Can AMD break the Intel code of silence?

By the time you read this, you will have most certainly heard that AMD is suing Intel.  According to the complaint that AMD filed with the US District Court in Delaware, AMD is accusing Intel of engaging in behavior that violates US antitrust law and is seeking both injunctive relief and an as-of-yet undetermined amount of loss-related and punitive damages.

By the time you read this, you will have most certainly heard that AMD is suing Intel.  According to the complaint that AMD filed with the US District Court in Delaware, AMD is accusing Intel of engaging in behavior that violates US antitrust law and is seeking both injunctive relief and an as-of-yet undetermined amount of loss-related and punitive damages.   Although AMD was emboldened by the findings of Japan's Fair Trade Commission that Intel violated that country's monopoly act, Charles Diamond, AMD's lead attorney on the matter, told me earlier today via phone that it was more about the timing and coalescence of certain market factors.  Particularly, said Diamond, "the way Intel's aggressiveness was timed with AMD's rise to prominence as a technology leader."  In my interview, Diamond, who works for the Los Angeles-based law firm of O'Melveny & Myers, also said "AMD has shown it can compete and it can out innovate and is capable of bringing to market better and cheaper products.   That being said, the decision by the Japanese authorities was an important event." 

In the complaint, AMD cites numerous examples of what it finds to be a pattern of practices that run afoul of US antitrust law.   One of the examples that struck a chord with me is the one where AMD claims that Intel used its leverage to hush Acer from extolling the virtues of the AMD technology-based products it was on the verge of launching:

AMD’s September 23, 2003, launch of Athlon64 was a watershed event for the Company. Upon learning the launch schedule, Intel did its best to disrupt it. For example, Acer committed to support the AMD rollout by making a senior executive available for a videotaped endorsement and by timing the introduction of two computers, a desktop and a notebook, to coincide with AMD events planned for Cannes, San Francisco and Taiwan. Days before the event, Intel CEO, Craig Barrett, visited Acer’s Chairman, CEO and President in Taiwan, expressed to them Intel’s “concern” and said Acer would suffer “severe consequences” if it publicly supported AMD’s launch. The Barrett visit coincided with an unexplained delay by Intel providing $15-20 million in market development funds owed to Acer. As a result, Acer withdrew from the launch in the U.S. and Taiwan, pulled its promotional materials, banned AMD’s use of the video, and delayed the announcement of its Athlon64-powered computers. Acer’s President subsequently reported that the only thing different about Intel’s threats was the messenger – they were “usually done by lower ranking managers,” not Intel’s CEO.

Bear in mind that this is AMD's version of the story and Intel is very likely to either have a different version of the events, or deny the allegation altogether.  That said, over the years, when hardware vendors have come to me to show off some new non-Intel-based gear, I have never been able to get them to go on record with a discussion of how the product fits into their notebook, desktop, or server lineups from a price/peformance ratio perspective when those lineups also include Intel-based products.  This was most certainly the case when IBM once offered the Aptiva-branded AMD-based desktop computers and was again so in more recent years when IBM began offering Opteron-based servers. 

The issue also made my job difficult to do when I was writing my series of stories on how Intel was falsely portraying Centrino as a collection of mobile technologies that outperformed similar configurations that didn't use Intel's WiFi radio (I wonder if this could turn into a class action suit involving other radio manufacturers).  Back then, there were several companies, Dell and IBM among them, that gave buyers a choice of configuring notebooks as Centrino-based WiFi notebooks, or as non-Centrino notebooks.  The option still exists today for some manufacturers.  Except for their WiFi radios, the notebooks were identical.  But when asked for the results or even an on the record comment regarding  their own battery performance tests to see how the notebooks with Intel's radios compared to the notebooks without, I was invariabley told by the public relations personnel at those vendors that "they weren't going there."   Although no vendor went on record to say what "there" was, it was unquestionably the territory that could spark Intel's retaliation.

While I'm relying on memory and don't have all the details of those instances, the issue popped up again just last week when I interviewed AMD's director of enterprise business development Ed Gasiorowski and HP's acting director of commercial notebooks Steve Schultis about the introduction of HP's AMD-based notebook.  Schultis flat out would not answer my question as to how the new notebook compared to HP's other Intel-based notebooks despite the fact that I asked at least twice.   Here's a transcript of that part of the downloadable MP3 audio interview (time codes included so you can fast forward): 

[13:28 David]: We talked about the price, $999, which is a fairly inexpensive price,... when you're thinking about building or choosing a processor to put into one of your notebooks, and you obviously have some choices, you can go with either AMD (and they obviously offer a couple of different mobile offerings), or you can go with Intel,.. well, let's first ask this question, do you also have notebooks that target the same group of people but that have  Intel processors in them. 

