Intel calls truce with AMD pays $1.25bn
Intel will pay Advanced Micro Devices (AMD) $1.25bn to settle all outstanding legal disputes, in a move that could weaken antitrust authorities’ cases against Intel.
The settlement ends a global campaign that AMD has been waging against its larger rival that stretches back 12 years. Regulators in Asia, Europe and the United States have taken action against Intel because of complaints by AMD that its business is being damaged by alleged anti-competitive behaviour.
Joanne Feeney of FTN Equity Capital Markets said the deal could stave off the US Federal Trade Commission’s pending decision to take action against Intel. “It eliminates a large amount of uncertainty for both companies. $1.2bn is a lot of money and I believe AMD will use it to accelerate their debt payment,” she said.
“Intel got the fact that it was a major risk of a huge settlement in front of a jury,” said Broadpoint Amtech analyst Doug Freedman. “It removes the coin-flip of a jury trial.”
FTC Chairman Jon Leibowitz said the commission will review the settlement: “Certainly we plan to review the settlement between Intel and AMD in their private litigation. The FTC has an ongoing independent investigation of Intel’s practices so we cannot comment further at this time.”
AMD said it will withdraw all its regulatory complaints worldwide and drop all pending litigation, including a case in the US District Court in Delaware and two cases pending in Japan. Intel and AMD also sealed a five-year cross-licence deal and said they would give up any claims of breach from their previous license agreement.
AMD executives said on a conference call the settlement creates a “level playing field” and that the company would seek “continued vigilance’ from competition agencies worldwide. They called the deal a move from “war to peace,” though noted that some narrow issues on Intel rebates remain.
“It will take time for people to understand how operating conditions in the processor business have changed. But make no mistake, they have changed,” AMD CEO Dirk Meyer said.
The deal is seen tamping down legal pressure that had become an increasing distraction for Intel, of the kind that has dogged Microsoft for years. New York Attorney General Andrew Cuomo filed an 83-page complaint last week that accused Intel of bribing or coercing companies like Dell to boycott AMD. Cuomo’s office declined to comment. A source familiar with the matter said the AMD and Intel settlement does not change the attorney general’s complaint.
Shares of AMD jumped 20 per cent on Thursday on news of the payment, which analysts expect the loss-making chipmaker to use to pay down some of its $3.2bn of debt. Intel shares edged higher.