HP was afraid of retaliation from Intel refused 1 million free processors and restricted AMD to 5% of market

Anti-trust regulators in the European Union released confidential papers from their case against Intel. To justify the $1.6 billion fined given to Intel they released documents that show a pattern of intimidation by Intel of HP its largest customer.

In a Mercury News story Hewlett-Packard – Intel dealings laid bare in European report, HP is shown to be in fear of its supplier.

HP feared that if it made too many computers using AMD, Intel’s rival, Intel might offer special incentives to Dell or other competitors. The internal HP memos revealed a surprising climate of fear at HP considering HP was the world’s largest computer manufacturer.

At one point AND offered 1 million free processors to HP but HP was afraid taking them would cause Intel to retaliate.

“And when AMD offered HP 1 million free microprocessors, saying it was a gift “no reasonable business partner could refuse,” HP took only 160,000 to avoid Intel retaliation, according to the report unveiled last week by the European Commission.” Mercury News

Even more telling are HP memos seven years ago about the pending release of a new line of HP computers based on the less expensive AMD processor. HP hid the release from Intel explicitly telling executives to limit information about the AMD computers.

Once the computers were released, Intel did react negatively.

“When HP finally introduced the controversial business computer, “Intel reacted very negatively,” according to an HP document cited by the commission, and for a time the chip maker broke off its rebate negotiations with HP. Eventually, HP and Intel resumed their talks. But the arrangement they worked out slammed AMD hard, making HP reluctant to reveal the terms to AMD.

“PLEASE DO NOT communicate to the regions, your team members or AMD” what HP has agreed to, an HP executive pleaded in an e-mail to Intel.

“Besides requiring HP to buy 95 percent of the chips for its corporate desktop computers from Intel, the deal discouraged HP from selling the AMD-powered computers to big businesses or through HP’s regular distributors, the commission said. It also delayed the computer’s launch in Europe, the Middle East and Africa by six months.Mercury News story Hewlett-Packard – Intel dealings laid bare in European report

Intel is considered the creator of the microchip and has worked steadily for 40 years to build the largest and most respected name in micro-processors. AMD started a year later struggled until the 1990’s to get any market share.

It is obvious from the documents released by the EU commission that predatory business practices were used by Intel to keep its competitor at bay.

The $1.6 billion fine is merely a cost of doing business for the worlds largest chip maker which made $5.2 billion in profit last year and more than $50 billion in profit during the years it tried to limit AMD in the market.