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"Intel Inside" campaign shackles OEMs
D-Fly writes "MSNBC is running an article, quoting a lot of anonymous PC manufacturing executives, about how Intel uses its "Intel Inside" branding campaign to gouge PC manufacturers.
Apparently everyone's favorite IC monopolist adds about 6 percent to the price it charges for chips, then gives the money back to companies for advertising purposes. If they screw up--ie the Intel logo is too small, they use a single non-Intel processor in the machine, Intel keeps the money
Saw it on Ars "
My girlfriend was just complaining about the exact same thing last week. She manages a beauty salon kind of place, and they get rebate checks from some of their makeup manufacturers for doing big instore promotions. They get a bigger check for agreeing to promote only one line in the store. So for an entire month they had a promo of only Shiseido products, and then went back to having lots of different signs around. The Shiseido reps were supposed to come by at some point during the month to verify it. But they never came by, and so the rebate check for the advertising didnt come in. This store move something like $44000 worth of Shiseido during the month of december, and the check would have been 8% of that. So I'm getting punished for it :-)
While, as an anti-trust attorney and economist, I don't find it clear that intel *is* a monopolist (I'm inclined to say they're not), if they are, it makes a difference here.
Assuming that they're enough of a monopolist to apply anti-trust principles, the best analogy would be to the (alleged) former Microsoft practice of "charge per unit made" rather than per copy used. For back of the envelope calculations, assume 90% market by MS at the time, and a $60 price. If MS offers $50/unit, it costs the OEM less to pay this, and completely cuts out DRI.
But the intel rules don't go this far; they seem to explicitly allow another "sub-line" which could be an identical machine with a non-intel processor. I don't see a problem here.
hawk, esq.
There is one problem with your argument. Most, if not all, new car dealers are franchises. A number of automakers (such as Saturn AFAIK) do require that their dealers sell no other brands of new car. Some others, such as Subaru, don't appear to care. However, for many, it is part of the franchising agreement.
As franchises, they are required to follow the rules that the franchiser sets. However, PC manufacturers aren't franchisers. If the "Intel Inside" stuff is voluntary, then I don't see a problem wtih it. Manufacturers don't have to pay the fee in exchange for advertising. While there are a number of brand loyalists, a lot of people, especially when shopping for fairly basic workstations (corporate) or lower end home machines, don't care.
Intel is making a lot of restrictions for participation, such as requiring that non-Intel machines be sold under a different brand or sub brand. While this may seem extreme, it makes sense. The cost of adding an additional label (i.e Compaq Presario, IBM Aptiva) is small, and lets you sub-brand while still taking advantage of the well known parent brand. Intel doesn't want to pay to advertise for non-intel machines. Note that a sub-brand is no big deal. Most major PC manufacturers have several already.
Personally, I'm quite happy with the performance of my Intel CPU. I felt it to be the best chip for the job, given that I run a lot of floating point intensive applications, but need Linux/ia32 compatability. If I didn't care about FP performance, I probably would have bought a K6.
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If Intel is giving discount for defined exposure, meanwhile willing to take the risk of outpricing their own products, then what is bad about that?
Manufacturers still have the choice of not going with Intel, or pay the 6 per cent. I really don't see the problem here. Thee _are_ viable alternatives (AMD, Cyrix).
MSnBC screaming about this smells of Microsoft trying hard to find others with their own 'business skills'.
Not that Intel is such an innocent baby, but in this case: no big deal.
Hello Chris, and thanks for the reply..
Regarding the statement "I can assure you that there is nothing in our deal that keeps us from using other chip makers.", I have some questions to clarify this statement, if you would: * Are there ANY additional Intel conditions regarding non-Intel chips and VA? By "additional conditions" I mean above and beyond the crafty "Intel inside" campaign which this story is all about. I *assume* VA is participating in the intel Inside promotion, which is designed to exclude alternative CPU's and lock-in OEM's. Are any additional conditions thrown in when you're partially owned by Intel? Additionally, does Intel have "any" influence over the management decisions of linux.com? I see this as a first step in an information war to equate Linux with Intel, but I hold out hope the domain will be fair to all variations of Linux (and related alternatives like *BSD).
Nazi Germany. They may have found them repulsive, but they sure didn't mind taking their gold and transforming their little agricultural country into a rich industrialized one (with discounted art, gold, and 'used' shoes..).
Is that what you mean by love/hate relationships that both engage and sicken you? Just curious.
(I'm not exactly equating Intel with Germany, I'm illustrating how people will go along with things that supposedly go against their better judgement, just because they make money of it. IMHO the *only* excuse is stupidity... people who can't figure things out aren't as responsible).
BTW both Intel and Microsoft stocks are SEVERELY inflated and I deliberately own none of either. Adobe, Apple, Corel, and News Corporation/Fox are all safe, undervalued bets for when the market adjusts itself, Any Day Now.
And how can AMD and Cyrix get market share as long as the largely (through few faults of their own) unknowing public takes the "Only game in town" as my father says and snubs the others?
I thought Intel had lost more than 50% of the home/small office market to AMD/Cytrix? Most of these other chips are "Windows Certified", which is even a more powerful brandname than Intel's.
Besides, a big corporation wants standardization more than anything, and will pay extra to get it. AMD/Cyrix computers use different chipsets and are not "drop-in" replacements. This is a big deal if you are putting a standard disk image on 100s of workstations you just bought that are supposedly all exactly the same.
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Business. Numbers. Money. People. Computer World.
Yeah, specifically "Windows Certified" is a way to make up for missing the Intel logo. I'm sure that AMD, et al., pay Microsoft to put the logo on the chip.
