View Full Version : Dell and Intel: Big Tech behaving badly

07-23-2010, 06:54 PM

NEW YORK (CNNMoney.com) (http://money.cnn.com/2010/07/23/technology/dell_intel/index.htm?source=cnn_bin&hpt=Sbin) -- Thursday's $100 million settlement between Dell and the Securities and Exchange Commission was a reminder that the government is going after tech's bad boys -- and Intel is likely next on the feds' list.

According to the SEC's complaint against Dell, Intel paid the computer maker rebates as part of a deal in which Dell agreed not use microchips manufactured by Intel's rival AMD. We're not talking small change: The payments totaled $4.3 billion between 2003 and 2006.

That's actually not what landed Dell in hot water. Instead, Dell was charged with defrauding its investors by pretending that those payments were operating income. The maneuver artificially inflated Dell's balance sheet and helped it beat Wall Street's earnings estimates for four years.

But Intel's naughty behavior continues to be the subject of a separate Federal Trade Commission antitrust investigation, parts of which were used in the SEC's case against Dell. That probe appears to be nearing an end: The FTC this week extended its deadline to settle with Intel over a years-long antitrust suit. The deadline, which was scheduled for Thursday, was extended for two weeks as the FTC considers Intel's proposed settlement deal.

Intel (INTC, Fortune 500) has already been slapped with penalties for using its dominant market position to bully chip customers into exclusively buying its products. The European Union conducted its own Intel probe that culminated in a record $1.45 billion fine, levied in May 2009. New York Attorney General Andrew Cuomo is also investigating Intel for antitrust violations.

In November, Intel inked an peace treaty with AMD (AMD, Fortune 500). The world's largest chipmaker paid its rival $1.25 billion and agreed to abide by "a set of business practice provisions." In return, AMD dropped all three of its pending lawsuits against Intel.

" doesn't have an obligation to help us; they do have an obligation not to do things that are intended to hurt us," Dirk Meyer, AMD's chief executive, said when the settlement was announced.
Dell's hidden kickbacks

For Dell, the money train really took off in 2003, when Intel sharply increased its payola. The SEC noted that the rise coincided with AMD's April 2003 release of its new Opteron processor -- which many analysts believed to be technologically superior to Intel's competing Xeon processor.

According to the EU investigation's findings, Dell wasn't the only computer maker that Intel paid to stay away from AMD. Intel also gave rebates or direct payments to Hewlett-Packard (HPQ, Fortune 500), Lenovo, Acer, and NEC.

What made Dell's case stand out is how the computer maker reported that income to its investors. Dell never disclosed that it was receiving those payments, and when Intel's incentives stopped coming in May 2006, Dell's quarterly operating profit dropped by 36%. Three-quarters of that decline was directly attributable to the disappearance of Intel's payments, according to the SEC.

But Dell (DELL, Fortune 500) lied to investors, telling them that the severe drop was due to the company "pricing too aggressively on slowing demand" and to component costs falling less than expected, the SEC said.

The deception went straight to the top. Dell founder Michael Dell and former CEO Kevin Rollins were each fined $4 million for acting complictly in the fraud. The SEC also fined several other high-ranking executives. Among them, only Michael Dell remains with the company in a top position.

When the government first began investigating Dell in August 2005, Dell hired outside investigators to conduct an internal review of the company's accounting activities. That probe lasted a year and involved nearly 400 lawyers and forensic accountants examining 5 million documents. In the end, they concluded that Dell's financial controls were weak and that senior executives had manipulated accounts to meet quarterly performance targets.

In January 2007, while the internal investigation was still ongoing, Rollins was forced out and replaced by Mr. Dell, who had been serving as chairman of the board at the time. Dell adjusted its financial results from between 2003 and the first fiscal quarter of 2007.

Dell's $100 million settlement gets it off the hook with the SEC. Despite the SEC's finding that Michael Dell was involved in the fraud, the company's board continues to stand behind him and said he will retain his position as CEO.

But Dell has other legal battles ahead. Unrelated to the Intel payments, a Web hosting company called Advanced Internet Technologies has sued Dell for selling faulty computers that the computer company allegedly knew would fail. The case is set to go to trial in October.

Other big tech companies are also in the government's crosshairs.

The FTC is reportedly looking into Apple (AAPL, Fortune 500) for blocking Google's ad network from its iPhone applications. Google (GOOG, Fortune 500) is facing its own Department of Justice investigation -- the DOJ is determining whether Google's settlement with authors and publishers over Google Books went too far. That deal allows Google to sell digital copies of out-of-print books that are still copyrighted.

Perhaps the most famous antitrust suit against a tech company was the U.S. government's decade-long crusade against Microsoft (MSFT, Fortune 500).

The government came close to breaking the company up, but eventually settled in 2001 for a much less drastic set of changes that included ongoing monitoring by a regulatory watchdog. The European Union took a harsher stance, and in 2008 fined Microsoft $1.2 billion for pricing out rivals and refusing to comply with the terms of the court's previous antitrust decision.

[I]Okay, I wondered in 2004 when the announcement was made that Apple was moving from Motorola to Intel for their chip maker why they didn't go with AMD which has always built faster, stronger processors than Intel. Gamers have always preferred AMD over Intel.

HEAT is what I was told. Motorola processors ran too hot (as I found out with my G5 iMac), and AMD, while lightning fast, was just too hot a core for what Apple wanted to do, like the MacBook Air, and the MacMini Server. Intel wasn't too far behind for speed, and they DO run cooler.

