Intel and AMD settlement details are revealed
NOW THAT IT'S ALL SETTLED and Intel and AMD aren't at daggers drawn in court any longer, what went into the deal settling their various legal disagreements and litigation?
The full settlement agreement has not yet been published but reportedly will be shortly.
Both AMD and Intel held conference calls this afternoon, or rather this morning at their headquarters on the US Pacific coast, going over what's in the deal, the terms of the settlement and how both companies 'are winners'.
AMD was first with CEO Dirk Meyer going over the three components to the agreement. First, Intel has agreed to a set of ground rules that both companies are to abide by to "ensure an open and free market". There's a new patent cross licensing agreement using multiple foundries, with Global Foundries agreeing to continue as a foundry under the new terms. Finally Intel has agreed to pay AMD $1.25 billion, which is to be paid in cash within thirty days.
In return AMD will drop nearly all of the regulatory complaints it has made against Intel throughout the world. However it was quick to point out that there are some practices that are exclusionary and "a narrow set of complaints" will be addressed to the regulators.
One of the matters that will still go through the courts is the lawsuit filed against Intel last week for threatening computer makers and paying billions of dollars in kickbacks, filed by New York Attorney General Andrew Cuomo. The State of New York is not one of the parties to the settlement agreement.
AMD and Intel also don't have agreement on retroactive rebates and discounts, so that will be one of the ongoing areas for discussion between the two companies.
Speaking for AMD about the business practices guidelines that were agreed upon, Meyer said, "Intel will no longer be allowed to condition not doing business with AMD as a condition of doing business with Intel."
Intel's response to the settlement was rather, 'we never did anything anyway'. Speaking on Intel's conference call, CEO Paul Otellini said, "They believe we conduct business in a way that we don't believe we do. What made sense is that we all agree what shouldn't be done so let's write it down and sign it and agree to it."
The patent cross licensing agreements, Otellini revealed, will be in force for the next five years, then there will be the option to renew them. Otellini said, "There will also be quarterly meetings to discuss whether there have been any breaches. If [there are] any violations they can come to us and have a discussion as business people rather than taking it through the courts."
With regard to the $1.25 billion he'll be handing over to AMD in cash, Otellini explained that an antitrust case in front of a jury means that costs could be trebled. In many ways, he feels, the $1.25 billion was a small proportion of what Intel could have been paying in front of a jury. When asked whether this was an admission of guilt, he snapped that 98 per cent of people settle in private antitrust cases in the US and that Intel will continue to do business the same way it has been.
AMD said that the spun-off manufacturing division of AMD, Global Foundries, is well positioned to establish itself as a leading player in the industry and also said that the settlement "paves the way towards Global Foundries and Chartered for a merger".
"The end of the legal wrangling is good news for both companies," said the CEO of Context, Jeremy Davies. "The $1.25 billion Intel will pay AMD is certainly a welcome cash boost for the company. With AMD withdrawing its regulatory complaints worldwide, hopefully both Intel and AMD will now be able to focus more of their efforts on providing support to their channel in Europe."
AMD CEO Dirk Meyer said, "We look forward to healthy competition with the mutual respect one would expect between world-class competitors."
That was quite different from Intel CEO Paul Otellini's stance of, "No changes at all in Intel's behaviour. Full stop."
But those differing statements and the attitudes they suggest are just reflections of the two companies' respective strategic positions going into this settlement, and as such, are not at all surprising. µ
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They probably are both "winners". I'm sure the agreed licensing involves allowing AMD's Global Foundaries or other foundaries to continue to make x86es under license, which could've been an issue in the courts. AMD gets some $1.25B compensation scraps as well. Intel, on the other hand, gets to avoid a pricey anti-trust suit, as well as a ruling being set that other companies can use to derive compensation from as well.
Actually they still have to face the lawsuites from the governments for illegal practices.
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I'd call them both winners here. Intel would have had to pay a lot more cash if a jury was involved but the litigation could have taken years. And as far as the government is concerned: everybody knows big business owns the US gov. They'll settle for peanuts like Vole did.
Unbelievable.
The AMD-Intel lawsuit would have been a dead-on win for AMD. (Anyone who disagrees, read the EU and New York State pdfs.)
So what do AMD do? Allow Intel to settle for a piddly 1.25 billion.
