share you had before, at least in this industry. Intel nearly bankrupted AMD and the only reason they were able to claw themselves back was because of ingenuity right when they needed it.

 

[ikjadoon]

I do wonder how much this even hurts, as this is related to actions that happened 15–20 years ago. It feels like the sort of thing that amounts to a slight slap on the wrist. The timing is potentially bad, but don't be surprised if this shows up as an "unexpected expense" in the future when there was otherwise a big jump in profits. Creative accounting practices.

Intel has already paid this fine, no? That's why, I thought, when it was initially overruled at the General Court, Intel actually sued the EU and demanded a refund.

Intel Wants Refund Over EU’s Overturned AMD Fine

The saga goes back as far as 2000

www.tomshardware.com

So this litigation may well continue for years, but Intel's books should already reflect the fine. Hopefully with the last set of appeals (EU appealing removing the initial $1.06b to begin with; Intel on getting a refund on the $1b) in the next year or two, we'll see how Intel 'turns a new leaf'.

Intel and the Courts. You could fill a documentary (or two) with all of Intel's legal troubles and subsequent missteps.

Another "fun" bite of history where you think Intel won, but in the end, they lost.

1. Intel allegedly steals from DEC for the Pentium & Pentium II.
2. DEC sues Intel.
3. Intel sues DEC.
4. They settle. Intel wins 'StrongARM', a high-perf / low-power ARM uArch, from DEC.
5. Dan Dobberpuhl, the lead architect of StrongARM, refuses to join Intel.
6. Dan founds SiByte. Dan sells SiByte to Broadcom for $2b.
7. Dan founds P.A. Semi. Dan sells P.A. Semi to Apple for $278m. Apple drops Intel 10+ years later.
8. Intel doesn't know what to do with StrongARM. AMD scares Intel, Intel sells StrongARM for $600m.
9. Intel fails to sell x86 CPUs for phones. W/o that & StrongARM, Intel leaves the mobile market forever.
10. Dan founds Agnilux. Dan sells Agnliux to Google for undisclosed millions.

Intel won one of the world's fastest Arm uArches, whose business was later worth $600 million, and they still couldn't figure out mobile.

You'd never know it: Intel allegedly stealing stealing DEC's work for the Pentium and Pentium II in the late 1990s was one factor that led to Apple releasing the M1 CPU and dropping Intel as a supplier.

 

[bit_user]

As economists have known since 1958, predatory pricing of the sort outlawed by antitrust law is not economically rational, and it would tend to hurt the perpetrator more than the victim.

Oh, right. Because nothing anyone ever concluded in 1958 could possibly be wrong.

Let me tell you some things economics has learned since then:

• Humans aren't perfectly rational market participants
• Participants' access to information affects the efficiency of markets
• Systems thinking & modelling has grown by leaps and bounds

That's enough to make me very skeptical of some old orthodoxies about things like pricing.

 

[JamesJones44]

I am just going to drop this here:

Intel Net Income/Loss 2010-2024 | INTC

Intel annual/quarterly net income/loss history and growth rate from 2010 to 2024. Net income/loss can be defined as the company's total income or loss before preferred stock dividends, taken from the Income Statement <ul style='margin-top:10px;'> <li>Intel net income/loss for...

www.macrotrends.net

Look at the years leading up to 2017. Look at '18-20. All this is a market correction back to what has been the average for years. They had exceptionally good years three years running, well above (nearly double) their traditional income.

This is like the little hen crying about how bad things are with a country ham under her arm.

You seem to be ignoring the rate at which their revenue is declining. While they are not losing much money now if the current trend continues even 1 year longer they will be losing a lot of money. Financial drowning happen quickly for large companies, GE went from the 2nd most valuable company in the world in 2001 to almost bankrupt by 2009 and finally had to blow itself up in 2015.

Sure the financial crisis accelerated GE's problems, but the problems internally were happing in much the same way Intel's are now and would have lead to the same result in 2015 IMO. If Intel can't turn the boat by 2025, I would put down large money in Vegas that they will turn out to be a shell of their former selves. So no matter how someone wants to put spin on the subject, it's a bad time for a 400 million dollar fine on Intel.

 

[JamesJones44]

As economists have known since 1958, predatory pricing of the sort outlawed by antitrust law is not economically rational, and it would tend to hurt the perpetrator more than the victim.

There is a massive difference between predatory pricing (jacking toilet paper up 200% during a pandemic) and business deals. Business deals that incentivize customers to use one product over another is firmly in the camp of anti-trust and not part of predatory pricing.

You can maybe argue the end result maybe the same, but in some cases these deals can be better for a customer (bundling products can be cheaper). It's only an issue when the deal tries to force a weak player out of the market or reduce their opportunities in the market, then it's clearly harmful, but I still wouldn't call it predatory pricing.

 

[Kamen Rider Blade]

Good on EU for forcing Intel to pay.
Intel needs to stop the delay tactics and pay AMD what it's owed and move on.

 

[helper800]

There is a massive difference between predatory pricing (jacking toilet paper up 200% during a pandemic) and business deals. Business deals that incentivize customers to use one product over another is firmly in the camp of anti-trust and not part of predatory pricing.

You can maybe argue the end result maybe the same, but in some cases these deals can be better for a customer (bundling products can be cheaper). It's only an issue when the deal tries to force a weak player out of the market or reduce their opportunities in the market, then it's clearly harmful, but I still wouldn't call it predatory pricing.

Predatory pricing means that you are pricing your components at a loss to gain market share and drive other smaller businesses out that cannot compete. Its an initial loss that brings in much more profit later if you can drive out competition. What you are referring to is profiteering, like during a crisis.

