|FROM ||Ruben Safir
|SUBJECT ||Subject: [NYLXS - HANGOUT] Video Chip IP lawsuites
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U.S. starts antitrust probe into graphics chips Fri Dec 1, 2006 3:44
By Scott Hillis
SEATTLE (Reuters) - The U.S. Department of Justice has issued subpoenas
to Nvidia Corp. and Advanced Micro Devices Inc. as part
of a probe into potential antitrust violations involving graphics chips,
helping to send shares in the companies lower.
Nvidia, the largest independent maker of graphics chips for computers and
other devices, said on Friday that no specific allegations had been made
against the company and that it plans to cooperate with the investigation.
AMD, the No. 2 maker of computer processors, said late on Thursday that
it had been subpoenaed. AMD entered the graphics business in October
after acquiring Canadian firm ATI Technologies for $5.4 billion.
Nvidia and AMD each control about 25 percent of the market for graphics
chips that are used in personal computers, mobile handsets, video
game consoles and other devices, with Intel Corp. controlling
Justice Department spokeswoman Gina Talamona confirmed that it is looking
into "the possibility of anti-competitive practices" involving graphics
chips and cards, but declined to elaborate.
Mike Hara, Nvidia's vice president of investor relations, told Reuters
that the Justice Department had asked for a broad variety of documents
concerning market studies, production volumes and orders.
"They are basically asking for information. They haven't told us what
they are looking for or why they are looking for it," Hara said. "The
information flow is basically one-way."
Intel, which does not make separate graphics chips like Nvidia and AMD
but integrates graphics functions on computer component boards it builds,
said it did not believe it has been subpoenaed in the investigation.
"To my knowledge, we haven't gotten a subpoena ourselves ... but I'm
not 100 percent certain," said Intel spokesman Chuck Mulloy, adding he
was checking with company lawyers to confirm.
Cody Acree, an analyst with Stifel Nicolaus, said it was too early to
tell what the probe would focus on.
"An antitrust action is typically some kind of pricing issue, aggressive
or almost ... fixed pricing. It's hard to believe that that would be the
case in graphics knowing the pricing curves that graphics goes through
and the rapid swings in market share," Acree said.
"This has been such a volatile area where ATI and Nvidia swapped market
share back and forth," Acree said.
The subpoenas spooked investors, with Nvidia shares falling $1.68,
or 4.5 percent, to $35.31 in busy Nasdaq trade. AMD shares fell $1.13,
or 5.2 percent, to $20.45 on the New York Stock Exchange. Intel shares
fell 2.8 percent to $20.80 on the Nasdaq.
Other analysts also said the shares were likely being hit from fresh
concerns that PC demand during the crucial year-end holiday shopping
season was shaping up to be weaker than expected.
(Additional reporting by Peter Kaplan in Washington and Jim Finkle
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