Intel and AMD Reach a Landmark Settlement

Intel and Advanced Micro Devices are burying the antitrust hatchet. In a move that clears up longstanding allegations that Intel abused monopoly power to thwart competition in computer chips, the two companies have reached a sweeping settlement. As part of the deal announced on Nov. 12, Intel (INTC) will pay $1.25 billion, and AMD (AMD) will drop all pending antitrust litigation. The two companies also forged a five-year cross-licensing agreement that gives the companies access to each other's key chip technology. "Today marks the beginning of a new era," AMD Chief Executive Dirk Meyer said in remarks prepared for a conference call discussing the agreement. "It represents the culmination many years of litigation and regulatory engagement." AMD is dropping all pending litigation, including a case filed in 2005 in U.S. District Court in Delaware and two cases pending in Japan, Intel said in a statement. AMD will also withdraw all of its regulatory complaints worldwide. "This has never been about money. It's about the marketplace," says AMD chief legal counsel Tom McCoy. "It's a pivot from war to peace." FTC ProbeAntitrust pressure on Intel intensified earlier this month after New York Attorney General Andrew Cuomo accused the chipmaker of using billions of dollars in payments to dissuade computer makers including Dell (DELL) and Hewlett-Packard (HPQ) from using AMD chips. The payments, made over several years, were part of a "systematic campaign of illegal conduct" intended to harm AMD, Cuomo alleged. The Federal Trade Commission, which has been investigating Intel for more than year, was also on weeks away from filing a lawsuit against Intel, people familiar with the matter have said. AMD's settlement doesn't fully defuse the FTC's investigation, says antitrust lawyer David Balto, a former FTC attorney. "FTC action is necessary to assure long-term relief in this market, that competition is fully restored and that consumers have the benefit of an open market," Balto says. What's more, AMD said it will continue to object to Intel's controversial payments to PC makers. Still, McCoy notes that Intel has agreed not to make barring purchases of AMD chips a condition of rebates. A key part of the landmark settlement is the cross-licensing agreement that is likely to make it easier for PC makers to build machines based on both companies' processors. The patent battle had stemmed from AMD's spin-off last year of its manufacturing operations into a subsidiary called GlobalFoundries, which it jointly owns with an investment firm backed by the government of Abu Dhabi. After the agreement was announced, shares of AMD surged 26%, to 6.68. Intel shares advanced 1.5%, to 20.13. Earlier this year, the European Commission fined Intel €1.06 billion related to allegations that the company abused its monopoly position in the European market for computer chips. "Intel has an ongoing obligation to comply with the Commission's May 2009 decision, " a European Union spokesman said in a statement. With Andy Reinhardt in London

Before it's here, it's on the Bloomberg Terminal.