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.
Faced with a lackluster voter turnout, Advanced Micro Devices announced Tuesday it is extending the deadline for its shareholders to vote on the proposed spin-off of its manufacturing business.
AMD, which in October announced plans to spin off its manufacturing operations, failed to get a quorum of its shareholders to vote on the issue. As a result, the deadline for casting votes has been extended to February 18. A majority of the shares is required to vote to establish a quorum.
The chipmaker reported that as of Tuesday, 42 percent of the eligible shares had been cast. Of this group, 97 percent are in favor of issuing the additional shares and warrants needed to spin off its manufacturing unit.
(Credit:
Yahoo Finance)
Under the proposal, AMD would become a chip-designing company and spin its manufacturing operations off to a new entity tentatively called The Foundry Company.
AMD would own 34.2 percent of the new manufacturing company, while the Advanced Technology Investment Co. would own the rest. ATIC is an investment company wholly owned by the government of Abu Dhabi, which is part of the United Arab Emirates.
Abu Dhabi has been invested in AMD since late 2007 when Mubadala Development Co., whose sole shareholder is the Abu Dhabi government, poured $622 million intol the chipmaker.
For AMD, the sooner it can spin off its manufacturing business, the sooner it will be free of the capital-intensive side of its business.
The chipmaker unpleasantly surprised Wall Street last month when it reported a $1.4 billion loss in the fourth quarter and a 33 percent year-over-year drop in revenue. The outlook for 2009 is not looking much better.The company noted that the current macroeconomic conditions provide little visibility into its business and that the continued corrections in its supply chain lead it to believe that first-quarter revenue will fall below that of the fourth quarter.
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Update at 1:50 p.m. PST, with information from American Guarantee's lawsuit against Intel in the Delaware Chancery Court.
Intel has filed a $50 million lawsuit against insurance carrier American Guarantee and Liability Insurance, alleging breach of contract.
The alleged breach involves the insurance firm's failure to pay for Intel's legal defense related to antitrust lawsuits filed by rival Advanced Micro Devices and consumers.
Intel, in the lawsuit filed last week in the U.S. District Court for Northern California, alleges that American Guarantee did not step up to the plate and begin paying for the chip giant's legal costs after it had exhausted $66 million in insurance policies provided by two other insurance carriers. (To read the entire lawsuit, click here for a PDF.)
Click on the image for a PDF of the entire lawsuit.
(Credit: Intel)The chipmaker, which holds a $50 million policy with American Guarantee, purchased several layers of comprehensive liability insurance from a variety of insurance companies from April 2001 through April 2002. Beginning in mid-2005, chip rival Advanced Micro Devices and consumers filed lawsuits against Intel, alleging that the chipmaker engaged in anticompetitive conduct and unfair business practices in the sale, promotion, and marketing of its microprocessors.
According to Intel's lawsuit, Old Republic Insurance provided $16 million in comprehensive liability insurance as the first line of defense, and XL Insurance America provided a second layer of $50 million in coverage under a commercial umbrella policy.
American Guarantee, Intel alleges, had an obligation to begin paying toward Intel's defense costs once the other two policies were exhausted. Intel's policy with American Guarantee calls for $50 million in total defense and or indemnity coverage.
In Intel's lawsuit against American Guarantee--referred to below as AGLI--the chip giant states:
The complaints in the AMD litigation, allege, among other things, that during the AGLI policy period of 2001 to 2002, Intel engaged in unfair business practices and anticompetitive conduct in its sale, promotion, and marketing of its microprocessors. Accordingly, these allegations trigger the potential for coverage under the "Advertising Liability" provision of the AGLI policy.
The chip giant further notes in its complaint:
Despite the clear potential of covered liability presented by the AMD litigation, AGLI summarily denied coverage leaving Intel to defend itself in the AMD litigation without the benefits owned under the AGLI Policy.
Intel is asking the court to find that American Guarantee has a duty to defend Intel in the AMD litigation, as well as pay out $50 million in damages plus interest.
American Guarantee declined to comment.
But in a lawsuit American Guarantee filed in the Delaware Chancery Court last week against Intel and the other insurance carriers, American Guarantee alleged:
In response to Intel's tender, American Guarantee sent multiple letters to Intel seeking information necessary to assist in its evaluation of Intel's coverage claim. Although Intel has supplied certain information to American Guarantee, most of the information requested has not been provided
Upon information and belief, Intel has also tendered the AMD Actions to certain of the Defendant Insurers. American Guarantee has requested that Intel provide it with the coverage positions of all other Defendant Insurers but does not know whether Intel has provided full and complete information in response to this request.
