Chip giant Intel Corp. has agreed to pay $1.25 billion to smaller rival Advanced Micro Devices in a settlement that ends a five-year complaint over Intel’s aggressive business practices.
Intel, which AMD has accused of antitrust behavior and patent infringement, does not admit to wrongdoing but agreed to abide by a set of “business practice provisions.”
Under the deal, AMD will withdraw its legal complaint in U.S. District Court in Delaware as well other cases around the world. AMD and Intel will establish a new five-year cross-licensing patent agreement and abandon previous breach of licensing claims. Also, AMD subsidiary GlobalFoundries will be allowed to operate as an independent company, allowing AMD to cut costs by separating itself from its manufacturing arm.
The settlement ends a long-running feud between the two Silicon Valley chipmakers and allows the industry to focus on growth as it tries to claw out of the economic recession. AMD’s complaints centered on Intel’s alleged practice of offering incentives to PC manufacturing partners to use Intel chips and threatening retaliation against those that didn’t buy from Intel.
Intel owns about 80 percent of the market for processors that run PCs and servers while AMD controls much of the rest of the market.
The deal does not, however, end Intel’s legal battles with regulators. In May, Intel was slapped with a $1.45 billion antitrust fine by the European Union. Last year, the Korea Fair Trade Commission fined Intel about $25 million for abusing its dominance in the chip market. Intel is appealing both cases.
Intel is facing a new antitrust suit filed by New York Attorney General Andrew Cuomo. The Federal Trade Commission has also been weighing an investigation into Intel’s behavior.
It’s unclear how much Intel’s adherence to the agreed set of business practices will satisfy regulators and help its legal appeals, though it should show that Intel is working in good faith with its chief rival. EU spokesman Jonathan Todd said Thursday that Intel’s settlement with AMD does not change its obligation to comply with European antitrust laws.
AMD framed the settlement as a return to peace and an opportunity to move ahead with its larger ambitions.
“It is an important milestone for us, for our customers, our partners, and most important, for consumers and businesses worldwide,” said AMD CEO Dirk Meyer during a conference call.
Intel CEO Paul Otellini sounded defiant, saying Intel did nothing wrong, but conceded that the two sides disagreed about Intel’s business practices.
AMD’s chief managing officer Nigel Dessau spelled out in a blog post some of the business practices that Intel will agree to. He said Intel will refrain from offering inducements to customers to either buy Intel chips or avoid purchases of AMD technology.
“What we are left with is competition based on strategy, design, marketing, sales and execution,” he wrote. “A level playing field; a fair fight. That’s all we ever wanted.”
Analysts said the deal is positive for both companies, allowing them to focus on their individual businesses. In-Stat chief technology strategist Jim McGregor said Intel benefited in particular, ending its legal battle with AMD by paying a relatively small amount, less than the EU fine.
“It’s a good day for Intel to put this behind them and move on,” McGregor said. “They’re in the processor business. They don’t want to be dealing with this stuff.”
Technology analyst Jack Gold of J. Gold Associates said the settlement gives AMD an infusion of cash as it tries to pay down $3.7 billion in debt.
For Intel, the deal preserves AMD as a competitor, which is good for encouraging innovation and avoiding even more regulatory scrutiny, he said. And it helps Intel prepare to better compete with ARM Holdings, a British chip-design company that provides the chip architecture for most of the world’s cell phones and mobile devices.
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