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AMD-Intel Lawsuit Fallout: Gory Details

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AMD would never come out and admit it, but one of the strategies going for the company in the upcoming legal battle with Intel is the possible exposure of incidents that could embarrass the chip giant.

These exposures could be powerful fodder indeed, especially in light of Intel's historically tight marketing controls.

What is at stake for AMD is of course a costly lawsuit that the company might fail to win. Perhaps even more imporant than this is the potentially costly anti-Intel marketing effort that might fail to win the company more market share.

AMD's new lawsuit -- filed today in Japan -- alleges that the world's largest chipmaker paid PC makers Hitachi, NEC, Fujitsu, Toshiba and Sony not to buy AMD processors.

It was the setup of the March 8 finding by the Japan Fair Trade Commission that enhanced the possibility of AMD's lawsuits. The Commission in Japan found that Intel's Japanese subsidiary, Intel K.K., violated Japan's Antimonopoly Act.

In one respect, AMD has an obligation to sue Intel. For years, Intel's dominance -- its airtight sales channels -- has been legendary. It has been the stuff of jokes and anecdotes in Silicon Valley. But, lately for AMD, the inability to gain traction in the market has not been funny.

"In the last few years, we've made a widely recognized transformation from a challenger to a technology leader and we're not seeing a fair return," said AMD spokesman Mike Simonoff.

If Intel takes a hit, it might not be of the legal variety. It will be interesting, for example, to see how well the company's image holds up to depositions and testimony. The notion that CEO Craig Barrett flew to Taiwan to threaten the Chairman of Acer, as AMD alleges, is the kind of incident that could dent Intel's image.

If it were Steve Jobs, Larry Ellison or Scott McNealy, the market might reply with a collective, "So what?" But AMD claims it is looking forward to exposing Intel at trial.

"It's pretty shocking stuff for those that aren't familiar with the inner working of this industry," Simonoff added. He said Barrett's Taiwan trip is just one example of Intel's actions.

"AMD's complaint reads a little like the Sopranos versus Mother Theresa," said Gartner (NYSE: IT - news) analyst Martin Reynolds. "There are guns-to-heads and other language in it that might be overselling the point, but nonetheless there are plenty of incidents in there that do perhaps deserve the attention of the court."

One of AMD's hopes is that what comes out in trial is colorful enough to affect the market. Certainly, denting Intel's image is important for the smaller chipmaker. But the stakes are high and the company cannot afford to lose the legal battle.

I hope AMD wins this one.

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