Intel to pay AMD $1.25 billion in antitrust settlement
Burying a very large hatchet in the computing industry, Intel has agreed to pay Advanced Micro Devices $1.25 billion as part of a settlement of a long-running antitrust case.
The pact, announced Thursday, resolves the private antitrust lawsuit AMD filed in 2004 and extends the companies' patent cross-licensing agreement. The new patent arrangement removes hindrances to AMD's effort to spin off its chip manufacturing business and to have other manufacturers build its processors.
In addition, Intel has agreed to "abide by a set of business practice provisions." Check below for a full list.
In turn, AMD says it will drop all pending litigation, including the case in U.S. District Court in Delaware and two cases pending in Japan, and will also withdraw all of its regulatory complaints worldwide.
AMD investors were delighted, sending the company's stock up 21 percent to $6.46 in morning trading. Intel's stayed flat at $19.84.
"While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development," the chipmakers said in a joint statement.
Government cases unaffected
Well, it probably won't end everything exactly. The settlement between the companies doesn't stop antitrust cases brought by governments.
After AMD filed its case in 2004, European regulators brought a separate case that led to a $1.5 billion fine, which Intel is now appealing. And last week, New York Attorney General Andrew Cuomo filed another antitrust suit against Intel.
"Those cases filed by those government regulators will continue," Intel spokesman Tom Beerman said. "We will continue at the same time to work with the regulatory bodies to work on those issues."
Added AMD's Drew Prairie, "We've notified the regulatory authorities of the settlement. They didn't have ongoing investigations because of us...That's a snowball rolling downhill."
Intel still must reckon with an investigation from the Federal Trade Commission, too. "Certainly we plan to review the settlement between Intel and AMD in their private litigation. The FTC has an ongoing independent investigation of Intel's practices so we cannot comment further at this time," FTC Chairman Jon Leibowitz said in a statement Thursday.
The European Commission didn't comment on whether Thursday's settlement would affect discussions about Intel's fine, but did say the agreement doesn't affect its regulatory scrutiny of the chipmaker.
"Intel has an ongoing obligation to comply with the Commission's May 2009 decision and with EU antitrust law," said spokesman Jonathan Todd. "The Commission continues to vigorously monitor Intel's compliance with its obligations under the May 2009 decision."
The cross-license agreement has been updated to reflect AMD's move to spin off its processor manufacturing business into a separate company, Globalfoundries, which currently is an AMD subsidiary. Under the updated agreement, AMD will be able to operate as a "fabless" processor company--one that relies on others to build its chips. In addition, Globalfoundries "is free to operate independently and go after third-party business without issues," Prairie said.
Another change: in the earlier patent cross-license agreement, AMD had to pay Intel royalties. Now neither company makes payments, Prairie said.
Intel: Settlement was 'practical'
Intel Chief Executive Paul Otellini didn't show much in the way of contrition in a conference call.
"We have competed fairly and legally," Otellini said, including the price discounts it offered computer makers as incentives to use Intel chips. In the United States, 98 percent of private antitrust cases are settled, he added. "It pains me to write a check at any time, but in this case it made a practical settlement. It was a good compromise between the two companies. In many ways it was a small multiple of the damage that could be awarded in a jury trial."
And Andy D. Bryant, Intel's chief administrative officer, said the restraints Intel agreed to don't really change Intel's behavior in practice, because it wasn't doing those things in the first place.
"AMD believes we have done business in some fashion they believe is inappropriate," such as punishing computer makers that don't buy a certain amount of chips from Intel. "We have said we don't do the acts they say we're doing...There are no changes to pricing practices as a result of this contract."
He did add that Intel changed some pricing practices as a result of the European Commission case.
Intel also said that as a result of the settlement, its fourth-quarter spending will increase from its earlier projection of $2.9 billion to about $4.2 billion; Intel is paying cash within 30 days. However, Intel's effective tax rate should decline from 26 percent to 20 percent for the quarter, Intel said.
A new relationship
The companies didn't agree to become best friends, but AMD and Intel are turning over a new leaf, moving toward "fierce but fair" competition, Tom McCoy, AMD's executive vice president of legal, corporate and public affairs, said in a conference call.
"With this agreement, we are trying to reset our relationship between AMD and Intel," McCoy said. That relationship has been "intense, emotional, and acrimonious for all too many years...We wanted to put this behind us. We didn't want pressures to build up. We wanted a healthy, normal relationship. Therefore we will see in the agreement, a thought-out procedure [through which] we will build trust and try to resolve our differences before spilling into the courts or into [the] public affairs domain."
Intel's Bryant said the agreement includes mechanisms for mediation and arbitration that provide "a very thorough ability to...resolve differences."
The constraints on Intel's practices caught the attention of Richard Brosnick, an attorney at Butzel Long who focuses on antitrust law.
"In settling a suit that arose from claims that steep discounts were anticompetitive, Intel has now agreed with its rival to a set of 'business practice provisions' that will presumably limit Intel's ability to compete with AMD on price," Brosnick said. "Of course any analysis would depend on the details of the deal, but as a general antitrust matter, I'd call that ironic to say the least."
