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AMD Admits It Borrowed Some of Intel's 386 Microcode : Computers: The revelation could hurt the company in its long legal battle, which moves next to state Supreme Court.


In an admission that could hurt Advanced Micro Devices Inc. in its long-running legal battle against archrival Intel Corp., AMD said Friday that its "independently derived" 486 microprocessor borrowed some microcode from Intel's earlier 386 chip.

The revelation sent AMD shares down $2 to close at $29 on the New York Stock Exchange. Intel slipped 25 cents to $62.75 on NASDAQ.

A 486 microprocessor is the brains of most personal computers being sold today, and AMD's new 486 was supposed to be free of Intel's intellectual property. AMD acknowledged Friday that its right to use Intel's 386 code was "potentially compromised" by a recent unfavorable state appellate ruling.

Intel and AMD have been locked in legal warfare over Intel's code for years. The dispute dates back to a 1976 agreement that AMD says gave it the right to clone some Intel microcode.

The fight now moves to the California Supreme Court, which agreed Thursday to hear AMD's appeal.

Friday's announcement by AMD concerned only its Am486SX line, which it began shipping in July. AMD's statement made no reference as to why the company waited until now to make the situation public. AMD said it has launched "a second Am486 proprietary microcode development program" to ensure that it will have an independently developed microprocessor if it loses its protracted court fight. AMD is based in Sunnyvale, Calif.

At Intel headquarters in Santa Clara, Calif., spokeswoman Pam Pollace said the admission came as no surprise. "This is what we've maintained all along," she said. "And once again it looks like AMD would rather take legal risks than develop a microcode independent of Intel."

Intel's 486 chips, which can process up to 20 million instructions per second, are its best-selling microprocessors. AMD began shipping the first of its 486 chips in April. Intel has said it intends to sue AMD for about $1 billion in damages over AMD's sale of the 386 microprocessor. The damages claimed were based on money AMD made on the chip and the money Intel lost because profit margins on its own 386 declined after AMD's clone appeared.

AMD could now be exposed to added damages if California's high court favors Intel. But analysts said the court's decision to reconsider the ruling against AMD bodes well for the chip maker, regardless of Friday's revelation.

"AMD didn't broadcast to the world that they used Intel microcode, so the world is mad at them," said Mel Phelps, semiconductor analyst at Hambrecht & Quist, insisting that AMD is still undervalued.

AMD and Intel are also battling in federal court over AMD's 486DX chips, which are more powerful than the SX line.

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