Intel to pay AMD $1.25 billion as companies end litigation war; Is it a new chip era?

Intel to pay AMD $1.25 billion as companies end litigation war; Is it a new chip era?

Summary: Intel and AMD said they will settle all legal disputes, including antitrust litigation, for $1.25 billion.

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Intel and AMD on Thursday said they will settle all legal disputes, including antitrust litigation, for $1.25 billion. AMD CEO Dirk Meyer said the settlement ushers in a "new era" in the chip industry. But Intel CEO Paul Otellini was a bit defiant in a conference call this morning, saying that there would be no changes to the company's business practices because the company has not acted illegally - and added that the New York Attorney General's complaint against Intel was also without merit.

Under the terms of the settlement, Intel will pay AMD $1.25 billion cash within 30 days. Among other key items (statement):

  • AMD and Intel both get patent rights in a cross-licensing pact;
  • Intel will give up any patent claims against AMD;
  • Intel will agree to adhere to business practice provisions;
  • And AMD drops all pending litigation against Intel.

Intel has been under fire from regulators in Europe over its alleged treatment of AMD.

The companies said in a joint statement that more details about the cross-licensing pact, a 5-year deal, and Intel's business practice agreement will be revealed in filings with the Securities and Exchange Commission.

Other odds and ends worth noting:

  • The agreement allows Globalfoundries, AMD's spin-off of its manufacturing unit, to proceed as an independent company. Globalfoundries can now go forward without being an AMD subsidiary.
  • The patent cross license will allow AMD to use multiple foundries.
  • In prepared remarks, Meyer said:

Today marks the beginning of a new era… one that confirms that the game has changed for AMD. It is an important milestone for us, for our customers, our partners, and most important – for consumers and businesses worldwide. In addition, it represents the culmination many years of litigation and regulatory engagement. And we are optimistic that it will usher a new era for our industry.

We look forward to healthy competition with the mutual respect one would expect between world-class competitors.

It remains to be seen if this settlement marks a new chip era, but the "healthy competition" Meyer refers to will determine AMD's fate.

Intel said that it will take the $1.25 billion hit in the fourth quarter. Intel now expects spending in the quarter to be $4.2 billion, up from $2.9 billion. The company maintained its previous outlook, but did note that its tax rate will be 20 percent, down from 26 percent (statement).

Update: AMD's legal, corporate and public affairs EVP Tom McCoy made the following remarks during a conference call:

For us, this has never been about money. It's about the marketplace. There's no correlation between the settlement amount and anything in the EU.

Intel will not be able to condition doing business with them on not doing business with us. They can't use inducements in order to force exclusive dealing, to delay customers from using our products, delaying or prohibiting a company that's advertising our products, withholding benefits from companies that are using our products...Intel has no obligation to help us. They do have an obligation not simply to do things that are designed to hurt us.

With this agreement, we are trying to reset the relationship between AMD and Intel. That relationship has been intense, emotional and at times acrimonious for many years...all too many years. There was a touchstone principle of our negotiations that we're going to be fierce competitors...we didn't want pressures to build up and wanted to have a healthy, normal relationship. You will see in the agreement thought-out procedures that we will...resolve our differences before spilling into the courts and into the public affairs domain. We'll see how it will go, but this is a start.

McCoy also noted that there are still a few kinks to be worked out between AMD and Intel, but ensured that the general agreement would open dialogue for such changes to be made through regulatory agencies. He continued:

The key issue for us is the conditionality. Structures or inducements or the opposite of inducements that are provided to customers are conditional on whether and to what extent how customers can also deploy AMD technology. That is the key practice that has constrained our access to the marketplace, whether at the computer manufacturer level or the channel level.

President and CEO Dirk Meyer added the following:

The industry isn't going to change like a light switch. The industry is an ecosystem...that's been built up to think and operate over several years. It's going to take a period of time for the market to operate in a particular fashion. Disagreement is a [start] to that.

The message is that there will be a new era of peace between Intel and AMD. For those of us following the industry for years, color me a touch skeptical on that one. AMD's CMO Nigel Dessau had this to say in a blog post:

AMD and Intel have today signed a historic ‘peace-treaty’. I use the phrase carefully because to some extent that is what it is.

More importantly, Dessau outlined business practices that prohibit Intel from:

  • 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.

Simply put, a lot of the settlement business practices take care of what had European regulators so wound up.

Intel remained utterly defiant during its conference call, and claimed no changes would be made to business practices because it never acted illegally in the first place.

