SAN FRANCISCOThe final impact of a suit brought by the U.S. Federal Trade Commission (FTC) against Intel Corp. is likely to be less than what many expect, according to an analyst, who rejected the notion that the courts would force the microprocessor giant to license modern x86 instruction sets to other firms.
In a research note circulated Monday (Dec. 28), Doug Freedman of Broadpoint AmTech said concerns regarding the potential ramifications of the FTC's case against Intel are "overblown" and that Intel's operational activities will likely be unobstructed after a ruling in the matter is issued.
Two weeks ago the FTC sued Intel, charging that the chip maker has for a decade illegally used its dominant position in the microprocessor market to stifle competition and strengthen its monopoly. The FTC also alleged that Intel redesigned its software compiler to degrade the performance of rival chips and claimed Intel is also using unfair business practices in the graphics chip market.
Among other things, the FTC wants Intel to simplify the licensing terms for its x86 instruction set. This has led to speculation that more companies would make chips based on the x86 architecture. It also helped fuel the resurrection of a long-circulating rumor that graphics chip specialist Nvidia Corp. might starting building x86 chips.
But Freedman said that his firm does not believe the courts will support forcing Intel to license the modern x86 instruction sets. As a result, Freeman said, he believes the FTC will be forced to settle for something less to avoid a protracted legal battle.
"We believe attempts were made to resolve the issue non-publicly," Freedman wrote, "but Intel balked at the FTC's requirements to license its buses, as well as x86 processors, to [Nvidia]."
Freedman said his firm does not currently see any potential change in Intel's business practices that would impact the company's earnings potential. Broadpoint AmTech believes Intel has a "much stronger case than people realize" and that the company will receive a favorable ruling on the matter before the end of 2010.
Freedman also wrote that Broadpoint AmTech does not believe the FTC case against Intel will benefit Nvidia by pushing out the winding down of its chipsets. Broadpoint AmTech anticipates that the chipset market will become "squeezed" as OEMs move towards processor platforms that integrate graphics in the low- to mid-tier and discrete solutions at the high end, Freedman wrote.
Freedman remains very bullish on Intel. His firm maintains a "buy" rating on Intel's stock and a share price target of $29. Freedman wrote that Intel, which traded at $20.31 in afternoon trading Monday, is the "best value" among semiconductor stocks.