Sep. 27--At the heart of the European antitrust case against Intel are a series of once-confidential memos that provide a rare glimpse into the intense and at times acrimonious negotiations between the world's biggest chip maker and Hewlett-Packard, the world's biggest computer company.

Even a company as powerful as HP, the documents suggest, had to make business decisions based on how Intel would react. The Palo Alto computer company reportedly was so worried about threats from Intel that it dramatically scaled back its plans earlier this decade to sell computers powered by chips from Intel competitor Advanced Micro Devices of Sunnyvale.

And when AMD offered HP 1 million free microprocessors, saying it was a gift "no reasonable business partner could refuse," HP took only 160,000 to avoid Intel retaliation, according to the report unveiled last week by the European Commission.

But the significance of the e-mails and other documents, which were generated by the two Silicon Valley titans after HP introduced a business computer using AMD chips seven years ago, remains in dispute. HP declined a Mercury News request to be interviewed and Intel insists it did nothing illegal, calling the commission's findings "wrong as a matter of fact, law, economics and elementary fairness."

Founded in 1968, Santa Clara-based Intel has long dominated the market for x86 microprocessors, the brains of most personal computers and servers. But AMD, formed a year

later, began making serious inroads into that business about 10 years ago as the quality of its chips improved. Then, on Aug. 19, 2002, HP introduced a business desktop computer in the United States with an AMD x86 chip, the first major computer maker to do so. That prompted Intel, HPs biggest chip supplier, to step up the pressure, the commission's report said.

At the time, HP had been negotiating to get a new round of Intel rebates, a form of financial incentive Intel has used for years to persuade computer companies to buy its chips. The deals tended to be renegotiated every few months, but how much Intel paid was not made public in the commission's report.

Although many rebates are perfectly legal, antitrust regulators contend large companies can misuse the payments to dominate their markets. In fining Intel a record $1.45 billion, the European Commission claimed the chip maker limited competition and, thus, consumer choice, by threatening to reduce or eliminate its rebates to customers who bought too many AMD chips. And it cited Intel's dealings with HP as a prime example.