Intel and Advanced Micro Devices have today announced an agreement to end all outstanding legal disputes, including antitrust and cross-licensing litigation.
Under the terms of the agreement, AMD and Intel have renewed their comprehensive cross-licensing agreement which includes technologies like Intel’s x86 ISA and AMD’s x86-64 extensions. Both firms will also abandon any previous claims to breaches of this agreement.
Finally, Intel has agreed to pay AMD a $1.25 billion USD settlement and abide by a new code of business ethics. In exchange, AMD will drop its antitrust suit in the US District Court for the District of Delaware and two pending cases in Japan. AMD will also drop its global regulatory complaints, which should include the ongoing case in the European Union.
“While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development,” the companies commented in a joint statement.
This cross-licensing settlement bodes well for AMD, which had previously been accused of violating the terms of Intel’s x86 license when it spun its manufacturing arm into Globalfoundries. Intel had alleged at the time that Glofo was not the AMD with which the agreement was signed and was preparing to demand an expensive renegotiation to accommodate the fledgling foundry.
Renewing the agreement will allow AMD to push ahead with its efforts in the microprocessor space without fear of injunction, but more importantly, it allows Globalfoundries to pursue its aspirations to compete with TSMC unhindered. Should Glofo realize its aspirations, consumers could ultimately benefit from a bidding war as Glofo and TSMC vie for production contracts with increasingly smaller bids.
However, the exchange of legal concessions is easily the most fascinating aspect of the agreement. By paying out a settlement and adopting a new code of business ethics, Intel has essentially made the tacit admission of wrongdoing in the US and abroad. It is also damning to observe how quickly Intel ceded the Delaware antitrust dispute, given the intensity of their objections in the EU.
The exchange also has serious cashflow implications for AMD. The company’s recent third quarter results put the firm up 18% QOQ to a profitable non-GAAP net income of $2 million, but their numbers were down 22% YOY. All things considered, AMD grossed $1.396 billion on the quarter, which makes a $1.25 billion payday very near to a free quarter of pure profit.
For Intel, the payout is a drop in the bucket; the firm netted a 950% higher income than AMD for 3Q10 at $1.9 billion. A sum of $1.25 billion is a small price to pay for reclaiming the agility to innovate and market without the looming threat of multiple billion-dollar fines.
Both firms will make public additional details about the agreement in filings with the US Securities and Exchange Commission.
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