Intel To Pay Over 1 Billion In Antitrust Settlement
Intel Corp. agreed Thursday to pay rival Advanced Micro Devices Inc. (AMD) $1.25 billion to settle a series of long-standing legal disputes between the two companies over antitrust and patent issues.
The settlement ends the legal battle between the two firms over Intel’s sales tactics, a clash that led to antitrust charges against Intel in several countries and a costly and malevolent trial next year.
But Intel is not entirely off the hook with the settlement, and still faces litigation from foreign governments on charges that it abused its dominant market position.
The largest such case is in Europe, where regulators have fined the chipmaker a record $1.45 billion over charges that Intel illegal bullied PC makers to pressure them into choosing Intel’s chips over AMD’s.
The European Commission “takes note” of Intel’s settlement with AMD, but that it does not alter Intel’s duty to comply with European antitrust law, the Associated Press quoted EU spokesman Jonathan Todd as saying.
Intel is also battling a federal lawsuit filed last week by New York Attorney General Andrew Cuomo, who accused the chipmaker of abusing its market dominance to “rule with an iron fist.” The U.S. Federal Trade Commission also is investigating the company.
Meanwhile, Intel is fighting an $18.6 million fine in Korea, and still faces a trial set for March in Delaware over a federal lawsuit AMD filed in 2005. That suit accuses Intel of holding AMD’s market share to 20 percent by threatening PC makers and offering financial incentives for steering clear of AMD chips.
The suit quotes a Toshiba manager who compared Intel’s incentives to “cocaine”, the AP reported. It also cites Gateway executives who said Intel’s retaliatory threats for working with AMD had turned them into “guacamole.”
For its part, Intel has said its rebates to large clients are legitimate, and benefit PC buyers through lower prices.
The Intel-AMD agreement follows a 1995 precedent in which the two firms settled over different issues. That arrangement gave AMD the right to continue producing processors based on the “x86 architecture,” a design both companies continue to use today.
A trial over the current set of issues could have been highly problematic for both companies, with Intel facing hefty fines if it had lost. The loss would also have added momentum to other cases against the Santa Clara, CA-based chipmaker.
Meanwhile, AMD, which is struggling to work itself out of $3.7 billion in debt and orchestrate a major corporate restructuring, could have found the trial prohibitively expensive.
Neither AMD nor Intel has disclosed how much they have spent on legal expenses, but it is likely in the tens of millions of dollars.
Intel also had some leverage against AMD, in that AMD’s restructuring has included a spinoff of its manufacturing arm to reduce costs. Intel says that move violated the x86 licensing agreement. However, AMD says the spinoff did not require a new license to produce chips that used Intel’s technology ““ a position with which Intel disagreed.
That spinoff is vital to AMD’s turnaround strategy after losing billions trying to compete against Intel in manufacturing –a battle AMD ultimately admitted it could not win.
Under the current settlement, AMD and Intel entered into a new, five-year cross-licensing agreement, and Intel dropped its claims that AMD had breached the previous agreement. In turn, AMD dismissed all litigation against Intel and is withdrawing its regulatory complaints worldwide.
Intel has also agreed to “abide by a set of business practice provisions”, although neither firm disclosed the details of these practices.
Given the $1.25 billion settlement, Intel said its current quarter spending would be $4.2 billion, instead of the $2.9 billion it had previously forecast. It also expects to see a 20 percent tax rate, rather than 26 percent.
All other expectations are unaffected, Intel said.
Shares of AMD spiked 22 percent on Thursday on news of the payment, which analysts expect the loss-making chipmaker to use to pay down some of its $3.2 billion of debt. Shares of Intel fell slightly to $19.78 after the settlement was announced.
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