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Intel

"Intel Inside" campaign shackles OEMs 61

Posted by CmdrTaco from the interesting-stuff dept.
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 "
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"Intel Inside" campaign shackles OEMs More

"Intel Inside" campaign shackles OEMs

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  • Intel asking for trouble (Score:1)

    by Anonymous Coward
    Intel's not in a good position right now. With the AMD K7 right around the corner, Intel's high end is soon going to be threatened and their low end is in serious danger from within the own company -- it's been pointed out that the new batch of celerons outperform the Pentium II 350 by a good margin and cost about $1 less per chip. They also perform only a few percent (about 4 or 5 percent) slower than the Pentium II 450, such that you're paying about $50 for every 1% increase in performance that the 450 would buy you.

    The upshot of this is that the celeron becomes the ideal business platform for those companies that want "Intel Inside." They can save a bundle on the budget and most of their users don't need the extra power (Hell I'm doing development on a Pentium II 350 here and it's plenty fast.) Intel may have shot themselves in the foot in the rush to cut AMD off from the low end users.

    Intel's position is only going to get more untenable as time goes on. I myself am planning on upgrading my aging intel system at home to a K7 when AMD finally releases the chip. The only thing I can see them doing is postponing the inevitable until they can get the Merced chip out the door. If Merced flops, Intel won't have a lot of recourse.

    If you have stock, now would probably be the time to sell...

  • Think of it this way: (Score:1)

    by Anonymous Coward
    The OEM's aren't paying an extra 6% for the chip for the extra advertising.

    You are.
  • It's really a shame that large companies have to resort to gimmicks such as this to maintain their power and money. When will they realize that these things DO get leaked and people DO care about them? Or maybe they don't think we do care? *shrug* I guess that there's really no good way to actually state disapproval and be heard - sure, you can say that you won't buy Intel chips, but there are so many other people that will that they probably really do not care. Unified approach needed?
  • Posted by Bird, MP:

    The deal here is that Intel is buying advertising space, talent, and labelling restrictions from OEMs. Is this legal? Is this fair? The only problem I see here is the labelling restrictions.
    Would it be legal and fair for Intel to offer a flat sum of money to an OEM to package only Intel chips in a successful line of machines? That depends on the situation.
    If the market is such that a chip manufacturer must have the support of a popular brand name OEM to enjoy success and exclusive support is available to the highest bidder, the cost of entrance is then raised to the cheapest such support. If an established chip manufacturer offers to buy all such exclusive support in such a market, it effectively raises the cost of entrance into that market.
    An established competitor (and I use the word loosely) able to directly affect the cost of entrance is a Very Bad Thing.
    The question (and the aforementioned crux) now becomes "Is the corporate market for PCs such that an entrant requires the support of an established line of brand name PCs?" While this may be debatable, I personally believe so. I believe that companies like Dell have established a history of reliable products and services that procurement departments trust. AMD, Cyrix, or any entrants are now forced to "match" Intel's "bid" by either offering similar discounts, plain lowering their prices, or handing OEM execs suitcases of cash. It all amounts to the same thing: raising the cost of entrance by that much more.
    The whole advertising deal is just icing for Intel. The only matter for concern here is the sale of exclusive OEM support for Intel microprocessors.
  • This is almost exactly the same as giving a ~6% discount to companies that use Intel chips exclusively. (This may also be monopolistic behaviour.) What Intel does with their revenues is pretty irrelevant.
  • Well, eric has spoken well as to why we no longer sell alphas, so I'll comment on some other issues, namely that of an open standard CPU.

    Now I don't speak for Intel in any way, but it seems to me that Intel invests in linux companies like VA (Whom I work for) and RedHat because of one simple reason : Multiple OS's mean more chips are sold. I can assure you that there is nothing in our deal that keeps us from using other chip makers.

    Chris


    --
    Grant Chair, Linux Int.
    VP, SVLUG

  • If you want MetaStream for the Mac, go to http://www.metastream.com/plugins.html [metastream.com] and click on "Mac plug-in".

    --
    Timur Tabi
    Remove "nospam_" from email address

  • My fault, it's http://www.faceintel.COM/ [faceintel.com]

  • /. covered this website a few months ago:
    http://www.faceintel.org/ [faceintel.org]
    The address was different back then, but all the material is still there. Very interesting reading.

