updated 9/1/2005 9:59:53 PM ET 2005-09-02T01:59:53

Responding to an antitrust lawsuit filed by a rival computer chip maker, Intel Corp. on Thursday denied its business practices broke any laws and dismissed the claims as “factually incorrect and contradictory.”

In a 63-page response to the 48-page suit filed by Advanced Micro Devices Inc., Intel said its rival is smaller because of the way it handles its business — not from any wrongdoing by the world’s largest semiconductor company.

“AMD has made its own business decisions and choices that have determined its position in the marketplace,” said Intel General Counsel Bruce Sewell. “AMD seeks to instead blame Intel for the many business failures AMD has experienced.”

AMD was not surprised by Intel’s response, said Tom McCoy, the company’s chief administrative officer.

“They’ve proved once again how arrogant they are,” he said. “All I can say is we’re going to bring the truth to the table.”

Intel filed its official response late Thursday with the U.S. District Court in Delaware, where AMD initiated its suit on June 27. The far-reaching case, involving PC makers around the world, is expected to take years to litigate.

In the lawsuit, AMD claims its business has been harmed by Intel’s practice of offering rebates, discounts and other incentives to convince PC makers around the world to use Intel, rather than AMD, chips.

In terms of shipments, Intel has about 80 percent of the market of chips that power PCs running Microsoft Corp.’s Windows operating system. By revenue, Intel’s share is 90 percent. AMD claims Intel’s behavior has kept its share low even though its chips are superior.

Besides refuting the superiority claim, Intel argued its incentives have led to lower prices and added PC makers are “not forced” to use its chips. Those “are the very practices that the antitrust laws are designed to protect,” it said.

“AMD claims that Intel sustains a monopoly that allows it to charge higher prices, but that it does so by lowering prices,” the response reads. “This allegation is inherently contradictory. ... AMD’s attempt to limit Intel’s ability to discount would only serve to raise prices.”

Rather, AMD’s problems stem from its reputation as being an unreliable supplier that failed to properly invest in its business, Intel said.

Intel’s filing also noted contradictions between the lawsuit and a statement made by AMD CEO Hector Ruiz. In a recent conference call, Ruiz said the company is in “the strongest position we’ve ever been in.”

Moreover, AMD has reported that its factory is running at capacity and AMD would have difficult meeting additional demand, Intel said. The response also noted AMD has recently seen its slice of the market for server chips increase.

“Despite its protestations to the contrary, when AMD is able to combine competitive products with reliable supply, the market responds,” Intel said.

AMD’s McCoy said the company waited to file its complaint until it was in a position of strength so that “no one could say we were doing this because we feared competing against Intel.”
Intel’s filing took issue with that as well.

“Under the cover of competition law, AMD seeks to shield itself from competition,” Intel said. “... AMD’s colorful language and fanciful claims cannot obscure AMD’s goal of shielding AMD from price competition.”

Intel’s response also raised several potential defensive moves, such as arguing the Delaware court does not have the jurisdiction because AMD’s chips are produced in Germany. Intel is studying other options, including a countersuit against AMD, Sewell said.

The response was filed after the close of markets. Earlier, shares of Intel closed at $25.26, down 46 cents, in trading on the Nasdaq Stock Market. Shares of AMD gained 11 cents, to $20.88, on the New York Stock Exchange.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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