Intel CEO Paul Otellini said the following:

Throughout this process we have not wavered in our convictions that Intel has operated within the law.

These cases can be extremely expensive and the cost of risk is high.

People can honestly disagree about business and marketing practices...we understand that others have a different perspective.

We continue to believe that we have not violated any laws in these areas, or regulations.

We won't do things that we both agree are wrong.

From our side, we won't do those things, we haven't done those things, and there's no difference going forward.

There are no changes to 'Intel Inside' with this agreement.

EVP and CAO Andy Bryant elaborated:

They believe we conduct business in certain ways that we don't believe we do.

What we've really done is codify what we will and won't do, mostly what we won't do.

We're going to try to establish quarterly meetings where we'll try to air these things.

We have what we think is a very thorough ability to vet differences...and solve them as business people, as opposed to through the courts.

There are [remaining] issues around pricing that the regulators might want to talk about [with us].

There are no changes to pricing practices as a result of this contract. It's against U.S. law for us to have any discussions about pricing.

Otellini had this to add in prepared remarks:

We strongly disagree with the New York attorney general's case and believe the case is entirely without merit...it is unfortunate that the New York attorney general intentionally distorted the facts.

Here's a look at some of the key chapters in the AMD-Intel legal war:

Topics: Processors, Enterprise Software, Intel, Legal

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  • Inhell got off cheaply

    Probably AMD needed the cash now because it would have gotten a lot more in a trial.
    Linux Geek
    • Yawn. Intel's Core 2 Duo and quad core line-ups fairly demolish AMD

      and their Phenom line.

      I used to be an AMD fanboy... then Intel came out with vastly faster products.

      Since it's about competition, when AMD outpaces Intel again, let Apple know. I refuse to go back to home-build fluff with Windows 7's asinine licensing schemes (never mind I left Windows given how far down the gutter it's gone) and Linux won't run half the software I need (or a perfectly viable Epson scanner too), via native code or adequately in an emulated "virtual machine".
      HypnoToad72
      • Strap on the blinders

        The focus of the article was the settlement that was reached.

        I took from it that AMD feels this is a good day because of the unfair business practices of their primary competitor.

        When AMD introduced the first 64 bit desktop CPU Intel said, yawn, what ever, so what.

        When AMD was producing faster chips at slower clock speeds, Intel was acting like clock speed was king.

        Today Intel has shown that they can produce superior products. But it was not until they were seeing a loss in their market share that they actually started making the investments.

        During this process of revamping their products they also took illegal actions to prevent AMD from being as potentially profitable as it could have been. Intel's actions could have resulted in harm to AMD in a financial sense.

        Just because [b][i]today[/i][/b] Intel produces faster microprocessors does not negate the fact that it was shown to be true, that Intel's illegal actions did inflict damage on AMD.

        <OffTopic>
        While the CPU's that AMD produces today are not as fast as those that Intel produces, I have yet to see a situation where the biggest bottleneck was the CPU. Most often it is hard drive performance that will cause a desktop to slow down.

        Further, gaming is enhanced by the video and physics cards. If I have a slower AMD quad then the comparable Intel Quad, but I am running two SLI cards ([i]for example[/i]), plus a physics card with plenty of RAM, maybe my FPS is 70 instead of the Intel's 100, as an example.

        Okay....

        70 FPS is bad?

        If the rig costs me $200 or more less and it performs at a level that exceeds my minimum standards substantially, I don't see an issue.

        I am not a gamer, most people who use computers frankly are not gamers ([i]as in 3d 1st person action shooters, heavy CPU, heavy 3D[/i]).

        When I went from a single SATA II drive to a RAID 0 I realized more performance gains from that then when I had gone from a single core 2.4Ghz to a dual core 2.8Ghz and from DDR 400 to DDR2 800.

        So this emphasis on what the CPU can do is practically irrelevant except for gamers or those who truly need the horsepower for such processes as CAD, 3d Rendering, multimedia encoding / decoding, etc...
        </OffTopic>
        Raid6
      • So now you are an Apple fanboi, huh? (nt)

        NT
        djchandler
      • AMD has a far better platform than Intel

        While it is very true that Core2 crushed AMD's offerings it is also true that AMD + ATI offer the best overall platform. AMD chipsets and IGP's outshine anything Intel offers.

        AMD also offers the better value for your dollar.

        Furthermore CPU processing power far exceeds recent software advancements, meaning the a fast CPU isn't as important into day's machines as it was 3+ years ago.

