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AMD says the split into two companies doesn't interfere with the agreement

AMD and Intel are rivals in the marketplace when it comes to x86 compatible CPUs and graphics processors. AMD and Intel have a cross-license agreement in place that allow AMD to use Intel IP to build x86 compatible processors.

On October 7, AMD announced that it was splitting its holdings into two separate companies. AMD will continue as a designer of CPUs and GPUs. The other company is called The Foundry and will be responsible for manufacturing chips for AMD and other companies.

The new company starts with AMD's chip fabs and the chipmaker will retain a 44.4% stake in The Foundry. The remaining 55.6% of The Foundry will be owned by a pair of Abu Dhabi companies that together invested $5.7 billion.

BetaNews reports that Intel issued a statement saying that it will be investigating whether or not the split of AMD and AMD's resulting minority stake in The Foundry violates the heavily redacted licensing agreement that allows AMD to design and manufacture x86 compatible CPUs.

The issue in the eyes of Intel is that the original licensing agreement granted AMD a non-exclusive, non-transferable license for x86 technology. Intel feels that with AMD splitting in two and now only owning a minority stake in The Foundry where Intel's IP will be used will not give AMD the control over the IP as stipulated by the agreement.

Intel's Chuck Malloy told BetaNews, "We have an obligation to our shareholders that we protect our intellectual property. We want to make sure their interests have been taken into consideration."

AMD for its part believes that it is not in violation of licensing agreements in place between it and Intel. AMD's Michael Silverman told BetaNews, "We are completely confident the structure of this transaction takes into account our cross-license agreements. Rest assured, we plan to continue respecting Intel's intellectual property rights, just as we expect them to respect ours."

According to eWeek, Hans Mosesmann, a financial analyst with Raymond James, believes that Intel could use the split of AMD and transfer of its IP to The Foundry to pressure AMD to drop long-standing lawsuits it has against Intel.

Mosesmann wrote, "AMD, in our view, is likely violating the Intel x86 cross-license, but we suspect Intel may look the other way as it benefits Intel to have an AMD that will over time have increasing variable costs (good for ASPs). Intel may choose to entice AMD to drop the anti-trust suits against Intel in return for this altruistic gesture.”

It appears that Intel is pressuring AMD to release a non-redacted version of the licensing agreement to the public, at this point only the heavily redacted version is available. AMD maintains that releasing a non-redacted version of the license agreement is not going to happen.

AMD spokesman Phil Hughes said, "It’s a business document and we are not going to negotiate this in the press or the media. This is something that the lawyers have to work out.”

That statement and Intel's willingness to release the full version of the licensing agreement could certainly make it seem AMD knows that it is violating the license agreement it has in place with Intel in some minds.

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

By ThePooBurner on 10/9/2008 6:56:20 PM , Rating: 1
The formatting of this post makes it hard to follow and see what exactly your point might be. As i still am not sure what it is.

RE: Tough times demand more than tough talk.....
By Visual on 10/10/2008 4:51:08 AM , Rating: 2
hell, the post actually ends with a comma - i guess we should be expecting part 2... no use trying to understand it before then :P

By crystal clear on 10/11/2008 4:16:52 AM , Rating: 2
Yes indeed the comma slipped in due to "copy/paste" from my earlier comments.

Yes as for the part 2 - I wont keep you waiting !

As for the trying to understand part of it....

The post itself is "bits & pieces " put together not formated prperly due to time constraints.

"figure it out"....

By crystal clear on 10/11/2008 5:00:16 AM , Rating: 3
Here comes the part 2....

Could Intel kill AMD's escape plan?

It is rival processor vendor Intel Corp. that holds the key to the survival of Advanced Micro Devices Inc. (Sunnyvale, Calif.) as a fabless chip company and the formation of Foundry Co., with wafer fabs in Dresden and, perhaps, in New York state.
In fact, with a few flourishes of a legal counsel's pen Intel could scupper it. The real question is: will Intel allow the plan to go through and keep AMD on life-support? That would have the advantage of allowing Intel to not be seen as a monopoly supplier.

When looked from the point of view of AMD, most analysts agree that the injection of petro-dollars from Abu Dhabi is a life-saver. The substantial re-organization — splitting off manufacturing — is enough to keep AMD in the microprocessor game but not enough to necessarily see it gain market share, seems to be the consensus.

The plan allows AMD to go fabless, which should give some sort of economic advantage over Intel, and clears $1.2 billion of debt of AMD's books, while the formation of Foundry Co., tapping into the IBM Common Platform alliance, should give AMD access to competitive leading-edge manufacturing processes.

However, when looked at from the point of view of Foundry Co. the deal makes less sense. The foundry market is already crowded and also dominated by TSMC. The idea that any newcomer to that market would choose to have fabs in the western hemisphere rather than the eastern hemisphere looks almost perverse.

Abu Dhabi wants to get into the chipmaking business — or at least invest in it — and that, along with about $8 billion, is the price. If Foundry Co. should start to flounder a fabless AMD will have other sources of 32-nm and 28-nm silicon from within the Common Platform alliance.

But one question that hangs over the plan is whether AMD has the right to pass on x86 processor manufacturing technology details, some of which are covered by cross-licensing agreements with Intel, to a third party, such as Foundry Co.?

Even if AMD argues that the cross-licensing that came out of an almost decade-long legal battle between AMD and Intel in the 1990s has become irrelevant with the passing of time and the expiry of patents, it should known that

Intel is quite prepared to go to court to hammer out the details — for years if necessary.

And the very act of being dragged to court could be enough to thwart AMD's dreams of resurgence. A smaller, fabless AMD would be less able to survive such an atmosphere of fear, uncertainty and doubt than its predecessor

"People Don't Respect Confidentiality in This Industry" -- Sony Computer Entertainment of America President and CEO Jack Tretton
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