New Economic Study Finds Intel Extracted Monopoly Profits of $60 Billion Since 1996



    Also Finds Consumers and Computer Manufacturers Could Gain Over $80
Billion from Full Competition in Microprocessor Market

    SUNNYVALE, CALIF., August 2 /CNW/ - A new economic study issued today by
Dr. Michael A. Williams, Director, ERS Group, found that Intel has extracted
monopoly profits from microprocessor sales of more than $60 billion in the
period 1996-2006. Dr. Williams' analysis explains why pro-competitive
justifications for Intel's monopoly profits are implausible.

    Williams also found that consumers and computer manufacturers could gain
over $80 billion over the next decade if the microprocessor market were open
to competition. The analysis noted that consumers would save at least $61
billion over the period, with computer manufacturers projected to save another
$20 billion, enabling them to increase their investment in R&D create improved
products and greater product variety; and provide additional innovation
benefits to computer buyers around the world.

    The ERS Group is an economic and financial consulting firm retained by
AMD's outside counsel, O'Melveny & Myers LLP.

    Dr. Williams said, "Intel has extracted $60 billion in monopoly profits
over the past decade; over the next decade consumers and computer
manufacturers would save over $80 billion from a fully competitive market."

    Williams continued, "In light of the recent European Commission decision
and prior Japan Fair Trade Commission actions, this analysis asks not whether
Intel has engaged in anticompetitive conduct, but how much Intel has gained
from the alleged conduct."

    Thomas M. McCoy, AMD executive vice president, legal affairs and chief
administrative officer stated, "Intel's monopoly profits of $60 billion
directly contradict Intel's claim that its business practices have resulted in
lower prices - in fact this study shows that billions of dollars have moved
straight from consumers' pockets to Intel's monopoly coffers."

    McCoy continued, "That $80 billion translates into an Intel monopoly tax
on every consumer who purchases a computer. That's a jaw-dropping figure that
helps explain why the European Commission brought antitrust charges against
Intel - the real harm that its abuse of monopoly power causes competition and
consumers."

    A summary of the study is attached.

    About Dr. Michael Williams and ERS Group

    ERS Group is an economic and financial consulting firm that specializes
in analyses for complex business litigation. Over 3,000 clients, including
Fortune 500 companies, law firms, universities, industry trade associations
and government agencies, have retained ERS Group professionals in a wide
variety of cases involving numerous industries.

    Michael Williams, Ph.D. is a Director of ERS Group. He specializes in
antitrust, industrial organization, and regulation. As an economist in the
Antitrust Division of the U.S. Department of Justice and as a consultant, he
has examined and provided expert testimony on a variety of antitrust and
regulatory issues, including monopolization, price fixing and tying
arrangements. He has served as a consultant to the U.S. Department of Justice
and the Federal Trade Commission in such matters as the proposed mergers of
Exxon and Mobil, BP Amoco and ARCO, and in litigated matters such as FTC v.
Rambus and U.S. et al. v. Oracle. His Ph.D. in economics is from the
University of Chicago. He presented testimony this year as part of the joint
DOJ-FTC examination on the future of the antitrust rules governing single-firm
conduct.

    About AMD

    Advanced Micro Devices (NYSE:   AMD) is a leading global provider of
innovative processing solutions in the computing, graphics and consumer
electronics markets. AMD is dedicated to driving open innovation, choice and
industry growth by delivering superior customer-centric solutions that empower
consumers and businesses worldwide. For more information, visit www.amd.com.

    
    A Quantification of Intel's Historical Monopoly Profits from the Sale
     of Microprocessors and a Projection of Future Consumer and Computer
           Manufacturing Gains in a Fully Competitive Marketplace

          A report by Dr. Michael A. Williams, Director, ERS Group

    KEY STUDY FINDINGS:
    -------------------

    -- Intel extracted monopoly profits from the sale of microprocessors
       of approximately $60 billion in the period 1996 - 2006.
    -- Pro-competitive explanations for Intel's $60 billion in monopoly
       profits are implausible for the following reasons:

       -- Recent European Commission charges and prior findings from the
           Japan Fair Trade Commission;
       -- The rarity of firms that achieved a 16-percent or more economic
          return;
       -- An examination of strong companies that have much lower economic
          returns, including Pfizer, Wyeth, ExxonMobil Corp., and Target;
       -- Intel's reported losses on its non-microprocessor businesses,
          showing that Intel lacks sustained, competitive advantages from
          brand-name loyalty and other factors;
       -- Negative average economic returns earned by other semiconductor
          companies.

    -- Consumers and computer manufacturers would conservatively gain
       approximately $81 billion in the next decade from full competition
       in the microprocessor market.

       -- Consumers, including both home and business users, would save at
          least $61 billion.
       -- Computer manufacturers are projected to save at least another
          $20 billion over the next 10 years.

    -- That represents a consumer savings of approximately 1.5% off the
       retail price of a $1,000 high-performance desktop computer in a
       fully competitive market.
    -- Computer manufacturer savings would result in: (1) increased
       research and development, (2) greater product variability, and (3)
       further innovation, providing additional benefits to computer
       buyers.

