After 10 years of working in Silicon Valley, I’m not so naive as to think that the company with the best technology always wins.
And it’s long been clear to me that behind the genteel reporting of quarterly earnings and the aspirational speeches by executives about innovation and competition, there is fierce, hand-to-hand combat waged by rival sales forces for every dime, for every customer.
I get it. Sales is a bloody contact sport.
I still found myself stunned by the behavior of Intel documented by the European Commission in its antitrust case. One would hope that even the most aggressive of competitors would find a line it would not cross. One would hope that a large public corporation would not engage in systematic behavior that could risk eroding the company’s hard-won reputation built over decades should it ever come to light.
But in Intel’s case, apparently not. Instead, it appears that some executives at this legendary company have misplaced their moral compass.
In announcing the record fine Wednesday, the European Commission released only the barest of details about the strong-arm tactics employed by Intel. We’ll have to wait for the commission to release the 500-page report to bring the true picture into sharper focus. But even the basic details contained in the three-page release were enough to shock.
Pay to delay
Intel offered rebates to get PC makers to not buy chips from rival Advanced Micro Devices. Intel paid PC makers to delay releasing products using AMD chips. One company felt so intimidated, it refused to take hundreds of thousands of free chips from AMD for fear of reprisal by Intel. And finally, Intel attempted to conceal this from the commission, which resorted to things like raiding its German office to gather documents for the case.
What happened to the company of Andy Grove? What happened to the company of Gordon Moore?
“These conditions, to buy less of AMD’s products or to not buy them at all, prevented AMD from competing with Intel on the merits of its products,” said Neelie Kroes, European commissioner for competition policy, in announcing the fine. “This removed the possibility of genuine choice for consumers and undermined innovation.”
Merit. Choice. Innovation. Those notions seem downright quaint in light of these revelations.
As I read the commission’s release, my mind flashed back to summer 2004, when I covered the U.S. government’s antitrust trial that it had launched to block Oracle’s hostile takeover bid for PeopleSoft. The trial brought to light a number of unsavory sales practices, such as desperately deep software discounts offered by Oracle; a “Crush SAP” marketing program created by PeopleSoft; and loads of complaints from customers about obnoxious and overly aggressive salespeople.
But it all stopped short of the line.
Intel’s behavior even seems egregious when compared to some of the worst accusations leveled against Microsoft during the days when it faced its own antitrust legal problems. Yes, Microsoft may have been heavy-handed in dealing with PC makers in requiring them to take its browser so it could suffocate Netscape. But it never paid people to not distribute Netscape Navigator.
In that case, Netscape fell into a death spiral from which it never recovered. In the case of AMD, the ruling provides validation after years of what seemed like a quixotic quest for justice. Even so, it’s unclear just how much this will help AMD recover financially from other self-imposed stumbles in the past couple of years.
Damage to Intel
Intel’s challenge is less financial, but no less challenging. While it remains the dominant chip company in the world, and is likely to keep doing so, it now must find a way to restore its once lustrous reputation.
Contact Chris O’Brien at 415-298-0207 or cobrien@mercurynews.com.
