Intel Corp will pay US$1.25 billion to make peace with Advanced Micro Devices Inc, as the companies whose microprocessors run nearly all personal computers finally found common ground in a bitter and colorful dispute that caused international antitrust trouble for Intel.
The settlement announced on Thursday sent AMD stock soaring and ended a four-year-old lawsuit in which AMD accused Intel of abusing its dominance of the chip market to keep a lid on AMD’s share. Intel has about 80 percent of the microprocessor market and AMD has about 20 percent.
According to the lawsuit, Intel penalized computer makers for using AMD’s chips or offered them financial incentives — payments that a Toshiba Corp manager likened to “cocaine.” Executives from Gateway complained that Intel’s threats of retaliation for working with AMD beat them “into guacamole.”
DEFENSE
Intel has defended its practices, saying it simply offered rebates to big customers, which allowed them to pass lower PC prices to consumers. A microprocessor can account for 15 to 20 percent of the cost of a computer, said Martin Reynolds, a vice president with the Gartner Inc research firm.
But despite Intel’s stance it did nothing wrong, the AMD lawsuit, which was scheduled to go to trial in Delaware in March, was one of Intel’s biggest headaches. Squashing the case removes the possibility Intel would be on the hook for even more if it lost at trial, Intel CEO Paul Otellini said.
“While it pains me to write a check at any time, in this case I think it was a practical settlement,” Otellini said on a call with analysts.
Intel shares fell US$0.16, 0.8 percent, to close at US$19.68 on Thursday.
The settlement will help AMD whittle its US$3.7 billion in debt.
Its shares jumped US$1.16, or 22 percent, to close at US$6.48. But even before Thursday, AMD’s complaints had their desired effect: Antitrust regulators in several countries filed cases against Intel based on AMD’s accusations — cases that won’t disappear because of the settlement.
INVESTIGATION
The US Federal Trade Commission is investigating Intel, and regulators in Europe have fined Intel a record US$1.45 billion. Intel has paid the fine but is appealing it. EU spokesman Jonathan Todd said on Thursday that the European Commission “takes note” of Intel’s settlement with AMD but that it does not change Intel’s duty to comply with European antitrust law.
Regulators in South Korea have fined Intel US$18.6 million — Intel is appealing that as well — and last week New York Attorney General Andrew Cuomo filed a federal lawsuit accusing Intel of using “illegal threats and collusion” to dominate the chip market “with an iron fist.” In 2005, Japan’s Fair Trade Commission found that Intel violated antitrust rules there. Intel accepted that ruling without admitting wrongdoing.
Under the terms of the new agreement, AMD and Intel entered into a new, five-year cross-licensing deal. Intel dropped claims that AMD breached the earlier agreement. And AMD is dropping all litigation against Intel.
“It is a pivot from war to peace,” Tom McCoy, AMD’s top lawyer, said.
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