Intel and AMD Settle Antitrust War for $1.25 Bln

Bitter rivals Intel and AMD have agreed to bury the hatchet on AMD's antitrust claims against Intel worldwide...for a cool $1.25 billion.

Chipmaker Intel has agreed to pay $1.25 billion to rival AMD to settle all antitrust litigation and legal disputes between the two companies. The agreement also includes a five-year patent cross-licensing agreement, and Intel is agreeing to adhere to a set of “business practice provisions” apparently designed to prevent the company from squeezing AMD out of markets and applying pressure to computer manufacturers to downplay or sideline AMD gear.

AMD has been relentlessly pursuing antitrust efforts against Intel for more than half a decade; the battle includes legal fights in Japan, South Korea, the United States, and the European Union. Under the terms of the settlement, AMD will drop all the litigation.

In a joint statement, the companies said: “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.”

Although some industry watchers expected Intel to fight AMD’s antitrust efforts to the last transistor, the settlement follows the European Union’s record $1.45 billion antitrust ruling against Intel, in which it found Intel had abused its dominant position in the processor market to squeeze out AMD, and engaged in illegal business practices using rebates and other kickbacks to persuade computer makers to drop or downplay AMD-based products. Similar charges were just leveled against Intel by the New York State Attorney General, and the U.S. Federal Trade Commission was already investigating Intel and was widely expected to weigh in soon with antitrust charges of its own.

Intel had repeatedly defended its sales and marketing practices—including issuing rebates to its biggest customers—as legitimate marketing that ultimately lowered prices for consumers.

The settlement will provide a welcome cash infusion to AMD, which has been struggling to make its bottom line look good after spinning off its manufacturing facilities into Global Foundries and repeatedly having to write down the value of its years-ago acquisition of ATI Technologies. For Intel, the settlement is almost certainly cheaper than waging protracted antitrust battles in several international markets—particularly if massive penalties like that handed down by the European Commission came home to roost. Although the patent cross-licensing deals will be good for both companies, some are wondering if the settlement will prevent Intel of just engaging in similar marketing practices in the future, in order to maintain its roughly 80 percent share of the microprocessor market.