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Payment by Intel to AMD ends a war

November 13, 2009|David Sarno

Intel Corp. said Thursday that it would pay $1.25 billion to its bitter rival, Advanced Micro Devices Inc., ending a multi-front legal war between the two companies that included allegations that Intel was using its dominance to unfairly muscle AMD out of the microchip market.

The settlement of the 4-year-old lawsuit will allow the companies to avoid a costly trial slated for next year, although it is not expected to end antitrust scrutiny by regulators in the U.S. and abroad.

In March, European Union regulators levied a $1.45-billion antitrust fine against Intel, saying that the world's largest microchip maker had illegally forced computer manufacturers including Dell Inc. and Hewlett-Packard Co. to forgo using AMD chips in their laptops and desktops. Intel has appealed that decision.

And last week, New York Atty. Gen. Andrew Cuomo filed a federal antitrust lawsuit against Intel alleging "a worldwide, systematic campaign of illegal conduct" to maintain its dominance and stifle its competitors.

The Federal Trade Commission is also investigating Intel but has not said how Thursday's settlement would affect its probe.

Meanwhile, Wall Street investors seemed pleased by the settlement: AMD's stock shot up nearly 22% to $6.48 in regular trading. Intel's stock was down less than 1%.

But Sunnyvale, Calif.-based AMD, which controls about 20% of the microchip market, compared with 80% for Santa Clara, Calif.-based Intel, maintained a cautious tone about the settlement.

"The industry isn't going to change like a light switch," AMD Chief Executive Dirk Meyer said in a conference call with investors. "I think it's going to take a period of time."

Analysts observed that even with a favorable settlement, AMD is still playing catch-up with its microchip technology.

"AMD gets cash, which is nice. But this doesn't change anything," said Hans Mosesmann, an analyst at New York-based Raymond James & Associates. "Their chips are not faster or cheaper all of a sudden."

As part of the settlement, Intel said it would abide by a "set of business practice provisions," but on Thursday the company said little would change in the way it operates.

"We have not wavered in our conviction that Intel has operated within the bounds of the law," Intel CEO Paul Otellini said in a separate conference call.

The ponderous antitrust case, which was to begin in Delaware in March, could have cost both sides hundreds of millions of dollars, analysts said. And according to court papers, lawyers had gathered enough documents "to fill 5,000 pickup trucks."


Bloomberg News was used in compiling this report.

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