Intel to pay AMD $1.25B to end legal battle
Intel and AMD agree to end all outstanding legal disputes between the companies, including antitrust litigation and patent cross license disputes.The rivals also obtain patent rights from a new five-year cross license agreement.
By Suzanne Deffree, Managing Editor, News -- EDN, November 12, 2009
Intel Corp and Advanced Micro Devices this morning announced an agreement to end all outstanding legal disputes between the companies, including antitrust litigation and patent cross-license disputes.
The deal will end a long-running legal battle between the rivals and will see Intel pay AMD $1.25 billion. Under the agreement's terms, AMD and Intel obtain patent rights from a new five-year cross-license agreement. Each company will also give up any claims of breach from their previous license agreement, issued in 2001.
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Intel has also agreed to abide by a set of business practice provisions. Such provisions, as stated in an SEC filing Intel made today, include Intel not offering rebates or discounts that limit or restrict a customer's MPU choices; Intel not taking actions that limit or delay purchases or use of specified AMD products; and Intel regularly instructing personnel on the terms of its agreement with AMD.
"Intel has historically used the 'Intel Inside' program to offer customer rebates that co-brand its PCs. Additionally, Intel may have made volume discounts to certain customers, especially those that only used Intel chips," Craig Berger, a semiconductor market analyst at FBR Capital Markets, wrote in a research note today. "Although it will not be made public which Intel business practices will end, we believe these rebates and/or volume discounts could be addressed. For AMD, although this agreement may level the playing field slightly, ultimately OEM purchasing decisions come down to product price, performance, branding, customer preferences, and long-term relationships."
Berger continued to state that AMD is two years behind Intel in ramping its process technologies. However, he noted that at AMD's analyst day Wednesday company management claimed that AMD's GlobalFoundries alliance will close this gap meaningfully by 2011.
For its part of the agreement, AMD will drop all pending litigation including the antitrust case in US District Court in Delaware and two cases pending in Japan. AMD will also withdraw all of its regulatory complaints worldwide.
In prepared remarks for a conference call this morning, AMD CEO Dirk Meyer also noted that the deal would allow GlobalFoundries "the freedom to operate as an independent world-class leading-edge foundry company, going forward, without being a subsidiary of AMD." AMD confirmed plans to spin off its manufacturing operations in October 2008 to form GlobalFoundries with an outside partner. As AMD did so, Intel claimed GlobalFoundries was not a subsidiary under terms of the 2001 patent cross-license agreement between it and AMD and was therefore not licensed under the agreement.
In a separate conference call this morning, Intel CEO Paul Otellini said that the payment does not imply an admission of guilt by Intel. He also said that the settlement guards Intel against a possible jury verdict in the Delaware antitrust case that could have included steeper punitive damages against Intel.
Analysts agreed this morning, noting that Intel avoided a lengthy and potentially uncertain trial process with the settlement. Barclays Capital semiconductor market analyst Tim Luke said in a research note that in addition to avoiding the trial process and lowering its overall legal expenses, the agreement by AMD to now withdraw its complaints in all regions "may help Intel in addressing its disputes with the New York Attorney General and to some extent potentially in its appeal against the European Commission's $1.5 billion fine and ruling."
Indeed, Intel has recently faced claims of anticompetitive practices beyond those made by AMD. New York State this month claimed Intel bribed and coerced PC OEMs, violating state and federal antimonopoly laws, by engaging in a campaign of illegal conduct to maintain its top-ranking place in the MPU market. In Europe, Intel is currently fighting allegations of anticompetitive behaviors made by the European Commission, ones that come with a record $1.45 billion EC antitrust fine.
Luke also noted that today's agreement will lower AMD's overall expenses and that the Intel settlement money will allow it to pay down some debt, $1.8 billion of which is due in 2012.
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What about the illegal $Bs activities between the two companies? It takes two, Intel and Dell, to tango. EU and the various US legal authorities should also fine and prosecute Dell too. Otherwise, they only have the case half done! It's even more important to prosecute the individuals involved, at least the two CEOs, in order to educate people, particularly powerful CEOs who think they are above the law and untouchable! Those activities are decided and carried out by the involved individuals. Why can they completely get away?
libra - 2009-20-11 12:40:00 PST -
The competition from AMD lets us enjoy very high performance PC CPUs at low price. We need to thank not only AMD for its efforts, particularly the innovation of 64-bit x86 that the growth was constrained and limited by Intel’s dirty deals, but also Abu Dhabi for its investment to keep AMD alive and being able to compete with the limited scale of economy.
The settlement is a win-win and is good for both company for moving forward and competing with better products. Intel eliminates the critical risk of going through the trial. AMD’s future is bright if it executes well because it now has the options of sourcing that it doesn’t have before, for example:
1. GF and TSMC for CPUs.
2. Chartered of GF and TSMC for GPU, GPU+CPU and chipsets. Chartered making money means GF making money and means AMD making money via the part of ownership of GF.
Why is UMC not mentioned? In my opinion, the #1 foundry of TSMC and its own Chartered (IBM technology based) of GF are enough. There is no reason for going to the 2nd-class UMC.
libra - 2009-14-11 19:00:00 PST -
Although AMD got some cash and Intel a slap on the wrist, AMD and their shareholders still got screwed in this deal.
Any mention of the guilty Intel execs being tried criminally? They broke a lot of laws.
Brad - 2009-13-11 05:51:00 PST -
Sounds cheap at the price to me... and AMD will, of course, never recover the lost ROI on AMD64 and the Opteron/Athlon64 from 2003-2006.
Do your analyst friends live in caves? The AMD complaint was not about volume discounts, which are a normal part of doing business - it was about exclusionary bribes and threats... and AMD has never been two years behind Intel in process technology.
As for the EC court case, it's way beyond "allegations": the ruling has been made and Intel is appealing it.
Scunnerous - 2009-13-11 02:20:00 PST -
Just the settlement between two companies isn't enough. Look forward to seeing punishments from various time-consuming legal systems for the bully's REPEATED ANTI-COMPETITIVE BEHAVIOR. The bully did it once at 80386 generation in 80's in a different way and did it AGAIN REPEATEDLY IN A MUCH LARGER SCALE this time.
Around $6B of block payments paid to Dell, especially based on Dell’s quarter earning needs, to buy Dell out for Intel exclusivity, the two dirty CEOs, especially Intel, think they are above the law and untouchable, or THERE IS NO LAW OR GOVERNMENT AT ALL! Whether they broke the law or not, the time-consuming legal systems MAY decide.
Will the Intel representative answer the following questions about rebate and kickback:
Has he seen rebates or kickbacks from auto or cell phone companies conditioned with not buying at all or limited buying competitors' products?
Has he seen a consumer rebate conditioned with not buying at all or limited buying competitors' products?
All consumer rebates I have seen just require the proof of purchase and the dated receipt. The Intel's representative may be able to educate us.
Now Intel start educating its employees how to write emails to each other to make it even more difficult to discover any dirty deals it may have in the future. Educating Intel’s and PC makers’ CEOs how to write emails to each other is particularly important!
David Zhao - 2009-13-11 00:47:00 PST
