Intergraph, the PC and workstation manufacturer, has pulled out of its PC and generic server business. The company has decided to focus exclusively on software and services. Intergraph''s chief executive James Meadlock blamed Intel for the company''s troubles, and said the decision follows the lengthy legal dispute underway in an Alabama federal court.

Intergraph claims that in 1996, after several years of mutually beneficial work, Intel wanted access and use of Intergraph patents already being used in Intel microprocessors, without royalty payments. When Intergraph refused, the company alleges, Intel used its monopoly power by engaging in a series of coercive actions to force Intergraph to give Intel access to the patents. Intergraph was already dependent on Intel for high end processors. With no other source of suitable high-end processors, its hardware business was under serious threat, and Intergraph filed a lawsuit on 17 November 1997. The lawsuit makes claims against Intel in three areas: illegal coercive behaviour, patent infringement, and antitrust violations.

The Federal Trade Commission then investigated Intel for anti-competitive practices. Intel and the FTC finally reached an 11th-hour consent decree in August 1999.

In April 98, the US District Court, Northern District of Alabama, issued a ''Memorandum of Opinion and Preliminary Injunction'' in which the court stated its findings of fact in the case, and ordered Intel to continue providing Intergraph with products and information as it did before the dispute.

Continuing with the case in June 1999, the court ruled that Intel has no licence to use Intergraph''s ''clipper patents'' as Intel had claimed it had under a cross-licensing agreement with the National Semiconductor Corporation. Whether Intel is guilty of patent infringement will be determined in the trial next year.

But all this has affected Intergraph, and the company says it has been forced out of its hardware business. Mr Meadlock says that Intel''s reluctance to supply information is to blame for its inability to compete effectively in its markets.

Intergraph registered a loss of $20.9 million in 1998, from revenues of $286.7 million. He added that Intergraph will pursue its dispute with Intel and defended his company as being one of the few to stand up to the chip giant.

Meanwhile, Intergraph will be reorganised into nine business units -- five dedicated to end markets like government and building-design systems, and four to products, including Intense3D and the ViZual Computing business. Intergraph is seeking third-party investments in both its ViZual Computing graphics workstation business and Intense3D add-on card operation, and has hinted that an outright sale of the groups may be in the offing.

The restructuring will cost the company about 400 jobs, and will result in a $20 million one-time charge to earnings.

Meanwhile, Intel has said that it "has been and is in full compliance with the preliminary injunction, both in the spirit and the letter" of the agreement. Intel is expected to file its own brief shortly.