EU regulators on Wednesday fined Intel Corp a record 1.06 billion euros ($1.45 billion) for antitrust violations and ordered it to halt illegal practices used to squeeze out rival AMD.

The European Commission said the world's no.1 chipmaker paid computer makers to postpone or scrap plans to launch products using AMD chips, paid illegal rebates to encourage them to use Intel products and paid a retailer to stock only computers with Intel chips.

Intel rejected the Commission's decision, arguing it was based on weak evidence that must be reviewed on appeal to an EU court. It also said it did not understand how to comply with the Commission's order.

The decision came as the United States is toughening antitrust enforcement, including an investigation into Intel. South Korea and Japan have said the company committed antitrust violations.

Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years, European Union Competition Commissioner Neelie Kroes told a news conference.

The antitrust fine, imposed after an eight-year investigation, is the biggest the EU's executive Commission has imposed on an individual company.

Financial analysts said U.S.-based Intel would be able to maintain its market dominance but the EU's decision could help Advanced Micro Devices boost its market share.

The Commission said Intel must cease all illegal practices immediately but Intel President and CEO Paul Otellini said in a statement that the company would appeal at the Court of First Instance, the EU's second-highest court.

Intel takes strong exception to this decision, Otellini said. There has been absolutely zero harm to consumers.

MYSTIFIED BY RULING

Intel's general counsel Bruce Sewell told reporters he was somewhat mystified and unsure what the company needed to change. He said Intel had not yet begun talks with the Commission on how to comply with its ruling.

Kroes said the EU antitrust sanctions would be carried out immediately. In a previous antitrust case against software giant Microsoft, the Commission froze its remedies during part of an appeal filed by that company.

Intel shares fell 9 cents or 0.6 percent to $15.13 in morning trading on the Nasdaq, which was down nearly 2 percent. AMD was up 6.4 percent at $4.62 on the New York Stock Exchange.

AMD said the Commission's ruling was an important step toward establishing a truly competitive market.

INTEL TO REMAIN DOMINANT

Some analysts said the decision would have little strategic impact and would not change the way Intel operates.

Others said it was a historic decision that showed the extent of the EU's determination to ensure dominant companies do not shut rivals out of the market and would have a big impact on the global IT industry.

Intel's competitive advantage is not that they cheated or anything like that. It's that they are much larger than their smaller rival AMD. As far as long-term competitive advantage (goes), Intel still has it, said Andy Ng, an analyst at investment research firm Morningstar.

The Commission said Intel must pay the fine, which represents 4.15 percent of the company's 2008 turnover, within three months of being notified of the decision.

The penalty surpassed the 896 million euro fine last year on glass maker Saint-Gobain for price fixing, and a 497 million euro penalty in 2004 on Microsoft for abuse of dominance.

Intel said late on Tuesday its orders and billing patterns had been slightly better than expected so far in the second quarter. It had first-quarter sales of $7.1 billion. Analysts estimated the company enjoys a sizeable cash balance, generating close to $10 billion in cash last year.

(Reporting by Foo Yun Chee, David Lawsky and Bate Felix in Brussels; Tarmo Virki in Helsinki; Georgina Prodhan in London; Eva Kuehnen in Frankfurt; Sachi Izumi in Tokyo; Doug Young and Kelvin Soh in Taipei; Tiffany Wu in New York; Editing by Timothy Heritage, David Cowell and Dale Hudson)

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