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Business. Numbers. Money. People. Computer World.
This is no different than how cars are sold. When you buy a $20.000 car, you can bet that at least $1.000 and probably more went to the dealer. That's pure marketing cost (and 5% of the total cost). Intel has to do the same.
--jon. Postel is dead. May we all mourn his, and our, loss.
I'm not sure that giving companies the SAME discount for exclusively using Intel chips is monopolistic. Especially when they aren't giving less of a discount if the company uses AMD (or other brand) chips in a different line of computers, and they aren't playing the MS game of secretly discounting certain companies more than others. Besides, is 6% really that much? On a celeron 300 that comes to less than 4 bux. Companies could add that into the cost of a new computer and you would never question it. Frankly, Intel is the only game in town until the K7 comes out, and that isn't even gonna be a cheaper alternative from what I've seen so far. Floating point is everything to me... AMD just doesn't cut it.
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I run BeOS. The rules don't apply.
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I run BeOS. The rules don't apply.
"This is true. I've been trying to get my father into an AMD chip and he won't go. Why?"
Hmm.. Unless your dad is mircron size, I don't think you will fit him in it!
I ate my tag line.
-=Ellis (D)25=-
Why am I so not suprised about this? And while I agree that this isn't good, there is another side to this issue that shouldn't be ignored.
/. in any way. *wink*
First, Intel is a corporation, and they're starting to loose market share, so they want to make as much money as possible. This scheme is just a way to try and get lots of exposure, and to try and keep products marked as being theirs, theirs.
So, before you start acting too suprised by this, keep in mind, they're only doing what pretty much any company would do in this case. They're trying to keep their profits up as much as possible. So they're slightly more anal than a lot of people are about this sort of thing. Is that suprising, given their falling market share? No.
This comment is solely the opinion of me, myself, and I. It does not reflect on
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Matthew Walker
My DNA is Y2K compliant
Matthew Walker
http://www.tweeterdiet.com/ - My Diet Tracking Tool
Looks like i might get first post...
Well, yeah, Intels a monopoly (or duopoly really)..
"Interviews with numerous current and former executives at Intel's largest OEM customers -- all of whom declined to be identified, fearing reprisals from Intel -- add fuel to the fire. These executives call the program addictive and claim their companies can't compete without it."
This is true. I've been trying to get my father into an AMD chip and he won't go. Why? It won't have "Intel Inside" Their FUD campaign has been wildly successful.
"There is no doubt that it's one of the major factors that influences [product] decisions," said a 20-year IBM PC executive who left the company in 1997.
Well, yeah. And how can AMD and Cyrix get market share as long as the largely (through few faults of their own) unknowing public takes the "Only game in town" as my father says and snubs the others?
"Responsibility for my career? I'm just a freakin' phone monkey!"
It's a thankless job, but I've got a lot of Karma to burn off
First: VA Research doesn't sell Alpha because the demand for Alpha (or lack thereof) doesn't justify them spending resources on it. VA Research is no longer the little guy on the block with some guy puttering about in the back room. They sell thousands of identical systems, all of which are now being outsourced to a 3rd party manufacturing firm. (Nothing new there -- for example, the Commodore 64 was not built by Commodore, it was built by a Taiwanese outsourcing firm).
Secondly, Red Hat was just reflecting their sales data, not trying to insult Alpha on Compaq. Basically, the reason for running Alpha has decreased now that you can get 500Mhz PIII chips. A 500Mhz PIII chip comes within 15% of Alpha performance, while costing 25% less.
All that nonwithstanding, LHS still sells Alpha Linux systems for those few who do demand it. If we ever get into a situation where we must streamline our product line, though, the Alpha systems will be the first to go -- we just don't sell of them for them to matter much.
I agree with your assessment of Intel's commitment to Linux, BTW. Intel is out for #1 -- Intel. But that's true of all the large companies now coming into the Linux business. You think Dell cares about Linux? Heck no! All they care about is whether there's enough demand to put a few engineering dollars into creating a Linux line. Linux could be a toaster as far as they're concerned -- just another widget to sell.
-- Eric
Send mail here if you want to reach me.
Gee, somehow these Deals With The [other] Devil don't surprise me.
Prior to investments, didn't VA research sell Alpha boxes?
Does this have ANYTHING to do with RedHat's insulting comments about Linux on Alpha (regarding Compaq's promotion of Linux/Alpha)?
I WONDER what's written in for software "partners" like BeOS? Do they lose marketing money if they update non-Intel software like the PPC version?
Note that Intel and MetaCreations partnered to form the "internet's Open 3D format" called MetaStream. Feh! Like 75% of MetaCreation's customers are Mac users, and the deal left MacOS without a browser plug-in for this "open" format (still no full disclosure of code either).
My view is: Intel is committed to Linux like Microsoft was committed to Java... commitment being measured in exnergy spent to co-opt the Movement.
In the absence of an open-standard CPU, we need to encourage competition. AMD exists only because they managed to reverse-engineer Intel designs, AND survive many lawsuits. It will be much harder to clone Merced. x86 is a Dead End regarding technology and competition. Intel's not known for supporting something once they obsolete it (Pentium Pro owners have my sympathy).
The MSNBC version looks like it was edited. The orginal was on ZD here:
http://www.zdnet.com/pcweek/stories/news/0,4153
The interesting thing is that if Compaq gets Intel marketing funds for their "Deskpro" line of computers, they can not use non-Intel for any model of that line. They need to start a new brand name.
Since most computer company's brand name line-up is already confusing, I imagine the barrier of adding a new brand name is pretty high. (Which is probaably why Dell doesn't do it.)
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Business. Numbers. Money. People. Computer World.