AND CONTINUE ON WITH THE SAME ILLEGAL TACTICS.
Meyer needs to stick to engineering and AMD needs to find a real CEO with grit, "Go for the jugular" instincts and great leadership qualities, not techie engineering degrees and lots of geekappeal - that's all AMD's had since Jerry "RMHF" Sanders left.
Also AMD, what a great move in remembrance of all the AMD stockholders who lost their shirts due to Intel's illegal tactics.
Idiots.
Otellini is right - Intel should have paid at least $500 BILLION in fines and he and the other CEOs belong in prison for ten years.
that hung sung guy is f_ed.. So is ARM.
Noticed the cross licensing is 5 years?!
AMD should have settled for 10 times what they settled for. Intel can afford it and AMD has lost a lot more than that due to Intels illegal practices.
Now will the Yank Intel fanbois that squealed when the EU charged Intel with $1.5billion put up and shut up. Their hero has all but admitted guilt.
Intel had to give AMD $1.2B right now because if they didn't AMD would go bankrupt and the U.S. government would split Intel apart. Big blue doesn't want that and they want to keep their monopoly right where it is. Don't be fooled, Intel is smart as shit.
AMD setteled way too cheap. The amount they are getting is about how much profit Intel makes in just 1 quarter. Intel is the big winner here because of AMD's stupidity.
With US courts, you never know what the outcome will be. Many times it's more like throwing coins (which for sure the lawyers will catch).
There was this other company in SV who sued itself to create an precedent and thus close a possible legal loophole.
You should consider
when for whatever reason legal things went wrong before court for Intel, they would have lost any reason to stay reasonable, considerate and calm.
If Intel were to suffer a major legal problem before US courts, Intel simply could have figured that the total costs of killing AMD are way lower than the total costs of keeping AMD alive.
They could have simply pulled the plug on AMD, killing them within 3 quarters max. By anouncning to not issuing a new x86 license, and by halfing their margin for 2 quarters. AMD and GloFo would bellyup like dead stinking fishes quicker than you could spell c-o-u-r-t.
Dirk Meyer is a clever guy (unlike his predecessor, an CEO impersonater) so he took the Intel money he could get an ran and make sure he still has a business tomorrow.
This immidiate cash infusion from Intel plus the 5 year x86 license keeps AMD afloat.
By the way, one INQ poster just recently almost described of what happend now. So its not even a surprise but simply a reasonable thing to do - for both parties.
For Intel:
"What Goes Around Comes Around"
AMD had to prove *specific* damages in addition to anti-competitive behavior, whereas the gov't lawsuits do not need to establish specific damages.
This is not easy to do - they can't say "we would have sold more chips", they have to prove it. When you factor in that AMD was claiming they were selling everything they could make to analysts during the time this lawsuit covers, if there was additional demand could they have really sold a lot more? It's not like you can just turn on new capacity instantly.
The other factor folks don't get is the US courts only had jurisdiction over damages in the US market, not the global market and this was due to AMD manufacturing chips overseas. If AMD produced the chips in the US, then the courts could claim jurisdiction over any chip sold. (There's a pharmaceutical case that has nearly identical circumstances and the court ruled there that even though it was a US company they could only claim damages in the US as they were manufacturing overseas).
The last problem was AMD was stuck with the GF stake in order to work around that pesky x86 license. They already ware down to a 34% equity stake, with the GF intention of buying SMIC this would have taken AMD's stake lower and when the payments started for the NY fab capital (~2010), AMD would have had to match their proportional share or had their stake taken down even further. At some point AMD was going to lose the "GF is just a subsidiary" argument. Now expect them to ditch this faster than you can say "Spansion".
And looming in the background were large sums of convertible bonds (1.9 and 1.5Bil I think) that had to be payed in 2011/2012. Even if AMD won the lawsuit, there would be an appeal and wouldn't see money probably until 2012.
AMD's hand was forced (I think most with the x86 license risk around GF). That should be abundantly clear from the fact that they settled for less than the EU got. Folks thinking AMD was in a position of strength are kidding themselves - they didn't have the time to see this out to the end; it was their last card to play with convertible bonds and the need to outsource manufacturing (and maintain the x86 license) looming over their heads.
