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Intel received today its sharpest rebuke yet for its alleged manipulative
business and antitrust practices at the hands of the European Union, which
slapped the California-based chip maker with a record $1.45 billion fine and a
cease and desist order to stop anti-competitive activities.

The EU fine is the result of an eight-year investigation into the rebate and
business practices of Intel, which commands 77 percent of the global processor
and memory chip market. The 1.06 billion euro fine is nearly twice the
fine levied against Microsoft in 2004 for anti-competitive business practices
and the largest antitrust fine charged against an individual company.

The EU ruling states the Intel paid undisclosed computer manufacturers to
delay or cancel the release of products that use processors and chips by
Advanced Micro Devices, the No. 2 maker of microprocessors. The European
governing body said Intel also paid illegal, secret rebates to stores and
computer resellers for not stocking AMD-powered

"Given that Intel has harmed millions of European consumers by
deliberately acting to keep competitors out of the market for over five years,
the size of the fine should come as no surprise," European Union Competition
Commissioner Neelie Kroes told a news briefing.

Intel reportedly will appeal the fine and the criminal judgment against its business
practices. The EU order does not prevent Intel from offering rebates to OEMs
and customers, but restricts the use of rebates and other payments from
preventing fair competitive marketplace practices.

The EU judgment is just one of several antitrust cases Intel faces. Rival AMD,
the alleged target of the antitrust practices, will have its antitrust
complaint in the United States
heard next year. And Japanese and Korean officials have issued rulings and
continue to review Intel practices.

The EU ruling and further actions in the United States are not likely to
produce substantive change in the processor market or result in AMD
surging in sales or market share. Analysts say the EU’s 2004 ruling against
Microsoft for anti-competitive practices related to its bundling its Internet
Explorer browser with the Windows operating system did not result in a
significant shift in rivals’ market share.

At a meeting with market analysts yesterday, Intel CEO
Paul Otellini stated the Intel’s second quarter is progressing better than
expected and should end with financial performance similar to the company’s
first quarter, $7 billion revenue. He also stated that demand for chips was
increasing, which signals that the PC market slump had hit bottom.