$1.25bn deal brings end to chip firms' legal battles

Published on Thursday 12 November 2009 19:46

INTEL will pay rival chipmaker Advanced Micro Devices $1.25 billion to settle all outstanding legal disputes, in a move that could weaken competition authorities' cases against Intel.

Shares of AMD jumped 20 per cent yesterday on news of the payment, which analysts expect the loss-making chipmaker to use to pay down some of its $3.2bn debt.

The settlement ends a global campaign that AMD has been waging against its larger rival that stretches back 12 years.

Regulators in Asia, Europe and the United States have taken action against Intel because of complaints by AMD that its business is being damaged by alleged anti-competitive behaviour. Intel, the world's top chip company, makes 80 per cent of the central processing units at the heart of personal computers.

Joanne Feeney of FTN Equity Capital Markets said the deal could stave off the US Federal Trade Commission's (FTC) pending decision to take action against Intel.

"It eliminates a large amount of uncertainty for both companies," she said.

FTC chairman Jon Leibowitz said the commission will review the settlement. "Certainly we plan to review the settlement between Intel and AMD in their private litigation. The FTC has an ongoing independent investigation of Intel's practices so we cannot comment further at this time," Leibowitz said.

AMD said it would withdraw all its regulatory complaints and drop all pending litigation, including a case in the US and two cases pending in Japan.

Intel and AMD also sealed a five-year cross-licence deal and said they would give up any claims of breach from their previous licence agreement.

AMD executives said the settlement created a "level playing field" and that the company would seek "continued vigilance" from competition agencies worldwide.

They called the deal a move from "war to peace", though noted that some narrow issues on Intel rebates remained.

"It will take time for people to understand how operating conditions in the processor business have changed. But they have changed," AMD chief executive Dirk Meyer said.