Digital, Intel deny FTC probe's ramifications

Digital Equipment Corp. and Intel Corp. yesterday confirmed that the Federal Trade Commission (FTC) has asked for additional information concerning their recent settlement of their patent infringement lawsuits against each other.

But the companies denied a report that the FTC has major antitrust reservations about the October settlement of the cross-lawsuits, which were filed last year over chip technology patents and nondisclosure agreements.

"We received a second request from the FTC for information [after providing initial information, but] this is not unusual for a transaction of this nature," said Dan Kaferle, a Digital spokesman. "Digital has not received any indication from the FTC that there is a problem with the agreement."

Intel spokesman Chuck Mulloy agreed that the second round of requests from the FTC was routine and said that the review still appears to be on target to take between three and six months, as was anticipated.

Both Kaferle and Mulloy declined to describe the content of the FTC's requests for additional information, and Victoria Streitfeld, a spokeswoman for the FTC, would not confirm that the FTC has antitrust concerns about the settlement. "We never comment, confirm or deny if we're looking at certain anticompetitive activities," she said.

The settlement in question includes the US$700 million sale of Digital's 64-bit Alpha semiconductor manufacturing facility to Intel and the further intertwining of the companies' microprocessor technologies, including Intel's Pentium successor, the IA-64 microprocessor, code-named Merced. A story in the Los Angeles Times says that the FTC is concerned that the settlement could limit competition in microprocessors to Intel's Pentium chip.

One observer expressed surprise that the FTC reportedly has antitrust concerns of that nature. The Alpha chip is also currently produced by Samsung and Mitsubishi, and Alpha's market share is so small, compared to Intel, that it is unlikely that Intel's purchase of Digital's fab and its intent to manufacture Alpha chips could affect competition with Intel's own chips. according to Terry Shannon, editor of Shannon Knows DEC, an Ashland, Mass.-based newsletter.

"I don't see how the presence or absence of that fab facility is really going to impact the popularity of IA-64," Shannon said. "Intel is not further marginalizing Alpha by acquiring the foundry in which Alpha is built."

But Linley Gwennap, editor of Microprocessor Report , a Sebastopol, Calif.-based industry newsletter, said the FTC's alleged concerns may have merit.

"Even though Alpha is very small [in terms of] unit shipments ... it is a strong competitor in the workstation and server markets that Pentium Pro and Merced are targeting," Gwennap said. "To have Intel responsible for making its own chip and a competitor's chip in the same market ... certainly seems like it could be a conflict of interest."

FTC staffers conducting the settlement review will make a recommendation within an undisclosed time frame to the five-member commission, who then vote on it, the FTC's Streitfeld said.