Intel's restraints
According to AMD, Intel will refrain from these practices:
• Offering inducements to customers in exchange for their agreement to buy all of their microprocessor needs from Intel, whether on a geographic, market segment, or any other basis• Offering inducements to customers in exchange for their agreement to limit or delay their purchase of microprocessors from AMD, whether on a geographic, market segment, or any other basis
• Offering inducements to customers in exchange for their agreement to limit their engagement with AMD or their promotion or distribution of products containing AMD microprocessors, whether on a geographic, channel, market segment, or any other basis
• Offering inducements to customers in exchange for their agreement to abstain from or delay their participation in AMD product launches, announcements, advertising, or other promotional activities
• Offering inducements to customers or others to delay or forebear in the development or release of computer systems or platforms containing AMD microprocessors, whether on a geographic, market segment, or any other basis
• Offering inducements to retailers or distributors to limit or delay their purchase or distribution of computer systems or platforms containing AMD microprocessors, whether on a geographic, market segment, or any other basis
• Withholding any benefit or threatening retaliation against anyone for their refusal to enter into a prohibited arrangement such as the ones listed above.
Those constraints will benefit the chipmakers' customers, computer makers such as IBM, Hewlett-Packard, and Dell, McCoy said.
"When we aggregate all these things together, we believe we have delivered to [the] marketplace and to mutual customers something they've wanted, which is more freedom of action to choose," McCoy said.
Updated at 7:00 a.m., 7:30 a.m., 7:56 a.m., 9 a.m., and 10:50 a.m PST with further details and comments.
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"My HP laptop has an AMD chip in it"
AMD began life as a cheaper Intel - w/o the x86, what would they have started making?
"silicone"? Intel is in the breast implant business now? That's what I call "product diversity"! ;-)
To use your own reasons against you, AMD isn' exactly competing on the strength of their product here either. A few short years ago AMD had both the performance and price advantage but they let it slip. Today, the fact is even the cheapest Intel i7 chip runs circles around most AMD's and that is how Intel is beating them. AMD has been milking the same technology for too long and slow to adapt so rather then actually make a better product they cry and sue the competition.
(and for the record, I do use both AMD and Intel chips. I use whatever the customer calls for and is appropriate for the pricepoint and intention of the system I'm building at the time. I see no point for the average Joe to get emotional and take sides in these CPU wars. When you're using a computer for web surfing and other daily tasks the manufacturer of the CPU under the hood usually makes no difference)
1.25 is huge massive more than i thought amd would ever see from these proceedings. as for your argument that amd competing with the strength of their product this is what all these legal hoopla is about. for 3 to 4 years AMD rocked intels clocks left and right but couldn't seem to get any footing. the cutting edge killer lineup was a hail Mary pass with their best stuff with hopes to fund further R&D but leaving them open if their lineup didn't get market play. Intel saw it coming and locked them out illegally with the aforementioned actions they are now paying up for. as for intel currently running circles i could hardly call a couple hundred points in 3d markvantage as circles. they have the edge and i concede that but amd is now in position for fair market with a big wad of cash to fund R&D.
your argument is like saying a rape victim asked for it by being good looking.
Which is why I generally prefer AMD chips.. They are "less expensive", not "cheaper" Intel charges way too much for their chips. That is until they come out with the next big thing. Then they are lowered to a more reasonable level. That's the only time I will buy Intel.
Intel by the way didn't invent the processor chip......
Innovation would have happened one way or another.
HAPPY THURSDAY
Besides, don't underestimate AMD--they too are moving to the 32 nm fabrication process and we could see VERY fast AMD CPU's within the next year or so.
They are extremely competitive in mass market where people go for a CPU with good price/performance ratio, not the hottest toy from today's benchmark.
As much as I like Intel quality, I simply can't convince myself to buy their CPUs because they are too expensive provided the performance gap is (for 90% of applications) is negligible and AMD systems cost on average 30-50% cheaper.
That would have been drastically different were I a gamer: games love Intel CPUs...
P4's were an awful chip, that was the time, when lower clocked Athlons were wiping the floor with intel processors. The specific timeframe you are talking about, the P4 era...is exactly when AMD was the most competitive and clearly ahead of Intel.
I don't know how you used that as an example...P4's were horrible chips. You could clock it at 4GHz and still not get much performance compared to a lower clocked Athlon.
But, if you jump ahead to today, yes, the Intel i7 is faster than the Phenom II chip from AMD.
all and all though this is still better than I expected to come out of this. I figured we would see a year or so of massive fines and bad press for Intel that would get lawyer whittled to pennies on the dollar, spun to look less bad and massive advert campaign till all was forgotten.
The US Department of Justice and the Federal Trade Commission will probably deliberate this for another 10 years before coming to any conclusions.
If AMD did finally go out of business, we'd all get the royal shaft from Intel. The rate of innovation would decrease substantially, and prices would rise sharply. So, let's do what we can to protect little AMD, if for no other reason than our own best interests as consumers.
if there was only one chip maker they could charge what ever they wanted. its called a Monopoly. if there was only intel or only amd they could charge outlandish prices. two is better than one it keeps tech moving forward and keeps prices reasonable. as for "they both do the same thing anyway" so does a deawoo and a bmw they both take you from point a to point b(not comparing either chip maker to deawoo just making an exaggerated point).
Wow, I would say that "you?re" the dumb one in this case. And the only word you decide to capitalize in the entire post is ?Monopoly? like the game board?
However, grammar errors aside, I agree that DMB's post sounds like they are saying that they prefer a single chip maker monopoly, which most arguments would go against. It is possible that DMB meant to suggest that it would be awesome if all processor chips were compatible with all motherboards, memory and video cards, etc.
- by CorwinB November 12, 2009 10:17 AM PST
- It's so funny how every time big litigation comes to bear down on Intel, there are tons of people saying "OMG Intel is innocent and AMD is filling against them just to get their money because they can't compete." And then Intel ultimately settle out of court because they know they are guilty and it cost less to skip paying lawyers and just pay up what they know they eventually have too.
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- by cloudmatt November 12, 2009 10:33 AM PST
- +1
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