Yesterday AMD CEO Dirk Meyer stood before a gathering of analysts and reporters at AMD's Sunnyvale, Calif. campus and said he was looking forward to taking on Intel in court beginning next March.

All the while, he had entered into an settlement with Intel that would net him $1.25 billion and a temporary truce with his arch-nemesis. All that was left was to finalize the press release.

Of course he couldn't say anything legally, but it shows the nature of litigation. Four years of discovery, only to settle before the court date. Intel CEO Paul Otellini said on a conference call to announce the settlement that it would be a cash payment to AMD in the next 30 days.

As a result, Intel has revised its fourth quarter 2009 earnings projections. The company will take the $1.25 billion hit this quarter. It now expects spending (R&D plus MG&A) in the fourth quarter to be approximately $4.2 billion instead of $2.9 billion. In addition, the effective tax rate is expected to be approximately 20 percent, down from 26 percent.

All other expectations are unchanged. When it reported third quarter numbers in October, it projected fourth-quarter revenue of $10.1 billion, give or take $400 million, with a gross margin at 62 percent, plus or minus 3 percentage points. It will still be profitable in the quarter, just less so.

So who wins and who loses in this settlement? Let's break it down:

Intel: Winner

In settling the case, Intel will face the accusations that it was guilty, it was going to lose, and so on. While the objective evidence will never be known – like how it used market development funds (MDF) against AMD – what is known is this: Intel would face legal bills that would grow exponentially during a trial; a jury that likely didn't understand the finer points of marketing promotions; quite possibly a jury with anti-big business sentiment, and triple damages if it lost.

"This case had been massive and promised to become even more so as the date for trial came closer," said Otellini on the conference call. "We exchanged more than 200 million pages of documents, conducted 2,200 hours of depositions, and took thousands of pages of expert opinion."

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In short, this was not going to be a fast trial.

"Intel is a billion dollars in the hole but they were spending a lot of it on legal costs anyway. The New York suit will fade now. The FTC will continue to talk about it but eventually they will say 'if you guys are happy, we're happy.' The EU is anyone's guess," said Martin Reynolds, research vice president with Gartner.

And John Spooner, senior analyst for Technology Business Research (TBR), notes "Intel wins in that it essentially settles the suit which, if it went to a jury trial, could have cost several billions more than a settlement cost. It also gives it the ability to set a precedent to say to the FTC and other investigatory bodies 'look we settled it, we're a good corporate citizen.'"

Loser: Intel?

Spooner still sees potential trouble for Intel. "if by signing these agreements then it emboldens others to sue it or emboldens the EU or any governments investigating to say maybe there is something there. But it could be seen the other way," he said.

AMD: Winner

Now we know how CFO Thomas Seifert plans to pay off that $3.2 billion in debt he discussed yesterday during the AMD analyst day.

More to the point, it takes all the legal heat off AMD as well as external pressure. "They are on the cusp of what looks like a strong product cycle. It would have been a shame if when they went to OEMs to evaluate those products that they ran into resistance like the last time they had a strong product cycle," said Nathan Brookwood, research fellow with Insight 64.

TBR's Spooner agreed that it takes heat off OEMs. "It gives AMD some cash and it gives them the ability leverage their chips. The big win AMD expects to gain is in market share by eliminating the fear factor among OEMs of them spending too much time with AMD over Intel," he said.

Gartner's Reynolds, who was at the AMD analyst meeting, likes the new team that CEO Dirk Meyer has put in place. "They all seemed sharp and had good plans. The product road maps are improved and things are coming out on time. The go-to-market team is all good. There was a lot less about 'how the evil Intel is hurting us' and a lot more on what they are going to do in the coming year," he said.

Next page: The consumer: winner

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