AMD bemoans Intel's $60bn 'monopoly profits'

Intel has made $60bn in "monopoly profits " over the past decade, AMD alleges in a new study.

The figure is based on Intel's combined profits over the past 10 years, corrected for the cost of capital and allowing for a five per cent margin for competitive advantages such as better innovation and management.

If the alleged monopoly is broken up, consumers would save at least $61bn over the next decade, and computer manufacturers would gain an additional $20bn which they could invest in product innovation.

Intel spokesman Chuck Mulloy dismissed the report as "wildly speculative".

"The timing of this study is for PR purposes only," he said.

The study was conducted by Dr Michael Williams of the ERS Group. It considers as a foregone conclusion what AMD has yet to prove in court: that Intel has an illegal monopoly in the x86 processor market and that it has used that position to inflate prices, stifle competition and protect its monopoly.

In June 2005 AMD filed an anti-trust suit against Intel. The case is expected to come before a judge in 2009.

Intel has always denied the accusations.

As evidence of Intel monopoly profits, AMD citied an earlier anti-trust conviction in Japan as well as pending litigation in the European Union.

The study also pointed out Intel's failure to achieve profitability in markets outside the microprocessor space. The company for instance has been struggling in the memory market and last year sold its division that develops processors for mobile devices.

The study also pointed out that Intel's historical profit margins of 25.95 per cent over the past decade are atypical. It argues that of the firms in the Fortune 1000, only Microsoft, tobacco and liquor maker UST, Coca Cola and Intel have achieved economic returns of more than 16 per cent over the past 10 years. The term 'economic return' is used to indicate any profits beyond the cost of capital that is invested in a company.

All other three vendors have been subject to anti-trust investigations.

Comparing Intel to the world's largest companies however does seem trivial.

Retail, for instance, is known to have much lower profit margins because it requires relatively little capital. The high tech sector however is believed to witness much higher margins because it requires large capital investments and has a high risk of failing to deliver results.

Comparing Intel's performance to other high tech vendors over the past five years paints an entirely different picture. Over that period, networking giant Cisco logged a net profit margin of 19.24 per cent and Oracle came in at 23.34 per cent. At 18.14 per cent, Intel ranked lower than its peers.

Neither Cisco nor Oracle has ever been convicted for anti-trust violations.