The real winners are the lawyers, After their fees are paid they'll be luck to clear a billion. Intel got off cheap.
From PC world: "AMD and Intel also said they have agreed to a new five-year cross-license agreement, and have given up claims of breach of contract from the previous license agreement."
How much you want to bet those claims of breach were only Intel retaliations for being sued?
1.25 billion dollars, eh? I wonder how much AMD spent on the case? Now, if it had been 1.25 billion Euros, that would be something...
The agreement allows AMD to increase it's production as well by being able to contract chip manufacturers without having a majority stake in the company. A big problem with supply for AMD was that they could only purchase chips from plants they owned outright or had a majority stake in. This will more than makeup for a possible bigger cash award had they gone to court. And they get a good chuck now and not 5 years down the road. Remember, this has been in the works in one way or another for about 10-12 years already.
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I really am surprised with AMD accepting so little cash.
Intel managed to take so much money from AMD with the monopolistic practices, that adjusting for inflation and public acceptance that never happened, AMD settled almost for free.
I don't really see how AMD will manage to survive 10 years if Intel will continue to do business as always. The R&D money will dry up someday to even keep up with Intel.
1.2 is cheap. should have been 3
But it's better then having nothing for AMD
and the cross licensing deal is also forced by Intel upon AMD
With their new revolutionary APU chipset.
a CPU /GPU combo chipset
AMD stock is up by about a third since this deal was announced. This agreement extends the existing x86 duopoly while providing some much needed cash to AMD and clearing up any claims Intel might have had against GlobalFoundries.
That being said, I still hope that the New York, E.U., Japanese and Korean (and likely FTC) lawsuit lead to a split of Intel's processor and fab businesses.
That, combined with opening up of x86 tech by mandating that Intel (and AMD) license x86 at a reasonable price would greatly increase competition and consumer choices.
Guido: Hey boys, I wouldn't go selling that AMD crap if you want to remain healthy, capiche?
Hardware boys: Sorry, godfather Otellini, don't break our kneecaps...can we have some more of those nifty "Intel Inside" stickers?
Officer Nacker: Guido, I'm sorry, we've had a complaint...you may be coming to the big house...
Guido: Oh, I almost forgot, here is my donation to the policemen's ball. Oh, and AMD, you might want to accept this little donation from us, if you want to remain healthy, capiche?
(who says crime doesn't pay?)
amd should invest the money in bribing retailers to market only their cpus and see how intel like it
..it will be even more ironic because the money originally came from intel! haha
Intel Gave AMD a perpetual x86 license
(with the 80% cpu inhouse manufacturing condition)
PLUS the fact that Intel has licensed from amd the x64 (64bit x86)
If intel does try to strangle AMD's x86 license then Intel will lose the 64bitx86 license also where all of its server markets is on and where the pc market is poised to go into.
Thats why Intel was forced into shenanigans like the dell deal
coz they know they cant legally strangle AMD without hanging themselves also
; and lastly the trust issue as the SEC might try to break up intel if
it remains the only x86 cpu maker.
Intel cant just remove AMD's x86 license
they know that they will lose in court
and even if they win then they have to give up 64bit computing in their x86 cpus which they now cannot do.
64bitx86 was and still is AMD's greatest asset in their patent portfolio
which Intel doesn't own outright.
So intel resorted to payoffs and rebates and unfair competition know as illegal business practices.
Coz legally they cant shut AMD down they have to use MARKET FORCES against AMD like turning the wholesale buyers and large retailers against AMD.
(true the c2d and i7 families of cpus are ahead of amd now but remember that for 4 years (before the c2d and i7) amd had the fastest and coolest cpus around the athlon64 family YET
for some reason DELL HP etc wont use them in their lineups of pcs?
In any economy the distributors of products (suppliers the supply chain)
play just as important role as the producers and consumers.
If the product cannot reach the consumers no matter how good the product may be then the producer wont be able to sell.
Thats how Intel shackled its competition. By taking control of the supply chain.
I think this is where the Regulatory bodies should look into as to how a big company intel was able to use the suppliers in the market not to sell its competitor's products and the mechanisms used in this objective.
having got 80% of the market in 6 years of x64.
No one can imagine, how boring such a big companies executives would feel, planning their release of Pentium 4.1 in Q1 2010.