Intel to pay AMD $1.25 billion

JORDAN ROBERTSON; The Associated Press | • Published November 13, 2009

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Settlement: It ends four-year lawsuit that charged chip producer with unfair market dominance SAN FRANCISCO – Intel Corp. will pay $1.25 billion to make peace with Advanced Micro Devices Inc., as the companies whose microprocessors run nearly all personal computers finally found common ground.

The bitter and colorful dispute caused international antitrust trouble for Intel.

The settlement announced Thursday sent AMD stock soaring and ended a four-year-old lawsuit in which AMD accused Intel of abusing its dominance of the chip market to keep a lid on AMD’s share. Intel has about 80 percent of the microprocessor market, and AMD has about 20 percent.

According to the lawsuit, Intel penalized computer makers for using AMD’s chips or offered them financial incentives – payments that a Toshiba Corp. manager likened to “cocaine.” Executives from Gateway complained that Intel’s threats of retaliation for working with AMD beat them “into guacamole.”

Intel has defended its practices, saying it simply offered rebates to big customers, which allowed them to pass lower PC prices to consumers. A microprocessor can account for 15 percent to 20 percent of the cost of a computer, according to Martin Reynolds, a vice president with the Gartner Inc. research firm.

But despite Intel’s saying that it did nothing wrong, the AMD lawsuit, which was scheduled to go to trial in Delaware in March, was one of Intel’s biggest headaches. Squashing the case removes the possibility Intel would be on the hook for even more if it lost at trial, Intel CEO Paul Otellini said.

“While it pains me to write a check at any time, in this case I think it was a practical settlement,” Otellini said on a call with analysts.

But even before Thursday, AMD’s complaints had their desired effect: Antitrust regulators in several countries have filed cases against Intel based on AMD’s accusations – cases that won’t disappear because of the settlement.

The U.S. Federal Trade Commission is investigating Intel, and regulators in Europe have fined Intel a record $1.45 billion. Intel has paid the fine but is appealing it.

Regulators in Korea have fined Intel $18.6 million – Intel is appealing that as well – and last week, New York Attorney General Andrew Cuomo filed a federal lawsuit accusing Intel of using “illegal threats and collusion” to dominate the chip market “with an iron fist.” In 2005, Japan’s Fair Trade Commission found that Intel violated antitrust rules there. Intel accepted that ruling without admitting wrongdoing.

Intel can easily absorb the latest penalty. The company made enough money in just the first nine months of this year to pay the European fine and the AMD settlement and still have nearly $1 billion left over.