[13:55 Schultis]: Yes we do. It's really all about offering a choice to our customers. So we have alternatives from both AMD and Intel-based systems and we leave it up to our customers to make the choice as to the technology that best suits their needs.

[14:11 David]: Well, other than what they may already know about the difference between an AMD and an Intel processor, um, when you think about the specific needs that you're catering to with notebooks that have both in them, or either one in them, um, who do you think the AMD processor-based notebook is targeted at versus the Intel notebook? One question is, are the AMD notebooks less expensive than the Intel-based notebooks?

[14:43 Schultis]: Well, I think if you look at the $999 price point including that three year warranty and the biometric sensor, um, you find that that there's a significant value there, that's, uh, typically we haven't included in our SMB notebooks.  The three year warranty is normally an upsell that is added on but we've been able to include that at the $999 price point with this overall system. So we've been able to put together a tremendous value for the customers. But, at the end of the day, it's really the customer that decides. So we do offer both choices and let the customer see which things meet their needs based on, uh, the different configurations..

[15:27 David]: I'm not going to ask for specific cost information, but, to HP, does AMD represent an opportunity to offer more value in a notebook offering than does Intel based on the cost of the part?

[15:40 Schultis]: I think it gives us an opportunity to offer a choice to the customers with the different feature sets that both of those, uh, partners bring to us. So... 

[15:52 David]: So, uh, again, Let me ask more directly. Do the AMD parts come at a lesser expensive cost than the Intel parts. I mean, one of the long term, uh, advantages of AMD or the reason that a lot of people thought AMD was so cool for the longest time was that, you know, you could get a lesser expensive product with the AMD technology built into it but not sacrafice anything in the way of performance or functionality.

[16:18 Schultis]: I think that the price points in the offerings will kind of speak for themselves on that area. You can go out and make the comparisons and, uh, I think that this is a very strong strong value offering that will appeal to many of our customers.

[16:33 David]: Well, if I'm a buyer and I'm looking at this, and I'm saying "Well one of the things that's cool about this is that today, Intel doesn't really offer a hybrid 32/64 bit part notebooks." Isn't that correct?

[16:42 Schultis]: That's correct. We feel that the 64 bit technology is, um, not, um uh, not something that we are enabling in the operating system out the door with this product. Uh, but it is someting that we'll watch over time. Um, so the product offering includes XP Pro with the 32 bit version. Uh, but what we'll look at is, over time, the 64-bit, not only applications but drivers and everything that's needed uh, from a mobile perspective, will become available.  So, for someone buying today  this could give them some peace of mind that down the road, when those pieces are in place, uh, they will have an upgrade path.

[17:30 David]: OK, so today, let's be really clear about this, that the notebook goes out and even though it's got 64 bit support on the hardware, it doesn't yet have 64 bit support in the software but somewhere down the line, uh, you may make that option available to your existing buyers to upgrade to that.

[17:49 Schultis]: Exactly. Uh, we're going to continue to monitor the 64 bit development on the client mobile side and, uh, as that becomes ready for primetime, we will enable that.

Questions directed at AMD's Gasiorowski

[22:28 David]: Going back to you Mr. Schultis, when you look at that market that HP is going after, does that fairly narrow market [previously described by AMD's Gasiorowski] represent something that HP sees as a fairly good market to particpate in, a fairly lucrative one?

[22:39 Schultis]: Absolutely.  Recent IDC numbers have shown a 24 percent year over year growth in the SMB notebook market and in fact HP recently sponsored a Harris Interactive survey and in that, notebooks were noted as the top technology priority for one out of every three SMBs. And, uh, 36 percent of those were intending to buy a notebook this year. So, overall, SMB is a great business for HP, uh, but the notebook side is actually a very fast growing and very important business for us.  So, uh, I'm not sure that I would use the word niche to describe that because it is a large part of our business.

