AMD (AMD) Needs Intel (INTC) EU Case To Save Its Skin

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Intel (NASDAQ: INTC) management and lawyers are in Europe talking with EU officials about whether the big chip company violated anti-trust laws in the region.

According to The Wall Street Journal "The EU filed preliminary charges against Intel in July, alleging the company offered rebates to customers only if they didn’t use AMD products." Officials want to know whether Intel came by its 80% market share in the PC and server markets by playing fair or by using dirty tricks to keep customers away from AMD.

The case is much more important to AMD (NYSE: AMD) than it is to Intel. As EU dealings with Microsoft (NASDAQ: MSFT) have shown, a large company can survive sanctions from the body, even penalties, and continue to do business successfully. AMD, on the other hand, is losing share. If it can get the locals to go along with its way of thinking, that Intel executives are thugs and mobsters, the smaller chip company might get a little wiggle room to sell more of its products.

AMD is weighed down with $5 billion in debt and recently took a huge write-off for its ill-advised buy-out of graphics chip company ATI. The company’s shares are down from $35 less than two years ago to $6.43. By most accounts the majority of Intel products beat comparable products from AMD based on performance and energy efficiency. That could have something to do with AMD’s share price fall

The EU may not care if Intel has a better set of chips. AMD may prevail. For the sake of its shareholders, it had better.

Douglas A. McIntyre