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Intel to Industry: Nothing’s Changed
It claims it’s done nothing wrong and never did

XML Magazine

Despite agreeing to pay AMD $1.25 billion in hush money, which sounds like an admission of guilt, Intel claims it's done nothing wrong and never did - and such a position is memorialized in the 20-page deal it signed with AMD Wednesday.

Intel CEO Paul Otellini claims it would have been improvident for Intel to risk losing the complex, nuanced AMD antitrust case that was supposed to go to trial in March.

Juries are such dicey things and with the risk of trebling Intel could have had to fork over double-digit billions so, as much as Otellini hates to write that check, Intel's could be getting off cheap.

AMD settled for cheap because it had to hock its fabs to Abu Dhabi and Intel could have lifted its license to make x86 chips and that would have been the end of them.

As we conjectured months ago, that was the lever that brought AMD to the bargaining table starting back in April.

AMD's general counsel Tom McCoy claimed that AMD's crusade against Intel has never been about money. Well, that's good because it's unclear how much of that $1.25 billion it's gonna get to bank and that's because it's widely assumed that its outside lawyers have been on contingency.

It's probably cost Intel about $500 million in legal fees over the last few years to deal with the AMD suit and its record document exchange, depositions and expert testimony as well as its defense against AMD complaints to regulators in Japan, Korea and of course the European Commission.

Anything near that neighborhood would have been material for AMD but nobody's ever been able to get a handle on its legal expenses so that's where the contingency assumption comes from.

Presumably its O'Melveny & Myers lawyers will be partying this weekend.

Otellini said during a conference call that the highest hurdle in the settlement was the money and how the amount related to other factors.

AMD maintains that the business practice concessions it wrung out of Intel are going to level the playing field and change the industry's ground rules. It claims it'll be "transformative," not like a "light switch," CEO Dirk Meyer said, but over time.

Intel, on the other hand, says nothing has changed.

Its Intel Inside program is unaffected. According to Intel's story all it did was to stipulate that it won't to do things it claims it doesn't do anyway - like bullying accounts into exclusives or punishing OEMs that use AMD chips or getting OEMs or retailers to delay or cancel their AMD boxes - just like it did in Japan - and so all its rebates and discounts and prices remain in effect exactly as they were before the Armistice Day armistice.

And Intel, which promised not to impair AMD with its compilers, is still free to reward customers for exclusives although it has foresworn to offer them inducements for exclusives (now there's a thicket to traverse).

It can't talk to AMD about pricing because that's against U.S. antitrust law so AMD is free - relatively speaking - to keep complaining to the regulators about what it perceives as Intel's illegal

  • "retroactive discounts" based on volume or share bought from Intel and then applied to purchases below the volume level;
  • so-called "accused bid buckets" under which a fund for defraying the cost of Intel chips is set up that AMD contends brings the price below cost
  • and so-called "accused end-user discounts" that combined with other discounts allegedly brings the price below cost.

The regulators in turn can talk to Intel.

The pact pledges the companies to avoid future litigation by using arbitration and mediation instead and there are going to be quarterly gripe sessions to clear the air.

For its trouble AMD gets the right to shift its manufacturing to any fab it likes. Baring someplace other than its joint venture with Abu Dhabi, Intel has cut a license agreement with Globalfoundries that'll get the money-losing operation off AMD books since it doesn't have to be structured as a conflated AMD subsidiary any more. That'll probably help Globalfoundaries swallow its Chartered Semiconductors acquisition, which in turn will get it more paying customers and help its financials.

Intel's chief administration officer Andy Bryant said its new patent cross-license with AMD is only a five-year agreement because there are so many "moving parts" and "various structures." It is renewable.

Intel is anticipating only a modest reduction in its legal bills.

It still has to deal with the class action suits that congregated around the AMD suit in Delaware and pursue its appeal of both the EC antitrust decision and its history-making $1.45 billion fine and Korea and its $18.6 million fine.

There is also the little matter of a possible suit leveled by the Federal Trade Commission - AMD calling off the dogs is unlikely to affect the agency's decision at this point - as well as the politically motivated antitrust suit New York Attorney General Andrew Cuomo filed just days ago against Intel in Delaware evidently expecting to ride on AMD's coattails.

There is speculation that Cuomo won't have the resources now to follow through although he claims he will. His suit is pretty much a dead ringer for AMD's.

AMD, meanwhile, hinted that it might us the money for debt reduction. It's up to neck in the $3.7 billion debt in acquiring ATI. At the end of Wall Street's day Thursday AMD's stock was up close to 22% at $6.48.

In light of the settlement, which is supposed to be paid in cash in 30 days, Intel adjusted its fourth-quarter guidance. It now expects spending to be ~$4.2 billion, up from $2.9 billion with a 6% lower tax rate.

You can see if the earth shook for you the way AMD says it did for them here.

About Maureen O'Gara
Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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