Intel pays AMD $1.25B legal settlement; FTC and E.U. continue reviews
UPDATED at 12:10 p.m.:
Putting an end to one of Silicon Valley's longest running legal battles, chip giants Intel and Advanced Micro Devices said today they have agreed on a $1.25 billion settlement that will resolve multiple lawsuits around the world.
The move comes as antitrust agencies in the U.S., Europe and Asia have stepped up scrutiny of Intel's business practices in the highly concentrated chip-making market. AMD has argued that Intel illegally uses its dominance to edge out competition through pressure tactics and massive rebates to computer makers to carry Intel chips. Last week, New York's attorney general filed a lawsuit against Intel for similar allegations, revealing as evidence e-mails where Intel apparently agreed to billions of dollars in rebates to computer makers like Dell to stop them from using AMD's chips.
In a conference call this morning, Intel CEO Paul S. Otellini played down the role of regulatory reviews on the settlement, saying Intel and AMD have been talking since last April on an agreement. Though he said the settlement "should provide some degree of comfort for regulators" to allay concerns of anticompetitive practices.
The peace worked out between the rival companies will be considered by regulatory agencies. But the settlement won't put an end to regulatory reviews, the FTC and E.U. said.
"Certainly we plan to review the settlement between AMD in their private litigation," said Federal Trade Commission Chairman Jon Leibowitz. "The FTC has an ongoing independent investigation of Intel's practices so we cannot comment further at this time."
E.U. spokesman Jonathan Todd said that the European Commission "takes note" of Intel's settlement with AMD but that it does not change Intel's duty to comply with European antitrust law. The E.U.'s competition bureau fined Intel a record $1.45 billion for anticompetitive practices.
Intel said it has agreed to pay AMD $1.25 billion and in return AMD agreed to drop antitrust and patent licensing lawsuits, including one in the U.S. District Court of Delaware and two cases that are pending in Japan. AMD will also drop its complaints to regulatory agencies, including the FTC, the company said in a conference call this morning.
In a joint statement, the two companies commented: "While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development."
As part of the settlement, Intel and AMD agreed to new five-year, cross-license pact and will give up any claims of breach from the previous agreement. Intel also agreed to abide by a set of business-practice provisions.
Their legal battles began nearly five years ago when AMD sued Intel in Delaware, saying Intel tried to maintain its dominance for microprocessors by providing discounts to customers that avoid AMD’s products. Intel had 82 percent of the market for personal-computer processors at the end of the third quarter, according to Mercury Research in Cave Creek, Ariz. AMD had 18 percent.
Antitrust lawyer David Balto said regulators shouldn't drop their reviews and suits because of a private settlement.
"This job is not done," Balto said. "Although the settlement may eliminate some barriers, FTC action is necessary to assure long-term relief in this market, that competition is fully restored."
Shares of AMD jumped 23 percent in mid-morning trading, up $1.25 to $6.57. Intel's stock edged up slightly, up 0.3 percent, or 6 cents, to $19.90.
-Bloomberg News contributed to this report.
November 12, 2009; 10:15 AM ET
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