Intel CEO: The exclusivity and loyalty of OEMs are up for bids

How much change will the PC market actually see?

We presented Moorhead and AMD Communications Director John Taylor with Otellini's statement of just minutes earlier, painting the CPU market as being driven by manufacturers whose loyalties have price tags that dominant players, by the EC's definition, are better able to satiate than others. While both declined to knock down the Intel CEO's illustrations entirely, Moorhead asserted there's a big difference between volume pricing -- which Otellini said was the only dynamic in play during the relevant period of the EC's investigation -- and exclusionary pricing, which gives customers huge price breaks in exchange for exclusivity. However it was that these deals were entered into, he told us, the EC determined that they were in fact made, and that Intel is in fact responsible.

"Who knows how far prices would have fallen had Intel played fairly?" Moorhead asked rhetorically. He went on to cite the count of the EC ruling where HP declined a majority of AMD's offer of free CPUs, in order not to interfere with its existing deal with Intel. "You can't get cheaper than free," he said.
At one point during today's Intel press conference, a reporter asked Otellini whether he felt consumers would be less inclined to purchase Intel-based products. "It's hard to imagine that the dynamics of competition would change," he responded. "Most customers buy from both suppliers today. Most customers buy more or less from each supplier depending on the quality of the products, the competitiveness of the products, and the pricing. That dynamic hasn't changed in my career at Intel, which is 35 years, and I don't expect it to change. I don't think a customer is going to put him- or herself at a disadvantage by buying inferior or more costly products just to try to walk lines that maybe are artificial."

AMD's Pat Moorhead, though, believes that Intel is now permanently marked. Like an ex-convict, it now has to check in with EU authorities periodically to have its behavior monitored. And that stain may extend to its business deals in the US and elsewhere, he said: "If someone steals from his neighbor, it still makes that person a thief, even though he didn't steal from your house."

From this point, AMD's John Taylor believes that customer and even press perception of AMD will be fairer and more even-handed. "It's not AMD that has to change," he repeated a few times, especially after we cited Otellini more times than he might have liked. "There is [now] a virtuous cycle of fair competition and innovation. [In its absence,] it doesn't matter how hard AMD innovates; the judges will score half-a-point for every blow AMD lands and two points for every blow Intel lands. [Intel's behavior] shuts down that virtuous cycle, stands on AMD's windpipe, and caps that reward for innovation that AMD would receive, that could have been poured back into R&D."

Expecting the opposite opinion from Otellini, one reporter asked him today whether he expected PC prices could rise as a result of the ruling, partly from Intel passing on the costs of the fine (payable within 90 days of the ruling) to its customers. Repeating his notion that the fine is not officially a "cost" per se that can be transferred to consumer prices, the CEO responded, "I think they'll absolutely see a difference in the price of PCs. Certainly...prices will continue to go down. Quality goes up, performance goes up. There's nothing in this ruling that reverses Moore's law."