A trial date in AMD's lawsuit against Intel is set for February 2010. The two parties currently have depositions under way, said representatives for both Intel and AMD.
Considering the vast majority of civil cases ultimately reach a settlement, the Intel and AMD case has the potential of following a similar path.
However, it is likely too early in the game for an immediate settlement, given that the parties are gathering more information via depositions.
"Settlements usually happen when all the chess pieces are on the table and everyone knows what they're looking at," said Chuck Mulloy, an Intel spokesman.
An AMD spokesman said his company is looking for more than a check from Intel.
"Any settlement we would consider would have to include an end to any business practices that are at the heart of our case," said Michael Silverman, an AMD spokesman. "A check is not enough."
Updated at 10:12 a.m. PST, with more information about AMD's financial performance.
Advanced Micro Devices announced Friday it would slash its workforce by 9 percent and institute temporary salary cuts, from its executive chairman on down to hourly workers.
AMD will cut 1,100 positions in the first quarter through attrition and layoffs, as one of its measures to cut costs during these recessionary times.
The chipmaker will also institute temporary salary cuts, with its CEO Dirk Meyer and Executive Chairman Hector Ruiz both taking a 20 percent cut. In the U.S. and Canada, executives that hold a rank of vice president or higher will receive a 15 percent pay cut and salaried workers a 10 percent cut. Hourly workers, meanwhile, will face a 5 percent wage reduction.
Voluntary pay cuts will be sought at AMD's offices outside the U.S. and Canada, as allowed by local governments there.
AMD will also halt its company 401(k) match.
AMD is the latest tech titan to announce a round of job cuts. Earlier this month Motorola announced a 6 percent cut of 4,000 workers, drafting and design software maker Autodesk a 10 percent cut affecting 750 employees, and even search giant Google announced cuts of 100 workers.
AMD's financial performance is under pressure. Last month, the chipmaker warned Wall Street its fourth-quarter revenue would come in significantly lower than previously expected.
AMD is scheduled to report its fourth-quarter results on Thursday.
When Apple converted to Intel in 2005 that was big. But 2008 Intel Atom converts make this look like a small-town baptism.
Overall, it was a good year for the Intel faithful despite the Wall Street financial crisis. Intel handily beat Advanced Micro Devices in the PC processor performance war. (Not coincidentally, AMD was forced to spin off its manufacturing operations to save itself.) But that really was last year's news since AMD had not been delivering competitive processors for almost two years.
iBook G3: Apple's conversion from IBM-Motorola to Intel pales against the conversion of PC makers to Intel's Atom
(Credit: CNET Networks)The tectonic shift in 2008 came as one PC maker after another adopted Intel's new Atom processor. Count 'em: Acer, Asus, Dell, Hewlett-Packard, Lenovo, Toshiba--to mention only the largest vendors. (Atom shipments in the third quarter were strong and expected to hit between 10 and 20 million units this year.)
This wasn't one sole convert (like Apple), this was a Pentecostal conversion of biblical proportions. Almost overnight, the entire top tier of the PC industry got the Atom religion. In fact, it happened so quickly and so massively that companies like AMD and Qualcomm didn't know what hit them.
Wait a minute, Qualcomm seemed to say, we specialize in making chips for small devices, why is Intel running away with this market? (Even Intel was a bit surprised at the swiftness of Atom adoption in Netbooks.) And though AMD had helped pioneer the market by supplying its Geode processor for the progenitor of the Netbook, the One-Laptop-Per-Chip XO laptop, the Geode never came close to the commercial success (or performance) of the Atom.
AMD took notice, however, and said it plans to deliver a processor for the ultraportable market (an upscale Netbook or cheap notebook--however you want to look at it) at the Consumer Electronics Show.
And Nvidia followed suit. And seemed to be posing the same questions. Hey, if everyone's doing this, is this the Second Coming of the PC? Or, at least, a restructuring of the traditional price structure of the PC market? (The other question Nvidia is asking itself is whether it can bust the Intel bundling Juggernaut).
Oh, and we almost forgot Microsoft. Not initially enthusiastic about the Netbook market because of its XP-centric nature, Microsoft seems to have also gotten the Netbook religion with Windows 7 which will be ready for Netbooks from day one.
