"Epson and Intel had an extensive cross-licensing arrangement, and I got a call from the VP of licensing," a former Epson executive said. "'We really want you to reconsider your decision,' he said. Clearly, someone had gotten to him."
That someone, according to this executive, was from Intel--Cyrix's archrival. And even though the U.S. group didn't bow to the pressure from headquarters, Epson eventually turned to Intel when Cyrix ran into.
Aggressive dealing is nothing new in the technology industry, but theillustrates how Intel has elevated the practice to an art form. Unlike other companies known for clumsier tactics, industry veterans say the leading chipmaker has risen to the top of its business at least in part by making deals through a combination of incentives, assistance and hard-nosed negotiating.
These tactics have fallen under new scrutiny in a controversialfiled against the company by competing chipmaker Advanced Micro Devices. AMD, which has said it will produce e-mails to back its claims, charges that Intel used threats and rebates to keep PC makers from cutting deals with competitors. South Korea and Europe have also begun to look into Intel's tactics.
"Our potential customers are not free to choose on the basis of price and performance. That is why we are not more successful," said Tom McCoy, executive vice president of legal affairs at AMD. "Major tier-one customers are unable to serve true market demand. To do so would run counter to Intel's dictates."
Intel has emphaticallyand has declined to discuss issues surrounding the trial beyond its official statements, such as its : "AMD seeks to impede Intel's ability to lower prices and thereby allow AMD to charge higher prices. AMD's colorful language and fanciful claims cannot obscure AMD's goal of shielding AMD from price competition."
Nevertheless, the AMD suit has drawn wide publicity, not just because of Intel's size but also because the company has been something of a Teflon defendant. Charges brought by semiconductor manufacturer <:link id="204668">Digital Equipment in the early 1990s led to an amicable settlement that seemed more like a real-estate deal than the culmination of a contentious legal dispute. Antitrust charges brought by another competitor, Intergraph,, though it won more than $600 million from Intel in patent settlements.
Intel has largely eluded the wrath of government agencies as well. Aby Federal Trade Commission was . Earlier this year, Intel agreed to accept but paid no fine and admitted no wrongdoing.
Those familiar with the situation say Intel can effectively defend itself in such cases because its tactics are far more subtle than those of other industry leaders with reputations for bullying and arrogance, such as
"You just don't feel violated, like with Microsoft," one PC industry veteran said.
Steve Tobak, a principal at Invisor Consulting who used to compete against Intel in the late 1990s while at Cyrix, describes Intel's business practices this way: "The stick is implied. They do it in a way that won't stick in court. But they also have a carrot. And it's a powerful and many-faceted carrot."
Those facets can include such tangible commodities as preferential chip allocation, marketing dollars and introductions to big customers--which can all easily translate into millions of dollars.
Hardware makers that take technological assistance from Intel, such as blueprints or royalty-free reference designs, are often predetermining their eventual adoption of its chips. But these plans also let them cut engineering budgets and the time required to come to market.
To maximize the timing and nature of these incentives, Intel also maintains a highly effective network of industrial intelligence. Often, when Cyrix was about to sign a deal with a second- and third-tier motherboard maker for a few thousand chips in Europe or Taiwan, Tobak recalled, Intel would swoop in with co-op dollars.
"No deal was too small," he said.
By contrast, the competition has never been quite as organized. Several years ago, sources say, Cyrix, AMD, Compaq Computer and IBM formed something called "The Sundance Consortium" to