        Until the majority of software can make proper use of multi-core and x64 technologies CPU speed isn't going to make much difference in the overall usefulness of the PC.
        mikefarinha
        • Agreed...

          I'm not sure what it is - if I'm just lucky, or it's just my choice in hardware. I ran the beta for both Vista and Windows 7 on this same computer (Athlon 64 3400+, 1 GB RAM, Nvidia GeForce 7300 GS, Gigabyte mobo) and I haven't seen ANY of the issues others seem to have had with their systems.

          During all of this - the system has been rock solid. It may not be the fastest but it seems to get me there without drama.

          Wolfie2K3
        • I beg to differ

          Oh if only that were true.

          I must remind myself to tell that to my financial advisor that his new AMD lappy with vista
          onboard getting blue screens due to not wanting to co operate with the ATI drivers for utilising dual screens.

          With any luck thats sorted by now but
          a fatal flaw on ATI's behalf.

          And i'm not going to tell him to go V7 to fix
          the issue if theres no new dll's for vista.

          Or better still as i initially joked with him you might be better of rolling back to XP :P

          Better platform lol you crack me up.

          Better platforms don't blue screen given the first chance to be let loose in the wild.

          And yes it gets back to the finger pointing as to who is to blame.

          Personally it makes little difference to me except that i know what i see in the field.

          No doubt if he knew what he was in for he wouldn't have made the purchase decission he did.

          Not handy as his situation requires that dual screen be working not compulsary of course but it defeats the purpose of having a KVM or such like if video won't even work through it.

          Great i can have external keyboard and mouse etc well der thats allready provided for by the lappy in any case.

          A better platform would have hit the ground running when vista and all new versions comeout.

          Best of luck finding that magic platform 9.5
          337
        • Unless you want parallelism support and efficiency.

          Then AMD chokes. That's why their 6-core cpus don't stack up to Intels. The fact that I have to buy an extra power supply to run an ATI card negates any potential benefit.

          I love it when people who've never written a line of code in their life point a finger and say, 'but it's the coder's fault!'
          Spiritusindomit@...
      • This is true, though quad sucked, damn FSB

        However, I suppose since you're actually concerned about quality, you should compare the parts in an apple machine with one built in a less fragile case.
        Spiritusindomit@...
  • This is good news for computer users

    Good news all around. The cross licensing will allow advancements with a minimum of lawyer intervention.
    WiredGuy
    • AMD's share price up 21.8% today - the market likes it.

      Apparently, stock traders like the this deal as well. AMD is up 21.8% and Intel is down less than 1%.

      Lawyers are left crying in their beer.
      WiredGuy
      • both companies can't afford loyal servants any more both going down? NT

        incidental reader
  • Won't matter, AMD is toast

    They haven't produced a CPU worth buying in the last two years and sales reflect that.
    No_Ax_to_Grind
    • You haven't looked at their roadmap have you

      Maybe they will and maybe they wont, but in the next year AMD will be releasing CPU's with ATI technology, so I wouldn't count them out just yet.
      Rude Union
      • Another person who doens't understand what a geometrical processor is for

        nt
        Spiritusindomit@...
    • Have you really look what advance technology AMD has compared to Intel?

      I'm always considering to have AMD processor rather than Intel if not withheld by the price of its motherboards a year back then, which is not the case nowadays. And now I regret to have stuck with Intel while I can have more processor technologies in the fraction price of Intel's. :(
      albalain
      • It all depends on what you're doing.

        video games, I'd go with an AMD/nvidia mix. Work on applications that require huge degrees of parallelism, I'm going intel. AMD makes their processors cheap by slacking off on business level features.

        Also, I hope you're not including ATI in there, because the money you save on the card (if any) will be going right back into an extra power supply and a bigger case.
        Spiritusindomit@...
    • what world do you live in?

      the phenoms are really nice chips and the recently released ATI radeon 5000 series is the best video card on the market by FAR. amd has powered all of my pc's since the 486 days. i will never own anything else.
      crabbypup
    • Blah, blah, blah, been there done that.

      Sorry but I have bought AMD based machines in teh past, when they offered something competitive and liked them, but that was then and this is now and they are not competitive.
      No_Ax_to_Grind
      • Your Opinion

        Most non gamers prefer AMD, and non gamers are the majority out there, sure Intel offers faster processors but not that much faster, and for the price they ask you got to be kidding me, AMD will last a long time.
        FredOneSaid