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940 versus 940. That may be the confusing Intel-AMD processor model-number juxtaposing that consumers can look forward to next year.
A Chinese Web site has posted details of Advanced Micro Devices' upcoming Phenom II desktop processors, of which at least two are due to be launched at the Consumer Electronics Show in January.
The post on HKEPC lists more than a dozen new models due to be launched during the next eight months. AMD is now moving its chips to 45-nanometer process technology from an older 65-nanometer process. Generally, smaller geometries result in faster and more power-efficient processors.
Processors listed include the quad-core Phenom II X4 920 and Phenom II X4 940 due in January, rated at 2.8GHz and 3.0GHz, respectively.
Interestingly (and maybe not coincidentally), AMD's high-end Phenom II X4 920 and 940 model numbers match those of Intel's Core i7-920 (2.66GHz) and i7-940 (2.93GHz).
Both the AMD and Intel models are 45nm quad-core desktop processors with large caches. High-end Phenom II processors come with 8MB of cache memory. Typically, the more cache memory, the better the performance.
Other processors listed include the Phenom II X4 810 and 805, both due in February, rated at 2.6GHz and 2.5GHz, respectively, according to HKEPC. These have 6MB of cache memory.
HKEPC also lists triple-core Phenom II X3 processors and Athlon X4 processors.
The site also posted a table showing new naming scheme for the processors.
AMD will bring out its first generation of 45nm processors just as Intel is beginning commercial shipments of its second-generation 45nm product, the Core i7, which Intel officially introduced on November 17.
Transmeta, a company that once hoped to rival Intel and Advanced Micro Devices to power portable computers, announced Monday that it would sell itself to Novafora for $255.6 million in cash.
Novafora said it hopes to use Transmeta's people and technology in its video processing chips.
"Transmeta's innovative technology and the expertise of its employees are valuable additions to Novafora," Novafora CEO Zaki Rakib said in a statement.
For their part, shareholders are expected to receive between $18.70 and $19 for each Transmeta share they own. The deal was unanimously approved by Transmeta's board, but still requires approval of its shareholders. The offer is higher than a $15.50-per-share unsolicited bid received earlier this year.
Separately, Transmeta said it has entered into a non-exclusive patent license agreement with Advanced Micro Devices (AMD). Under the terms of the agreement, AMD will transfer to Transmeta 700,000 shares of Transmeta's Series B Preferred Stock held by AMD. AMD invested $7.5 million in Transmeta last year.
The deal to sell itself puts at an end the company's efforts to figure out what to do with its technology, which was once a top-secret effort to unseat Intel in the low-power PC market.
"We believe the deal is a win for all our stockholders," Transmeta President Les Crudele said in a statement. "We have spent the past several months extensively exploring our strategic options and believe that the agreement with Novafora best serves the interest of our stockholders."
Updated to add reference to analyst downgrade.
Intel issued a fourth-quarter warning on Wednesday, noting its financial performance will be less than previously forecast and comes a day after downgrades by analysts.
The chip giant is scaling back its forecast as its revenues come in "significantly weaker" than expected across all its market segments and the countries that it operates in. Gross margins, as a result, also received a revised outlook.
Intel, which released its quarterly warning after the markets close, saw its shares drop 7.47 percent in after hours trading. During the regular trading session Wednesday, Intel had ended the day at $13.93 a share, down 2.94 percent.
Intel lowered its fourth-quarter revenue outlook to between $8.7 billion and $9.3 billion, compared with its previous guidance of $10.1 billion to $10.9 billion.
And its fourth-quarter gross margins are anticipated to come in around 55 percent, versus its earlier forecast of approximately 59 percent.
In a cost-cutting move, Intel also said it plans to reduce its research and development spending and its general administrative costs to $2.8 billion in the quarter, versus a slightly higher $2.9 billion. Overall spending for the year is expected to come in at $11.4 billion, compared with its previous forecast of $11.5 billion.
Intel said those are the only unexpected changes it expects at this time.
One analyst, Craig Berger of Friedman Billings Ramsey, was ahead of the game, putting out a research note Tuesday that cut Intel's revenue forecast to $9.8 billion from $10.4 billion.
Wall Street is expected to take another slice at Intel's earnings, now that the chipmaker has issued a revised lower forecast. Intel said it expects to report its fourth-quarter results on January 15.
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