"Inside Intel" - required reading for the Feds

As the Federal Trade Commission begins its latest antitrust investigation into Intel, analysts predict the FTC will have difficulty getting Intel's OEM customers to testify that they've observed monopolistic practices. The analysts say PC vendors are unlikely to say more than they absolutely have to, as much out of fear as out of loyalty to the chip company. And don't expect the FTC to turn up much by digging for dirt at Intel's offices. According to Tim Jackson, author of a new book called 'Inside Intel,' the company stages mock busts internally to keep its managers vigilant.

As the Federal Trade Commission begins its latest antitrust investigation into Intel, analysts predict the FTC will have difficulty getting Intel's OEM customers to testify that they've observed monopolistic practices.

The analysts say PC vendors are unlikely to say more than they absolutely have to, as much out of fear as out of loyalty to the chip company.

And don't expect the FTC to turn up much by digging for dirt at Intel's offices. According to Tim Jackson, author of a new book called "Inside Intel," the company stages mock busts internally to keep its managers vigilant.

"You could be sitting at your desk one day typing an e-mail," says Jackson, "and the door will open and three guys in suits will come in and say, 'We're freezing all the documents in your office, please stand outside.' The idea is to simulate what it would be like to have an antitrust investigator come in and go through your email and your paper files. Intel managers get to be extremely careful about what they commit to paper and what they say on voice mail and email," he said.

"Inside Intel" is perhaps the first detailed look at how Intel has put together its 80% market share in the microprocessor industry. According to the author, the FTC investigation comes at a time when Intel has shifted from what Jackson calls its "exclusion" phase, in which it beat back competitors in the 1980s largely through lawsuits, to what he calls the "cultivation" phase.

"When you've already got an 80 to 85% market share, the extra profitability you get from squeezing your competitors down from 15% of the market to 10% is much less than the extra profitability you get from growing the entire business and consumer demand for your products," reasons Jackson. "In the Intel Inside program, the company reached out beyond its customers in computer companies to end-consumers and said, 'Here's why you should buy one of our new microprocessors.' That's an example of trying to grow the entire market instead of trying to attack competitors," he said.

Jackson says his book is not authorised by Intel. In fact, he claims the company has been largely hostile to the project, even cautioning employees around the world not to cooperate with his research.

As to whether Intel has engaged in anticompetitive practices, Jackson says that's been its strategy ever since it developed a program code-named Operation Crush to deal with Motorola back in the early '80s. But strangely enough, Intel's market dominance hasn't necessarily been bad for PC buyers.

"Intel is no longer a real competitor in the microprocessor business," asserts Jackson. "It's part of the playing field. The argument in Intel's favor is simply this: That by having such a hold over the market, it has been able to generate dramatic improvements in productivity, which has meant dramatically falling prices to consumers," he said.

"Inside Intel" is published by the Dutton division of Penguin Books and is due in bookstores later this week.

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