43% of Intel’s profits a result of monopoly, AMD claims

A study commissioned by AMD found that virtually all of Intel’s profits are “extractions” from the blue team’s monopoly in the microprocessor market.

AMD fired another salvo at its rival, closely on the heels of the EU indicating that it is taking steps to file antitrust charges against Intel. A study, commissioned by AMD, published today claims that “Intel has extracted monopoly profits from microprocessor sales of more than $60 billion in the period 1996-2006.”

Michael Williams, Director of ERS Group and publisher of the report, also said that consumers and computer manufacturers could save about $81 billion over the next decade, if the microprocessor market were open to competition. The lion’s share of this number $61 billion would fall into the hands of consumers with the rest being savings for manufacturers, which could be used for higher R&D investments that would result in better products and a greater product variety.

Williams said that Intel’s profits are estimates derived from standard financial numbers as well as information necessary to calculate a firm’s economic profits, both of which are available in financial statements publicly available. The model used is based on research conducted by Merton Miller and Franco Modigliani, which is used by more than half the Fortune 1000 firms to analyze their economic performance, AMD said.

In this calculation, ERS found that Intel is likely to have recorded profits of $141.8 billion during the 10 year period. From that number the consulting firm subtracted competitive profits ($54.2 billion), economic profits ($87.7 billion), a portion of economic profits attributed to assumed advantages and then came up with estimated monopoly profits of $60.1 billion.

Estimates aside, we have spent some time this morning and went back ten years to dig up financial reports and numbers as they were available:

There is no surprise that over the course of the decade, Intel made a killing in terms of net profits, while AMD came up with a bottom line loss. Intel’s profits totaled about $68 billion for the period, while AMD had to swallow a loss of $616 million.

While Intel recorded annual profits of at least 1.3 billion during the period, AMD was able to hit the black only four times, with record earnings of 983 million in 2000. In those years, Intel’s profit advantage was at least 11x (2000) and as high as 53x (2005).

Intel has not commented on Williams’ report.