    Monopoly Profits

    -- Intel's economic return on its microprocessor business was
       calculated using publicly available information and standard
       economic methodology. The method begins with standard financial
       statements and derives from them the information necessary to
       calculate a firm's economic profits. It is based on Nobel
       Prize-winning research conducted by Merton Miller and Franco
       Modigliani and used by more than half the Fortune 1,000 firms to
       analyze their economic performance; Wall Street investment banks to
       assess potential investments; and leading management consulting
       firms, such as McKinsey & Co. and Stern Stewart & Co.

    Intel's Total Profits (total return 25.95%)             $141.8 billion
    Competitive Profits (cost of capital 9.94%)             - 54.2 billion
                                                            --------------
    Result: Economic Profits (economic return 16.01%)        $87.7 billion
    Portion of Economic Profits Attributed to Assumed
     Advantages (5.0%)                                     - $27.3 billion
                                                           ---------------
    Result: Monopoly Profits (11.01%)                      = $60.4 billion

    -- Intel's economic profit ($88 billion) was calculated by first
       determining total profits ($142 billion) and subtracting from that
       value its cost of capital ($54 billion--which includes a normal
       profit), resulting in economic profits of $88 billion.
    -- Intel's economic profit margin of 16-percent (the $88 billion)
       stands in stark contrast to the economic returns of 498 other
       public companies examined. Like Intel, they had capital of $1
       billion or more in 1996. Of these companies, the average economic
       return was less than one percent. Intel earned an economic return
       higher than 99-percent of these large companies, including
       companies with strong brands, research and development, or
       intellectual property rights, such as Pfizer, Wyeth, ExxonMobil
       Corp., and Target.
    -- Only four companies earned economic returns of 16 percent or more -
       Microsoft (38.25%), UST Inc. (28.54%), Coca-Cola Co. (16.58%), and
       Intel (16.01%) - and each of these companies has been associated
       with antitrust determinations. Of course, high economic returns by
       themselves do not demonstrate anticompetitive conduct.
    -- To be conservative, the study next provided Intel with a generous
       assumption that 5 percentage points ($28 billion) of its economic
       return were attributable to legitimate advantages. That left the
       $60 billion monopoly profit figure.

    Consumer and Computer Manufacturer Savings

    -- The calculation of future consumer and computer manufacturer gains
       employed four conservative assumptions:

        -- Intel's price premiums would fall by 50% over five years; price
           premiums were calculated by comparing Intel products with their
           AMD counterparts.
        -- AMD's market share of units sold would rise from 27% to 35%
           over five years.
        -- Total industry sales would grow at only half the historical
           growth rates.
        -- OEMs would pass-through 75% of cost savings to computer buyers.

    -- Data from 2Q2006 through 1Q2007 were used as the basis for
       projecting consumer benefits from increased competition over 10
       years.

        -- Consumer benefits for 2012-2016 set equal to benefits in 2011.

    -- As an example of consumer savings on a specific computer purchase,
       the study notes that consumers would save more than 1.5 percent off
       the cost of a $1,000 performance desktop computer.

    Intel microprocessor ASP - 2006               $121.12
    Intel microprocessor ASP - 2011(projected) -  $101.30
                                                  -------
    Total price reduction for computer
     manufacturer:                                 $19.82(16 percent less)
    Savings passed on to consumer:                    75%
    Total consumer savings per computer:           $14.87, or 1.5% of a
                                                   $1000 performance
                                                   desktop computer

    About Dr. Michael A. Williams and ERS Group

    -- ERS Group is an economic and financial consulting firm that
       specializes in analyses for complex business litigation. Over 3,000
       clients, including Fortune 500 companies, law firms, universities,
       industry trade associations and government agencies, have retained
       ERS Group professionals in a wide variety of cases involving
       numerous industries.
    -- The ERS Group, an economic and financial consulting firm retained
       by AMD's outside counsel, O'Melveny & Myers LLP, specializes in
       analyses for complex business litigation.
    -- Michael Williams, Ph.D. is a Director of ERS Group. He specializes
       in antitrust, industrial organization, and regulation. As an
       economist in the Antitrust Division of the U.S. Department of
       Justice and as a consultant, he has examined and provided expert
       testimony on a variety of antitrust and regulatory issues,
       including monopolization, price fixing, and tying arrangements.
    -- Williams has served as a consultant to the U.S. Department of
       Justice and the Federal Trade Commission in such matters as the
       proposed mergers of Exxon and Mobil, BP Amoco and ARCO, and in
       litigated matters such as FTC v. Rambus and U.S. et al. v. Oracle.
       His Ph.D. in economics is from the University of Chicago. He
       presented testimony this year as part of the joint DOJ-FTC hearings
       on the future of the antitrust principles governing single-firm
       conduct.
    




For further information:

For further information: Advanced Micro Devices Mike Silverman,
512-602-3781 (PR) MICHAEL.SILVERMAN@AMD.COM or Mike Haase, 408-749-3124 (IR)
mike.haase@amd.com

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