Battle of the billion dollar brains

THE credit is easy. The choice looks huge. And there seems to be no pressure. Strangely, though, customers usually walk out of PC World and other Dixons Group stores with computers in boxes that bear the familiar legend 'Intel Inside'.

Possibly that is simply because Intel, the creator of the original microprocessor computer brain, is simply the best. But court documents filed by Intel's biggest competitor, AMD, suggest that those customers might not have chosen as freely as they thought.

The legal documents accuse Intel of systematically perverting the market by bribing and threatening the makers of personal computers and those who sell them - including Dixons and PC World.

AMD has been Intel's great rival since computer giant IBM pioneered the personal computer and named Intel as supplier of its 'brains'.

The relationship between the two providers was fraught from the moment IBM ordered Intel to let AMD be a 'second source' of chips for its machines back in 1982. Court battles have erupted time and again.

But this time AMD has gone nuclear. Court documents in the possession of Financial Mail accuse Intel of a string of astonishing violations of American, Japanese, and European competition laws.

The documents claim that Dixons receives money from Intel in exchange for keeping personal computers equipped with AMD chips out of the hands of customers walking into Dixons group stores. Other computer retailers named in the documents include Toys 'R' Us and Time Computers.

All are accused of taking payments known as 'marketing development funds' to ensure that computers are sold with Intel rather than AMD chips. The document says: 'In the UK, Intel has locked up substantially all of the business of Dixons Services Group that accounts for two-thirds of the personal computer market.

'In exchange for Intel payments, Dixons has agreed to keep AMD's share below 10% of its business.'

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The documents naming Dixons are part of a massive anti-trust (monopoly) claim filed last week by AMD that threatens to blow apart the apparently cosy relationship between Intel and personal computer makers. AMD's chief executive, the charismatic guitar-strumming Hector Ruiz, is taking a big risk.

In 2002, when AMD tried to convince computer maker Hewlett-Packard to use its chips, the company demanded $25m (£14m) to compensate for expected Intel retaliation. HP executives reported that Intel regarded its rival's entry to be a 'Richter 10 event'.

Gateway, once one of the biggest personal computer dealers in America, said that it was 'turned into guacamole' in vengeance for selling computers with AMD chips. And Michael Capellas, former head of PC manufacturer Compaq, admits that he felt there was a 'gun to his head' to stop him from buying AMD chips.

The latest legal document - an American civil action filed at the District Court of Delaware - also claims that the ' Intel Inside' advertising campaign is a way of subsidising computer-makers promotions.

Manufacturers who agree to use only Intel are also offered free credit. The writ claims that one executive was offered $1m to dump AMD. When he declined, the document says, he was asked: 'How much would it take?'

Paul Otellini, Intel's chief executive, said: 'Intel has always respected the laws of the countries in which we operate. We compete aggressively and fairly to deliver the best value to consumers. This will not change.'

A spokesman for Dixons Group said: 'This is a matter between AMD and Intel. We have long-standing, commercial relationships with both companies and others.

'These are of course fully compliant with all relevant regulations and our own ethical sourcing policy.'

But with a judgment from Japan's Fair Trade Commission reigniting the slow-burning European Union investigation into Intel, the UK market is under the spotlight as never before.

Andy Grove, the former chairman of Intel, was a teenage Hungarian refugee who escaped to the West and called his biography Only The Paranoid Survive. But it seems that Intel's main rival is the one that feels someone is out to get it.