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Intel Inside - Like It Or Not

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EU charges chipmaker with antitrust violations.

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The Wall Street Journal reports that the European Union plans to file new antitrust charges against Intel (INTC), alleging that the chipmaker gave computer retailers incentives to use its chips and not to sell PCs with chips produced by competitor Advanced Micro Devices (AMD).

The simple student might ask: if true, isn't that cut-throat marketing and doesn't the consumer benefit?

Previously, the EU charged that Intel's decision to offer large discounts to Intel-only shops violated its monopoly laws.

Intel says the EU's case is based on complaints from rival AMD - not consumers. AMD filed a complaint with the EU in 2000 and a second complaint in 2006 alleging that electronics retailer Media Market agreed to sell computers using Intel chips in exchange for undisclosed payments. Intel notes that the EU's Statement of Objections isn't a finding of anti-competitive actions.

However, Intel's subsequent decision to cut chip prices across the board ended what some have called "most favored Original Equipment Manufacturer" sales tactic. The chipmaker's old pricing practices also raised questions in the U.S. and Korea.

The decision to cut prices across the board hasn't hurt Intel's earnings. The chip maker's second-quarter income surged 25% to $1.6 billion, or $0.28 per share, compared with $1.2 billion or $0.22 per share for the same quarter a year ago. Analysts expected Intel to earn $0.26 per share.

Intel's second quarter sales grew 9.1% to $9.47 billion, beating estimates of $9.33 billion. North American sales rose 8.9%, European sales increased 17% and Asian sales rose 7.8%.

Intel says it expects third quarter sales of $10 billion to $10.6 billion, with sales of chips for laptop computers overtaking desktop sales for the first time this year.

Intel is the world's top producer of microprocessors, the electronic guts of personal computers. It grabs about 80% of the market. In addition to AMD, competitors include Texas Instruments (TXN) and Samsung Electronics.

PC makers Dell (DELL) and Hewlett-Packard (HPQ) are Intel's biggest customers.
No positions in stocks mentioned.
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