Andrew Orlowski, on the bizarre financial scheme between Intel and Dell:
Intel’s rebates amounted to 38 per cent of Dell’s operating profit in the fiscal year 2006, and rose to 76 per cent (or $720m) in one quarter alone, Q1 2007. While almost all of the Intel funds were incorporated into Dell’s component costs, Dell did not disclose the existence, much less the magnitude, of the Intel exclusivity payments.
Effectively, Intel bribed Dell not to use chips from AMD, and, eventually, Dell grew financially dependent upon those bribes.
Not that bizarre. Rockefeller’s Standard Oil was notorious for having a rebate system in place with railroads. It’s one of the major ways they mastered transportation in the oil industry and were able gain control over supply and pricing.
Of course, Rockefeller did it better.
In their case, Standard was paid a secret rebate on every barrel of theirs the railroads transported, making their cost of transport way lower than competitors’. Not only that, but they got the same rebates for every barrel oil competitors shipped. (Source)
The Dell/Intel stuff is pretty benign in comparison.
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