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

SUNNYVALE, Calif.—(BUSINESS WIRE)—August 1, 2007— 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.
 



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