On Nov. 7, 1994, Alexander Wolfe broke the story in EE Times about a bug that caused Intel Pentium processors to yield errors in some floating-point calculations. Intel downplayed the problem, until news of the bug spread across the mass media and the processor giant was forced to recall the bad chips, at a cost of millions.
Now there's something else at Intel that just doesn't add up. Painful as it might be, the sooner the company comes clean, the better.
On May 13, the European Commission slapped Intel with a $1.45 billion fine after weighing at least eight complaints of anticompetitive business practices by the company. The EC said Intel had made rebate payments to Acer, Dell, Hewlett-Packard, Lenovo, NEC and a European retailer over a period of more than five years so that the companies would buy more of its CPUs and would delay or restrict plans for selling products based on processors from Advanced Micro Devices.
Intel chief executive Paul Otellini vows to fight the decision and claims the company can refute the EC's evidence. He says the EC, in its case against Intel, did not admit into evidence or properly analyze exculpatory documents and testimony supporting Intel's defense.
We find that hard to believe.
Otellini declined an opportunity to provide the press this strong evidence. More significantly, in cases that resulted in similar findings against Intel in South Korea and Japan in 2008 and 2005, respectively, the evidence in question apparently either was not presented or had failed to convince regulators.
Let's be frank. PC makers work in a climate tinged with fear because their two biggest suppliers—Intel and Microsoft—are monopolists with business practices that one would be polite to call aggressive.
OEMs share a small portion of the blame. During the Microsoft antitrust case, one top PC maker told us about rebates from market development agreements used to shut out Windows competitors. The money—often arriving just days before the close of a financial quarter—was like crack cocaine to an industry that lives on razor-thin margins.
Luckily for Intel and Microsoft, end users have been blissfully ignorant of what happens in the high-tech industry. But that won't last forever.
The EC plans to publish its full 542-page report soon. Early next year, testimony could begin in a U.S. case AMD has brought against Intel based on similar allegations. Other U.S. investigations are pending.
It's time for some transparency and candor. With $10.6 billion in the bank, Intel can easily afford to pay the European fine, and it has amassed enough goodwill among the public to survive a full disclosure of what happened.
Intel has a long history of technical accomplishments and employs many of the industry's finest engineers. It owes them and its customers a full accounting of practices in its sales and marketing organizations.
The day before Intel was scheduled to go to trial at the U.S. Federal Trade Commission in 1999, the microprocessor giant settled with the government. The move ended a long antitrust case against Intel, and the company avoided a steady stream of negative press of the type that its partner Microsoft had endured during its own antitrust litigation.
As it has done in South Korea, Intel could appeal Europe's decision, dragging out a case that was originally filed nine years ago. But the facts, scope and penalty in the European case are much broader than in the earlier U.S. antitrust action.
Indeed, the chip maker is now in a situation where it must face a growing perception of guilt. By its own count, Intel is facing "at least 82 separate class actions" filed by lawyers on behalf of customers in at least eight U.S. states who allege they have been injured by paying higher prices for computers containing Intel microprocessors, Intel said in a February annual filing with the U.S. Securities and Exchange Commission.
There's no question Intel has made great contributions to the industry with its technology. Now it's time to make an equally great contribution with its honesty.