 

[TerryLaze]

It's certainly not as if they'll go out of business. The issue would just be that they might have to cancel more products/projects or exit/spin-off more product lines. It also costs money "innovate" (i.e. to invest in future products). Less $$$ means they might have to scale back some features, optimizations, redesigns, etc.

That's what the 14th gen is, instead of releasing a new arch as they should they released a gen they don't have to pay any (more) R&D for and that will be cheaper to produce due to fab improvements and that will release without any competition at all for new products.
And we already know that the OEMs will gobble them up just to be able to put something new on the market.

Good on EU for forcing Intel to pay.
Intel needs to stop the delay tactics and pay AMD what it's owed and move on.

Intel already paid AMD 1bil + back in 2009 after the settlement, this is a different thing and all of the money will only go to the EU. Basically the 1.06bil already went to the EU and either intel got that back already so will pay the 400mil fine out of that or they didn't already got it back in which case they will just get less money back from the EU.

Settlement Agreement

"a. As consideration for this settlement agreement alone, Intel agrees to pay and shall pay to AMD the total sum of One Billion, Two Hundred and Fifty Million Dollars ($1,250,000,000), in U.S. currency, within thirty (30) days of the Effective Date."

 

[TerryLaze]

Intel nearly bankrupted AMD and the only reason they were able to claw themselves back was because of ingenuity right when they needed it.

AMD paid 5,4bil for ati in 2006, a year they made negative money in...
AMD ruined themselves with that move, so much so that they were forced to sell their fabs and the only thing that allowed them to keep going for long enough to turn it around was the 1.25bil they got from intel.

The Rise and Fall of AMD

AMD's Fall. AMD has long been subject of polarizing debate among technology enthusiasts. Considering that it was once considered equal to Intel, many wonder why AMD is failing. However,...

www.techspot.com

Three days before Intel launched Conroe, AMD managed to sucker punch itself. On July 24, 2006, AMD announced that it intended to acquire ATI in a deal worth $5.4 billion, comprising $4.3 billion in cash and $1.1 billion raised from 58 million shares. The deal was a huge financial gamble, representing 50% of AMD's market capitalization at the time, and while the purchase made sense, the price did not

ATI was grossly overvalued, a conclusion AMD eventually acknowledged when it absorbed $2.65 billion in write-downs due to overestimating ATI's goodwill valuation. To compound the lack of management foresight, Imageon, the handheld graphics division of ATI, was sold for relative peanuts to Qualcomm in a $65 million deal (now named Adreno, an anagram of "Radeon" and an integral component of the Snapdragon SoC), while Xilleon, a 32-bit SoC for Digital TV and TV cable boxes, was sold to Broadcom for $192.8 million.

 

[Nick_C]

This is the same Intel that was found to have implemented a means of crippling the performance of competing OEMs CPUs by having code compiled using ICC send chips without "GenuineIntel" as a its "VendorID" string down sub-optimal codepaths (i.e. ignoring the actual feature set of the CPU). In the FTC settlement they didn't even need to remove the implementation - just make clear that the bias towards Intel CPUs is a feature of the compiler.

 

[thestryker]

I'm not really sure this will have any impact on Intel aside from no company wanting any money to go away. They'd had the entire fine amount held in an account during most of the process so I doubt even after the initial overturn they'd have quickly moved to reintegrate all of the funds.

 

[punkncat]

You seem to be ignoring the rate at which their revenue is declining. While they are not losing much money now if the current trend continues even 1 year longer they will be losing a lot of money. Financial drowning happen quickly for large companies, GE went from the 2nd most valuable company in the world in 2001 to almost bankrupt by 2009 and finally had to blow itself up in 2015.

Sure the financial crisis accelerated GE's problems, but the problems internally were happing in much the same way Intel's are now and would have lead to the same result in 2015 IMO. If Intel can't turn the boat by 2025, I would put down large money in Vegas that they will turn out to be a shell of their former selves. So no matter how someone wants to put spin on the subject, it's a bad time for a 400 million dollar fine on Intel.

We can conjecture all we want. There certainly are, and maybe you are one of, the type of people that can see these trends and leverage them to make themselves quite rich in the stock market...and I am assuredly not one of them. IMO it's too early to bag Intel for some losses given the market enviro they (and everyone else) are dealing with over the past couple of years. Say what you want, but AMD took it straight to their gut, along with other factors. Years and years of refreshes instead of real innovation, poorly performing sectors of their business model, etc. But, at the same time, give it a couple of years when some of the folks who bought into PC over the shutdowns to age out of current hardware....

Long story short, we shall see.

 

[JamesJones44]

Predatory pricing means that you are pricing your components at a loss to gain market share and drive other smaller businesses out that cannot compete. Its an initial loss that brings in much more profit later if you can drive out competition. What you are referring to is profiteering, like during a crisis.

Yep, you are 100% correct. Forgetting my Econ 101 already.

Thank you for the correction!!!

 

[rtoaht]

This is the same Intel that was found to have implemented a means of crippling the performance of competing OEMs CPUs by having code compiled using ICC send chips without "GenuineIntel" as a its "VendorID" string down sub-optimal codepaths (i.e. ignoring the actual feature set of the CPU). In the FTC settlement they didn't even need to remove the implementation - just make clear that the bias towards Intel CPUs is a feature of the compiler.

Shouldn't AMD develop their own compilers instead of depending on Intel's compilers. At least AMD should pay some royalty to Intel to let them use Intel's compilers instead of crippling or blocking.