[23:18 David]
: Well, I use niche because I'm referring not just to SMB, but further kind of slicing it down to those members of the SMB market that will need to take advantage of some sort of 64-bit capability for digital content creation or engineering and engineering design, uh, and also who need a thin and light.. you know.. who are willing to give up a little bit of performance for something that's a little more thinner and lighter. Uh, that seems to be the the target that, uh, Mr. Gasiorowski just agreed would be the target of the Turion processor so I'm just kind of confirming with you that you see, uh, opportunities in that market.

[23:52 Schultis]: Uh, we do see opportunities, but we see actually as having broad appeal because the the 32 bit performance on that Turion 64 is, uh, very, uh, very good. And, uh, we think that, uh customers who are looking for good performance, great battery life, in a thin and light product, uh, will look at this not only from a obsolescence protection story (I can get 64-bit down the road), but I think that, um, frankly the majority of our customers will be really focused in on just the 32-bit side of it, uh, in the near term and so I think that, uh, has some fairly broad appeal from that perspective.

[23:30 David]: Uh, Mr. Schultis, did you guys do any testing on this product? Did it turn out ...because you just talked about the great performance of the Turion processor ...uh, where did it uh, turn up in terms of performance against Intel?

[23:45 Schultis]: Uh, There are several benchmarks uh, out there. I think that uh, you know, what I would say is that, uh, from a battery life standpoint, uh, this product uh, is in the 3 hour and 45 minute range and uh it does a great job the types of applications that a business user would be doing.  Uh, I think that you can kinda contrast with that with what SMBs were buying.. you know two years ago... virtually every SMB offering was a desktop processor-based offering in the 7-8 pound range with a battery life of 2 to 2 1/2 hours. So, we're very please to bring this out in the thin and light space, uh, that gives you the great battery life, gives very competitive processing power, and uh, is a great value at the $999 price.

[24:34 David]: But to contrast it versus systems that are two years old is probably, uh, while it's a fair comparison, because we can say "boy we're so much better off now than we were then," uh, really today, the people who are listening right now are trying to say "Well how do I make a decision between the two?" So, no vendor is going to bring a chip in and just put it in a notebook without running it through some tests and kind of figuring out where, where it, uh, how it compares to the other offerings that it's selling, uh so, can you give me some idea of where the Turion-based notebook falls in both peformance and battery life versus the offerings from Intel?

[26:11 Schultis]: Uh, sure. I think that, uh, there are a lot of benchmarks out there, uh but, from our perspective, it fits in this 3 1/2 hour to 4 hour class which is what we consider kind of, uh the entry battery life for a thin and light notebook. It needs to be in that range.  And we see the offerings from both companies uh being uh, being uh, in this class of, this class of products from a battery life standpoint.  From a benchmark standpoint, we definitely look at uh, all the different, uh benchmarks and and uh, you know I encourage your readers to go take a look the various ones out there because you see kind of a variety of results. But I think that uh, you see that this offering is very competitive from a standpoint of applications that business users would be looking at.

[27:07 David]: So, I'm getting a feeling that you want to be .. that you don't want to be too specific on the benchmarks and I understand that ....I'm sensitive to the fact that you have partnerships with both companies, you have to be careful about how you present the information. Is that what's...

[27:21 Schultis]: And we like to let the customer make the choice on that. Uh, and they can look at the benchmarks that are most relevant to what they're doing, look at the configurations, and offerings and pricing and make that decision themselves.  So, uh, we're very pleased to add this to our lineup and give the customers the choice and uh, I  think that's uh kind of the big news is that we've got an AMD Turion 64-based product uh that gives us choice in the thin and light space.

As you can see, Schultis is not just coy, he's downright evasive.  I'm not sure how many different ways I could have asked the question. And, when I asked him about the senstivity to the Intel relationship, he adds to my conclusion rather than denying it.  The reason this important is that when vendors like IBM, HP, Dell and others come to the technical press to disclose them, often under a non-disclosure agreement, on their roadmaps, every single offering is neatly positioned to attract a specific target.  The vendors will show stack and charts saying "This is our low end peformance big screen offering and this other one is our mid range performance big screen offering and and this other one is our high performance big screen offering, and so on.  Details regarding comparative performance are provided, as they should be to both the press and to customers.  But once an AMD-based product enters the equation, a code of silence kicks in.

Whether or not that code of silence can be broken as a result of this case -- in other words, whether or not hardware manufacturers will provide testimony that favors AMD's case -- remains to be seen.  Said Diamond in my interview of him, "We wll be subpoenaing the hardware vendors for all of their e-mails to flush out those conversations."