  • This news is not new, Intel has been doing this for the past 3 or 4 years now. I'm not sure that these conspiracy theorys for the Wintel monopoly are so true... Intel will only give advertising money for those products that solely use their Intel logo. Unless you can cut a deal with Intel, goodbye Microsoft Windows Compatibile Logos.
  • It's not quite the same thing. Advertising costs are usually tacked on *after* sticker price on cars. There is a "dealer" holdback (3-5% usually) which the dealer gets when he sells the car, but that never has strings attached to it.
  • You have a point. I was wondering about the fact that MSNBC is pushing the story...seeing as how we all know exactly where the MS in MSNBC came from. Distract attention perhaps? This is all a big red-herring from the king of kings of disinformation, redirection, and monopolistic business practices. Whoop-dee-doo that Intel pays people to hawk their products as long as they stick to a few conditions. You could say the same thing about television - Intel pays the broadcasting company a certain amount to hawk their product, but will refuse payment if certain conditions are not met. This isn't exactly unusual.
  • So, the dealer has to pay for the sticker on the car, because otherwise people wouldn't buy it, hence people have to pay more.

    What's the problem here? If people want to pay more because they like to see the sticker, while they still have the choice to buy a car without the sticker, that's just fine. In every market people pay for names, for reputation.

    It may or may not be plain stupid but it isn't unfair.
  • Tell me about it. They even put it on the damn sticker! At least with leasing I only pay for the advertising I use.. ;)

    Still, Intel charging extra $$$ to builders is fine by me: those builders can choose to build on AMD, Cyrix, Transmeta ;).. And once Linux is done conquering the world, the choices widen even further..
  • This marketing scheme was developed in 1994, way before AMD or Cyrix had any noticable market share. You can't blame Intel's agressivness on falling market share.

    Given that, Intel is very famous for its maketing skills. The technology might be advancing from one generation to the next, but Intel has been very smart about pricing structure and availability. The Intel Inside marketing scheme is just part of that agressive, take no prisoners, do or die maketing scheme.

  • I knew there was a reason that I owned their stock! I've got the same love/hate relationship with Microsoft. Hate their products, love their stock.

    Is that so wrong?
  • To own an Intel processor.

    This kinda thing has to stop. But I suppose that AMD would do the same if they had the market share of Intel.

    What is the world coming to?

    Oh well.
  • Yes =)
    I haven't had a laugh like that in a while,
    Thanks Man
  • anyone else get a good laff at the name of the
    spokesperson from HP defending Intel?
    *Mike Borg* ROFL :)
  • *pout*
    I was tryin to make a funny :(

  • Intel has done this for years now, and I don't see what the big deal is. It's marketing, people, and Intel's proven that they know what they're doing when it comes to marketing. You don't want an Intel CPU, buy a different one. It's really not that hard.

    Also, they don't just start yanking the money from companies--they work with them to let them know how to get in compliance. Finally, is it really necessary to scream "FUD!!" at every single computer-related thing that you don't like? It's getting tired.

    Cheers,
    ZicoKnows@hotmail.com

  • No, this isn't quite the same thing. It's as if the car maker originally charged $20000 and gave the dealer $1000, but then realized that he was a monopoly and started charging $25000 for the car and giving $5500 to the dealer, but ONLY if the dealer doesn't sell any other cars (entrenching the monopoly), and if not, they don't get the "It's a Ford" sticker, without which no average consumer will buy a car. If they don't sell just Fords, Ford keeps the money. If they do get the money, Ford makes another $500 times what they were selling before (subject to loss in demand) and the car dealer makes more money, and the consumer pays a higher price. This is bad.
  • Just to clarify: while AMD reverse-engineered (and improved upon) the x86 generations prior to the Pentium, all of AMD's parts since then (K5, K6-x, and the upcoming K7) have been original designs. And yes, they had to survive a ton of lawsuits! ;-)
  • Hate to be a "me too", but this is the same everywhere. Think of Intel as a franchise, rather than a product. Really, that's what it is -- a computer manufacturer decides to sell Intel products, or they don't. If they decide to base their product line on Intel products, they get some baggage with that. It's no different than a pizza joint deciding to franchise with Domino's.

