No worries at Intel

S&P 500: -24.43 (-2.69%)

Intel (INTC) -0.53%
Nearly a full decade after Advanced Micro Devices’ first complaint about its larger competitor, EU regulators laid a record $1.45 billion fine on Intel for abuse of a dominant market position. This decision follows a 2005 ruling in Japan and another in Korea last year, both of which determined Intel was abusing its dominant market position.

But shareholders don’t care much for the opinion of government officials, and the share price of Intel barley moved today on the news. Investors are far more interested in Intel’s attempts to cut costs, improve margins, and control inventories – the main focus of its analyst day on Tuesday.

The ruling is more of a positive for AMD than a negative for Intel since any form of settlement would help AMD with its debt load. In terms of the market for microprocessors, however, little will change.

The practice in question is allegedly restrictions attached to volume rebates, not the principle of rebates themselves. Intel holds over 70 percent of the market for all microprocessors (the central engine of every computer) and benefits from a self-reinforcing scale advantage that allows them to outspend AMD on research and development by more than four to one.

In short, Intel’s fines are nothing to worry about.


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Peter Lazaroff, Junior Analyst