Intel To Pay $1.25B To AMD to Settle Legal Issues

[Kilhart]

Apparently this is a pretty big story or something.

4th UPDATE: Intel To Pay $1.25B To AMD, Ends Legal Battles - WSJ.com

NEW YORK (Dow Jones)--Feuding chip rivals Intel Corp. (INTC) and Advanced Micro Devices Inc. (AMD) agreed to settle all of their outstanding legal complaints, with Intel paying AMD $1.25 billion and agreeing to abide by a set of rules for how it conducts its business.

The agreement, which also includes a renewed five-year cross-license agreement, comes as Intel faces an increasing amount of scrutiny from government regulators regarding alleged anticompetitive practices.

AMD indicated that the deal would relieve the animosity between the companies, adding that provisions regarding Intel's business practices would allow the chip makers to compete on a level playing field. However, the company acknowledged that the settlement wouldn't immediately change the balance of power.

"The industry isn't going to change like a light switch," AMD Chief Executive Dirk Meyer said, but he added that the company will be able to compete better on the strength of its products and customer relationships.

AMD said it plans to tell regulators taking actions against Intel that the settlement resolves nearly all of its complaints.

"The agreement to a great extent, to a great extent, resolves outstanding disputes between AMD and Intel under the antitrust laws," AMD counsel Tom McCoy said.

Intel and AMD make nearly all the chips used to run computers and servers, though the much larger Intel controls roughly 80% of the market.

AMD shares surged on the news, rising as much as 26% to a new 52-week high of $6.73. The stock recently traded at $7.48, up 31% on the day. Intel shares added 3 cents to $19.87.

Legal and regulatory battles have increasingly been turning against Intel, and Roger Kay, president of Endpoint Technologies Associates, which tracks the field, said that by settling, Intel may have alleviated some pressure regarding the cases brought by others.

"It was only going to get more expensive the farther down the litigation road they went, and this takes a lot of wind out of the sails of the other suits," Kay said. "Intel may have just reduced its legal tab by a number of billions of dollars."

Intel Chief Executive Paul Otellini said, "All of these comments and actions from regulators have come from the complaints between these two private parties, and I think [the settlement] should provide some level of comfort between the regulators."

Intel has not stopped believing that it has acted lawfully with regard to antitrust, Otellini said. The company continues to believe the discounts it offers to customers are lawful.

"While it pains me to write a check at any time, in this case it made a practical settlement, and it was a good compromise between the two companies. And in many ways, it was a small multiple of the potential damages that could be awarded in a jury trial," Otellini said.

Intel had $9.2 billion in cash and short-term investments as of the end of the third quarter.

The Federal Trade Commission, which has an ongoing independent investigation of Intel's practices, said it plans to review the settlement between Intel and AMD, but declind to comment further.

The European Commission Thursday acknowledged the companies' settlement but said it would continue to monitor Intel's compliance with obligations announced in May, when the commission fined the company nearly $1.5 billion for impeding competitors' ability to sell microprocessors in EU countries. Those obligations include not offering conditional rebates that the commission deemed problematic.

A person familiar with a probe of Intel by New York Attorney General Andrew Cuomo's office said the Intel-AMD settlement isn't expected to affect the attorney general's ongoing antitrust lawsuit.

Meanwhile on Thursday, Intel named A. Douglas Melamed, an attorney with a long background in antitrust, as its general counsel, according to The Wall Street Journal, citing sources familiar with the matter.

According to the settlement, Intel will not be able to make customers' business with Intel conditional on excluding AMD. It also cannot use inducements to force exclusive dealing, nor can it ask customers to delay or prohibit the marketing of AMD in conjunction with their products.

While agreeing to thee terms, Intel still asserted that it has not done anything unlawful, and therefore current policies wouldn't need to change in response to the settlement.

The settlement was sorely needed for AMD, which has struggled with mounting losses and high debt levels related to its acquisition of graphics chip-maker ATI Technologies. With the lawsuit and other legal disputes now behind it, the company removes a serious investor concern, said Wedbush Morgan analyst Patrick Wang.

"AMD's liquidity issues are going to be taken away," Wang said. "This is something that is going to take away a major overhang for investors."

For years, AMD has complained about Intel's dominance and chip-pricing practices, with a long-awaited antitrust lawsuit set to begin in March. This year, the European Commission levied the largest antitrust fine in its history against Intel for anticompetitive practices. And earlier this month, New York's attorney general filed a lawsuit against Intel alleging the company threatened computer makers and paid huge kickbacks to stop them using competitors' chips.

Intel has also faced investigations in South Korea and Japan.

"We look forward to healthy competition with the mutual respect one would expect between world class competitors," AMD's Meyer said.

As part of the patent licensing pact, he said GlobalFoundries, AMD's joint manufacturing venture, is no longer required to operate as a subsidiary of AMD.

Intel said as a result of the settlement, its fourth-quarter effective tax rate will be about 20%, not the 26% previously expected. The company's other forecasts are unchanged.

[SephYuyX]

Aww butt hurt AMD cant take the heat anymore.

[Olo401]

More like they can't afford the legal fees in this shitty economy. Actually it's a smarter move for them anyways. They get Intel to pay out and essentially admit their fault, while AMD's position in a down economic situation is shored up. They can also pay off the debt from acquiring ATI.

[Cephius]

So basically, Intel paid AMD $1.2b to continue taking it up the ass from a market share standpoint. Got it.

[Olo401]

So basically, Intel paid AMD $1.2b to continue taking it up the ass from a market share standpoint. Got it.

Intel's so far ahead in the performance and server markets it probably doesn't matter to them what happens.. they probably just wanted to make this go away during a time when it makes sense to clean things up for a turnaround in the market.

[Amastacia]

Not to say that AMD isn't making a lot more noise than necessary, but there are at least a few grains of truth to their complaints of anticompetitive practices.

I imagine the marketshare landscape pre-Core2 would've looked a bit different if Intel hadn't had shifty incentives to block AMD out. AMD had a better product, and couldn't capitalize on its superiority with volume OEMs who wanted to keep their discount rates from Intel.

Can go into a million what ifs, but this wouldn't have gained so much traction if it was totally groundless. This ends up being a cheap way out for Intel, and a reprieve for AMD. Now the latter just has to start developing better CPUs, rather than just competing in the value space on price.

[Olo401]

Hmm.. seems there's also a 5-year cross licensing agreement that was part of the settlement package. That's HUGE for AMD.