    Where advocacy is needed is not here. We need advocacy at the mfr/seller or reseller level; let them know that we want options (if we do.) Demand AMD products! Or whoever.
  • Good point. It does happen in so many industries. Many large organisations offer "kick-backs" for solely promoting their products. Hell.... In Australia it happens even in the medical industry. Doctors get kick-backs for perscribing a particular brand rather than just giving a general name for the remedy. hehehe... "So I'm getting punished for it. " Of course.... But then again it's all your fault! hehehe..
  • Many computer makers offer AMD chips in their boxes. Well, I know IBM offers their Aptiva line with AMD as well as Intel chips. Just don't buy a PC with Intel Inside if this bothers you. If soft-headed people get taken by advertising, let them. You can't change them. If they want to pay a little more for the 'security' of having an Intel chip, what's wrong with that? Just because it's a computer doesn't mean you have to be rational...
  • "There's no reason to change," said Mike Borg

    anyone with the last name BORG has already lost all credibility
  • "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). "
    Well Cyrix is now owned by National Semi Conductor. Currently they are not doing much in the current wave of CPU chips. According to what I have heard, National is trying for a new approch w/ cpu's. Being that alot of the items on the mother board would be put on the chips, like all the controlers, bios, ect. They are trying for the USB future also. No more slots. So basically you CPU box would be the size of a a couple pack of smokes.

  • yup! (Score:1)

    by Ellis-D ( 19919 )
    "Most of these other chips are "Windows Certified", which is even a more powerful brandname than Intel's."

    Windows Certified is just a scheme to make their processors sell better.. Windows will run on any standard 32-bit x86 processor..
  • I totally Agree... And I like my PII chip. It's got one fricken fast FPU (well, an r10000 whoops it but still... This isn't a SGI machine.) 6% isn't that terrible and it's just marketing (like many others have said.)

  • 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.)

    Actually, I'm typing this on a Dell Optiplex GX1 (whatever that's supposed to mean), and it sports both the intel swoosh and the m$ window.

    Right on about the confusing model names, though!
  • and they're all the same, you sure could save a hell of a lotta money by buying AMD-based workstations, developing a disk image that works on that particular hardware configuration, and copying it across 'em all, just as you would have to do with an intel-based workstation!



    As for intel (or their MB chipsets) being *standardized*, I'd defy you to buy 100 workstations from *anybody*, set 'em up, and then, 2 weeks later, try to *find* 100 more IDENTICAL motherboards. Sorry, the market is just moving too fast for that!



    I guess if you're willing to buy from Compaq, (which I'm *not*), you might be able to get identical systems for about six months, then next year's models will be totally incompatible, just throw last year's away....



    Mikie
  • and they're all the same, you sure could save a hell of a lotta money by buying AMD-based workstations, developing a disk image that works on that particular hardware configuration, and copying it across 'em all, just as you would have to do with an intel-based workstation!

    As for intel (or their MB chipsets) being *standardized*, I'd defy you to buy 100 workstations from *anybody*, set 'em up, and then, 2 weeks later, try to *find* 100 more IDENTICAL motherboards. Sorry, the market is just moving too fast for that!

    I guess if you're willing to buy from Compaq, (which I'm *not*), you might be able to get identical systems for about six months, then next year's models will be totally incompatible, just throw last year's away....

    Mikie
  • Borg is quite a common Swedish name. We have a Mikael Borg here too.
  • Most companies offer brand-advertisement kickbacks, that's why bars have all those neon signs, that's why restaurants use "coke" branded cups, because they get a break on the price. To me this is a non-issue that someone is trying to create fuss over, out of sour-grapes...

  • This is old, other industries do it (Score:2)

    by Anonymous Coward
    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.

  • 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.


    --

  • 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.
    --
  • 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.
  • 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.

    - - - - - - - - - - - - - - - - -
    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!

  • 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.

    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 /. in any way. *wink*
    --
    Matthew Walker
    My DNA is Y2K compliant
  • 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!"
  • 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

  • Sellouts: VA Research, RedHat, BeOS, MetaCreations (Score:3)

    by Sleepy ( 4551 ) on Wednesday April 07, 1999 @11:40AM (#1945658) Homepage
    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).

  • Original Article (Score:3)

    by IntlHarvester ( 11985 ) on Wednesday April 07, 1999 @11:13AM (#1945659) Journal

    The MSNBC version looks like it was edited. The orginal was on ZD here:
    http://www.zdnet.com/pcweek/stories/news/0,4153, 397877,00.html.

    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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