The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (May 13, 1997)

The big news today for growth stocks is obviously the king of all technology stocks, INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>, being sued by the deposed bitter uncle, DIGITAL EQUIPMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DEC)") else Response.Write("(NYSE: DEC)") end if %>.

The suit claims that Intel willfully infringed on ten different patents held by Digital Equipment for microprocessor architecture. The extent of the infringement, according to Digital, ranges across the entire Pentium family, which means if the accusation is credible, it went on for several years.

I'm obviously in no position to judge the merits of the law suit, knowing none of the particulars, or even that much about the fine points of the industry or law, but a couple of flags have to be raised, even if only to elicit real responses.

First, the language of the press release by Digital has to make one laugh a little: "Alleging that Intel's patent infringement has caused Digital economic injury and, if not stopped, would cause irreparable harm, the company seeks both an injunction and monetary damages, including triple damages for Intel's willful violation of the patents."

Over the past decade, Intel's stock has risen from $3 and change (split adjusted) to more than $150, a 43% annual growth rate. In that same decade, Digital's stock has gone from over $100 a share to the $30s, an average loss of 10% a year. Color me skeptical, but any patent infringement Intel perpetrated over the last few years with its Pentium line isn't what caused Digital "irreparable harm."

It's also curious why it's taken Digital so long to file a suit, if indeed Intel's been out of line ever since the first Pentium chip. Maybe I'm too jaded, but it sounds like a sour grapes case of the first order.

Don't get me wrong, if Intel's in the wrong, make 'em pay. But does it strike anyone else that the timing of this announcement just feels funny (right after Intel announced another well-received microprocessor)? We'll have to let the courts fight this one out (but if I were a betting man, I'd wager this one never gets before a jury). In the mean time, Intel got a little cheaper today if anyone's looking for bargains.

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