WASHINGTON Intel Corp.'s settlement this week of Federal Trade Commission antitrust charges won't have any profound or immediate effect on the PC or workstation arenas, experts told EE Times, but could presage a subtle shift in the industry's movement to 64-bit computing.
In its broadest terms, the FTC agreement requires Intel to freely provide its OEMs with advance technical information on upcoming chips. Faced with potential legal restraints, Intel may have to tread more gently as it attempts to promulgate its upcoming IA-64/Merced processing hardware.
Separately, Microsoft, the other half of the Wintel duopoly, which is embroiled in its own, separate Justice Department antitrust action, may be forced to offer less aggressive terms as it bundles its forthcoming Windows 2000 64-bit operating system into the marketplace.
"I think we're going to see a kinder, gentler Intel," said one designer of high-end servers. "Do you really think they want this stuff to go out into the market and not work the best way it possibly can?" Microsoft, too, is reportedly anxious to move Windows 2000 into mainstream enterprise computing and fend off looming threats from revitalized 64-bit Unix releases planned by SCO, Hewlett-Packard and others.
A tendency toward a somewhat friendlier playing field may be the first result of the FTC agreement announced Wednesday (March 17). "The [Intel] settlement says that you can't strong-arm intellectual property out of your competitors," said Andrew Allison, a market analyst based in Carmel, Calif. who is publisher of the newsletter, Inside the New Computer Industry. "Intel very wisely chose to settle. Microsoft hasn't been that smart."
"It's very clear that there have been abuses, although people can argue about" their extent, Allison said. However, he thinks Intel will adhere to the letter of the agreement. "Intel's aggressive but they understand the limits and they've been given new limits."
Specifically, the agreement prohibits Intel from denying to any OEM "information on a general-purpose Intel microprocessor of the type necessary to enable a customer to design and develop systems incorporating those microprocessors in time for introduction into the marketplace by the official release date for such microprocessors."
In addition, the agreement reads: "For purposes of this Order, it shall be presumed that disclosures of advance technical information no later than six months before the official release date of a microprocessor are sufficient to enable a customer to design and develop a system."
However, in what may be interpreted as a loophole, the agreement "does not include detailed microprocessor design information not generally provided to customers."
For legal scholars, there are far more serious loopholes in the agreement which are, at least initially, raising some eyebrows.
"This settlement is a good deal for Intel," said Richard H. Stern, a Washington patent attorney and law professor at George Washington University. "I think this is as good a result as Intel could have gotten maybe better." However, he noted that there are some provisions "which leave open some big questions."
Specifically, the agreement appears to free Intel of its requirement to provide timely information and chip shipments to an OEM if that OEM is suing Intel or has sought an injunction against Intel.
Pointing to additional wording in the agreement, Stern said, "Let's go back to those loopholes where it says the customer shouldn't seek an injunction. This is kind of like a reverse compulsory license, where the customers of Intel have to agree that they're going to give Intel a license. Because that's what it amounts to. If you can't get an injunction, that means all you can get is what amounts to some kind of royalty.
"So how do you decide what the royalty is?" Stern continued. "When you're bargaining for a patent license, the threat of an injunction is a factor that tends to increase the amount you can get as a royalty. If you can't get an injunction, there isn't much royalty you can get, either. There isn't much mechanism in this agreement, as far as I can tell, to resolve such issues."
The bottom line, said Stern, is that "There should be more definition in the agreement, specifying how it should be implemented in the real world."
For its part, Microsoft officials said they would have no comment on the Intel/FTC agreement.
Industry analyst Allison sees the Redmond, Wash., software giant as pursuing a scorched-earth policy in its separate battle with the Justice Department. "I think Microsoft is self-destructive," said Allison. "I think Unix is reemerging. The longer Microsoft messes around with Windows 2000, the stronger that swing to Unix will become."
For its part, Microsoft officials denied any friction within the industry. Further, they said that a "kinder, gentler" Microsoft wasn't necessary to prod the industry toward 64-bit Windows, because the company was already pretty easy to get along with. "We work with thousands of customers each day to make sure all our products work well," a spokeswoman said. "Microsoft has acted in a way that's good for the industry."
Nevertheless, Microsoft recently disclosed plans to reorganize the company into four separate business units in a bid to more directly address the needs of software developers, enterprises users and Internet development. The move was characterized by some observers as a preemptive strike to thwart any potential breakup of Microsoft, should it lose its antitrust dispute. Microsoft officials said the reorganization had no relationship whatsoever to the Justice Department case. Industry analyst Allison characterized the reorganization as largely cosmetic.
Most immediately, the Intel settlement may have few repercussions in the workstation world from which the dispute initially arose. The original government complaint against Intel charged that it had withheld technical information from Compaq Computer Corp., Intergraph Corp. and Digital Equipment Corp.
"My hunch is it [the settlement] probably means nothing to Intergraph," said Jay Moore, senior workstation analyst at Aberdeen Group Inc. (Boston). "Intergraph made the right move in spinning off their Intense 3D graphics business, because there's a big market for their graphics technology. But their workstations are descending on the list of buyer choices. They certainly were hurt by being blackballed by Intel. However, other market forces have hurt them as well."
He pointed to the emergence of Compaq and Dell as major workstation vendors and the fact that the workstation buying process has become less of a specialized sell and more of a commodity market, analogous to the PC arena. Yet Moore believes Intergraph's workstations have a good shot at remaining strong in certain vertical market segments like EDA.
At Intergraph (Huntsville, Ala.), chairman and chief executive officer Jim Meadlock took a clear-eyed view of the settlement. "I think the FTC did what it needed to do," he said. "I think it's unrealistic to think any Federal judge would shut down Intel."
Despite the agreement, under which Intergraph is ensured continued access to Intel technical data and microprocessors, the relationship between the two companies appears rocky. "It's very confrontational and very unfriendly," Meadlock said. "We were the main force against them in this case. They don't give us any more [technical information] than they have to."
Indeed, to beef up its business prospects, Intergraph spun off its Intense 3D graphics operations in the midst of the dispute, creating a business separate from its workstation division. That decision was prompted by the growing popularity of Intergraph's innovative graphics technology a new 3-D architecture code-named "Wildcat" that was introduced last year. Meadlock said the graphics business is proceeding apace and Intergraph has already snared Dell, Compaq and IBM as customers.
At the same time, the company's workstation business sagged as a result of the donnybrook with Intel. "In 1995 and 1996, we were the number one workstation competing in the Windows NT space," Meadlock said. "This whole confrontation with Intel has hurt us. We're now number four or five. Will we ever get back to where we could have been? I don't know."
For its part, Intel sees the FTC agreement as hewing to a narrow path. "It's a framework if there's an IP dispute between us and our customers," said an Intel spokesman.
But the Intel/Intergraph dispute may not be entirely dead yet. Intergraph still has a patent lawsuit against Intel, filed in November 1997. The case is currently scheduled to come to trial in Alabama in February 2000.
Indeed, Allison said, "The interesting thing is going to be this case, which is the second shoe dropping. If Intergraph prevails, then Intel will be in for a lot of trouble."
More important, a broader FTC investigation, which is reviewing all of Intel's business practices, is still being conducted. Intel said it is cooperating with that investigation.
Compaq, which was also a party to the antitrust dispute with Intel, appears to be satisfied with the agreement. "We believe the proposed consent decree addresses the needs of the industry," a company spokesman said. "Compaq therefore supports the proposed settlement."