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Intel, AMD kiss and make up

Intel and AMD have been involved in long-standing dispute over intellectual property and antitrust issues. Intel was fined $1.45B by the EU for its anticompetitive practices and last week, New York Attorney General Andrew Cuomo filed an antitrust lawsuit against Intel.

Cuomo had rather harsh words for Intel, stating, “Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market. Intel’s actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices.”

However, Intel and AMD now appear to be making amends. The pair issued a joint statement today which reads, “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 a part of the settlement, Intel will pay AMD $1.25 billion, AMD will drop all of its pending lawsuits against Intel, and the pair will enter into a new 5-year cross license agreement. In addition, Intel will "abide by a set of business practice provisions" in the future.

AMD CEO Dirk Meyer today championed the agreement, stating, "Today, I am pleased to announce the last major component of that transformation – in the form of a transparent and public agreement with Intel to create a level playing field in the x86 processor industry – taking us one big step closer to achieving our bold vision."

Meyer continued, adding, "Today marks the beginning of a new era... one that confirms that the game has changed for AMD. It is an important milestone for us, for our customers, our partners, and most important – for consumers and businesses worldwide. In addition, it represents the culmination many years of litigation and regulatory engagement."

Following the announcement, AMD shares are up 25 percent to $6.61 while Intel is up almost a percentage point to $20.05 as of 10:00 AM EST.

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RE: Should have Held Out for more Cash
By rs1 on 11/12/2009 3:32:53 PM , Rating: 5
I see your reasoning, but I can also see AMD's strategy here:

1. They need cash NOW. They might have been able to get more cash later, but what good is that if it takes so long that AMD is no longer a viable company when it finally does get the cash. Court cases take a long time, and consume a significant amount of resources while they are ongoing.

2. Under the agreement, Intel drops its licensing suit, which AMD would probably have lost. AMD saves a bunch of extra money by not having to defend itself in this suit, and also no longer has to worry about either getting cut off from its x86 license or being forced to renegotiate at extremely unfavorable terms. Given that AMD's business is built around selling x86 CPU's, this is hugely important for them.

3. AMD doesn't have anything all that impressive on their roadmap until 2011. Now is a good time for them to be taking a cash infusion from Intel, even if it is a smaller one. It ensures that the company should be able to survive through 2010 so that maybe they can become competitive again in 2011 if they manage to stick to their plan.

I think AMD's settlement was aimed more at preserving their ability to compete successfully with Intel in the future than it was at maximizing the amount of cash extracted from Intel. The two goals are slightly different.

By ajfink on 11/12/2009 6:56:34 PM , Rating: 2
AMD never would have lost an x86 licensing suit - it would immediately lead to a practical monopoly.

"I modded down, down, down, and the flames went higher." -- Sven Olsen
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