Intel, AMD Settle to the Tune of $1.25B

New York slaps Intel with antitrust charges

Longtime rivals Intel (NASDAQ: INTC) and AMD said today that they had reached a settlement that ends years of legal contention over Intel’s market practices — practices that landed the world’s largest chipmaker in court and under the regulatory microscope.

Through the agreement, Intel will pay AMD (NYSE: AMD) $1.25 billion and has agreed to abide by a set of “business practice provisions.”

“Intel has agreed to an important set of ground rules that we hope will define the path of a free and open market in the microprocessor industry,” AMD President and CEO Dirk Meyer said during a conference call today. “Intel will not be able to condition doing business with them on not doing business with us — that’s one way I would put it.”

Meyer said the guidelines under which Intel and AMD will compete would be available later “as quickly as we can achieve that.” But he highlighted some areas in which Intel has agreed to curb its marketing efforts.

“They can’t use inducements in order to force exclusive dealing, to delay customers from using our products, delaying or prohibiting companies from marketing or advertising our products or systems with our products, withholding benefits from OEMs if they agree to use our products … compilers will not unfairly, unofficially impair the performance of our products,” Meyer said.

The two will also engage in a new, five-year patent cross-licensing agreement, and both will abandon claims of breaches under previous agreements.

“What’s important about this agreement is … it’s a shift from war to peace,” Meyer said. “We’re never looking for any help, we’re just looking to not be hurt … They do have an obligation to do things that are not designed to simply hurt us. We are trying to reset the relationship between AMD and Intel.”

“We’ll see how we go,” he added. “This is a start … Both parties intend for this agreement to be an opportunity to pivot the relationship and go forward in a very classy way.”

While AMD could potentially benefit from less aggressive competitive maneuvering, the agreement is also an important move for its larger rival.

The settlement significantly reduces the amount of legal pressure Intel is facing, particularly as a result of AMD lawsuits stemming from Intel’s business tactics. AMD said it would now drop all pending litigation — including its lawsuit in U.S. District Court in Delaware and two additional cases pending in Japan.

AMD also said it would withdraw all of its regulatory complaints worldwide.

Intel said that settling the spat with AMD — in which it had also accused AMD of violating Intel licenses when it created its GlobalFoundries spin-off — would save it money from a protracted legal battle.

[cob:Special_Report]But executives today added that the egregious competitive tactics that AMD claims it undertook never happened, so agreeing to provisions barring those tactics while settling litigation was a no-brainer.

“It makes a lot of sense, I think, for us to stipulate that we won’t do things that we both agree are wrong,” Intel CEO Otellini said during a separate conference call today. “From our side, we won’t do those things, we haven’t done those things, and therefore there’s no difference carrying forward.”

Andy Bryant, Intel’s chief administrative officer, added: “The things that AMD was concerned about … are things that we don’t do and we readily agreed to [the settlement] because we don’t.”

Intel has felt the pressure ratchet up several notches in recent months. In May, European Union regulators slapped the company with a 1.06 billion euro fine in response to findings that it wrongfully hurt competitors like AMD. Intel has also faced similar — if less financially painful — regulatory action in South Korea and Japan.

Recent weeks haven’t been much kinder to Intel, with the New York attorney general filing an antitrust lawsuit against Intel earlier this month.

“I would like to thank the regulatory agencies around the world for their diligence,” Meyer said. “Their work has allowed us to achieve this milestone we are optimistic that they will continue that vigilance to maintain a level playing field.”

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