For the record, I've only ever owned two (2) Intel powered PCs. Everything else has been AMD, and I've only ever had one computer cook itself to death, being the G5. My AMD machines have always performed to my expectations. And the 64 Bit Dual Core Athlon I have right now is just plain awesome. Adobe CS5 (all 16 apps of it) runs just as well as it does on my Mac. Office 2010 runs much faster than Office 2008 on the MBPro.

I always thought, like I do Microsoft, that Intel was just too big for their own good. They've done wonders for Apple, but this story only confirms my suspicions about them.

Now I miss my PPC iMac.

07-24-2010, 05:17 PM
are u sure the imac cooked itself and it wasn't the capacitors.??! have not seen the imac G5 fail dues to CPU.

07-24-2010, 11:08 PM
The G5s were hot, hence the high fan noise on the iMacs, and the towers. But to be fair, all the G5s were from IBM, not Motorola. IBM's interest in CPUs has long been focused on servers, where heat, noise, and size are much less important than in the consumer market.

Personally, I am glad the G5s are going away. My least favorite Macs overall. Apple did a great job shoe horning them in consumer gear, but to some degree they were pounding a round peg in a square hole.

As for picking Intel over AMD, three things seemed most important, and in hind sight make it look like the right decision.

1) Apple was selling more portables than desktops. Intel had the best laptop CPUs and chipsets at the time.

2) Apple wanted/needed their machines to be different and better. They used EFI from Intel to leap frog the 20+ year old tech of BIOS. Much smarter, much more Mac like, and left the generic PC crowd in the dust. Allows great Mac features such as Target Disk Mode and NetBoot. Also made it much harder to hack Mac OS onto generic hardware. They had to do this. No real choice.

3) AMD's future was in doubt, or at least was more cloudy than Intel, especially in those days. The last thing Apple wanted to do was hitch its wagon to yet another CPU partner that might not be around in a few years, or may not be cutting edge, especially in portables. They already rode Motorola and IBM all they way down until both companies exited the consumer PC CPU market. Could not/would not ever do that again......critical business decision.

Having said that, I too had hoped that they might partner with AMD to balance out Itel's traditional predatory business practices that were possible solely based on their market dominance.

Now, look on the bright side:

- Intel Macs are the best ever (IMHO), at least since the clone days or older.
- Best laptops in the world, which their key market
- EFI is more solid than either BIOS or Open Firmware (PPC).
- Apple is selling more Macs than ever, and is surpassing MS in importance!
- Apple's success has allowed them to do things there way, such as developing the A4 for iPad and iPhone. Notice they did not go Intel Atom.

Going with Intel was a compromise, but the best choice. Their success since then pretty much proves that. Don't forget, there were other choices too. They could have worked with Freescale (who picked up where motorola left off), and one or two other PPC producers, including PA Semi. But all other options would have been much higher risk compromises than going with Intel.

Read more here (http://en.wikipedia.org/wiki/Apple–Intel_transition).

...I know.......none of this makes us want an AMD powerhouse Mac desktop any less. :rolleyes:

07-25-2010, 12:05 AM
are u sure the imac cooked itself and it wasn't the capacitors.??! have not seen the imac G5 fail dues to CPU.
I spent a day taking it COMPLETELY apart.

The CPU was black and scored with carbon all around the edges. It looked like someone had taken a torch to it.

I went very carefully over more than a dozen different components (audio, video, motherboard, downpower supply, and various PC boards throughout the whole thing. Nothing, but the processor and surrounding surface, showed any signs of heat damage.
I went through three power supplies on my two G3 iMacs in four years, and I saw MOSFETs and capacitors that were "cooked". If there was one that went inside that iMac, I would have known it.

It was definitely the processor that cooked.

07-25-2010, 05:52 AM
My most dependable Macs (never broke down yet and seemed to run easy.. no excess heat/crashing) Were the PowerMac 8500 and the G4/733 Digital Audio.

Mom had a G5 iMac and it had a new MB 3 times because of capacitors and finally its PSU went out

I had a G4MDD (too much noise/heat) a G5 Dual 1.8 (heat at least the heat sinks were very discolored) and now I have an Intel iMac (baked a hard drive, I have since turned up the fans)

07-25-2010, 10:43 AM
My only real complaint with the iMac line is lack of access to the HD. Nothing to do with the Intel tech though. Ironically, the ibook line was murder to swap HDs, and most of the PPC iMac line has not been too bad to swap. Now all of the laptop line except the MB Air is easy to swap HDs, but the iMacs are way too hard.

Back on topic....it is very interesting how Dell charged ahead and dominated the PC market for half a decade when they had payola from Intel, but now are shrinking back to being just one of many PC builders now that the payola has long dried up. Also interesting that Mr. Dell survived this debacle. How ironic is his famous quote now: Shut it down... (http://tech.fortune.cnn.com/2007/10/07/dell-vs-apple-10-years-later/)

Also interesting that Dell is in hot water and facing at least one law suit for selling PCs KNOWING that they had bad capacitors, and that they would fail. Yes, these are the same capacitors that Apple (and others) used would swell and burst in the G5 iMac. At least Apple acknowledged it and provided a extended warranty period.

Dell gets an F for saying nothing, and Apple gets a C- for providing some relief, but not doing proper recall. Left it up to users to figure it out, and users had to wait for the machine to fail to get a repair, and some of the replacement boards had the same bad capacitors IFAIK.

08-02-2010, 10:51 PM
Well, my experience with Dell's is this:

Dad had one for three and a half years - It's dead now.
Ex wife had one for two years - It's dead now.
Brother had one for three years - It's dead now.
I just "buried one" at age three last week for a client.

They all had in common some design flaw or other made by Dell that caused a premature death to what should have been a good system for years to come. Overheating or MoBo damage killed each one.

Like the joke goes, "Bummer dude, you're getting a Dell".

I stand by that.