Managerial Economics 2nd Edition by William Boyes

Exercise 3

In early 1998, S3 was a small microchip-design firm with a big problem. The company knew that Intel's patent wall would eventually stall its highperformance graphic-microchip business. S3 hatched a plan to fix the problem. It outbid Intel to acquire the patents of bankrupt microchip maker Exponential Technologies. In doing so, S3 acquired a patent that predated Intel's. Explain why S3 spent $10 million to purchase a bankrupt firm. What is the implication for the dominance of Intel?