A report released by a marketing research firm today is backing up what many in the industry already think: Digital Equipment's (DEC) claim against Intel (INTC) based on patents allegedly used unlawfully is not tenable and may be driven more by its weak position in the market.
Digital is charging that Intel has infringed on ten patents--for technology used in Digital's high-performance Alpha processors--in the design of Intel's Pentium Pro and Pentium II processors.
"There are only a finite number of ways in which to implement a microprocessor design, and Intel's designers independently implemented similar design methodologies to Alpha," said Ashok Kumar, an analyst at Southcoast Capital Corporation, in today's report. (Intel is an investor in CNET: The Computer Network)
"We believe that Digital's lawsuit against low-hanging fruit, namely Intel, is a facade to get Intel into signing a cross-licensing agreement," the report stated.
Digital is claiming that the design features of the Alpha processor were disclosed to Intel under a nondisclosure agreement in 1990 and 1991 as part of an effort to license the Alpha architecture to Intel and that this data was willfully misappropriated.
Southcoast Capital's report adds that Digital was banking on the notion that sheer performance would drive sales of its processor and allow it to grab a significant piece of the market. But this hasn't happened. Compared with shipments of even IBM's PowerPC and Sun Microsystems's SPARC chip, Alpha's volumes are "piddling," according to the report.
In 1996, Digital and its partners shipped 240,000 Alpha chips, while Intel sold more than 300 times that figure, the report said. Digital has realized that competing head-on with Intel is a strategy of "questionable sanity, given that more and more server and workstation vendors have gravitated to the Intel/NT power base."
Moreover, the report poses the question: "Does Alpha have a future?" The future scenario "may not be unlike Apple's, with Alpha being primarily sold as an upgrade to the installed base of 450,000 [Digital] VAX machines," according to Southcoast.
The case will likely be settled out of court, Southcoast noted. "We believe the companies will come to a settlement, as opposed to letting the cases slowly and expensively wind their way through the legal system."
The report also addressed the Cyrix (CYRX) suit against Intel. "These patents were filed in 1992 and 1993, respectively. With disclosures on these filings available as early as 1993, it would be unfathomable for Intel to proceed with an identical implementation," the report stated.