Breakthrough: AMD and Intel settle antitrust dispute, reach new cross-license agreement

Intel has made a statement to Betanews this morning that it and Advanced Micro Devices are settling their long, outstanding legal disputes, including pending antitrust litigation in Delaware court, with Intel agreeing to pay AMD $1.25 billion.

Intel will also agree to abide by a new set of business practices, which may be announced in a matter of minutes. It's over.

"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," reads Intel's statement this morning.

10:55 am EST November 12, 2009 · "The agreement to us signals a new era. It's a pivot from war to peace," announced AMD Executive Vice President for Legal Affairs Tom McCoy, in a statement that could entitle the opening of a new chapter in the x86 computing era.

With poignant and historic language, AMD executives this afternoon announced the end of the intellectual property and business practices dispute with Intel that at one time, from a marketing perspective, defined AMD as a company. Intel's executives' statements remain forthcoming at this time. But AMD CEO Dirk Meyer explained today's agreement has three categories:

1. Intel will agree to new ground rules for corporate business practices.

2. A new, five-year patent cross-license agreement between AMD and Intel will give both companies broad access to each other's technologies.

3. GlobalFoundries, the manufacturing arm of AMD that was spun off as a subsidiary, may now be completely separated from AMD and operate independently. Under the previous cross-license agreement with Intel, GF had to operate as an AMD subsidiary in order for AMD to share Intel intellectual property with it -- the old agreement prohibited AMD sharing Intel trade secrets with another company. The new agreement permits such sharing specifically with GF.

However, we learned this morning, not all business practices to which AMD and certain other governments had been objecting, will be covered by Category 1 of the agreement. Specifically, from AMD's point of view, it appears only Intel conduct with regard to limiting end users' choices between AMD and Intel technology, will be curbed. But business practices such as volume rebates to OEMs may (perhaps) be allowed, so long as they are not exclusionary -- specifically, as long as they are not structured in such a way that OEMs promise not to purchase AMD parts, or to hold AMD purchases to specified caps.

We'll learn more from Intel's point of view in a few minutes. In advance of Intel's statement, that company has already released an update to its financial guidance, increasing its business expenditures to account for the one-time charge of $1.25 billion to be paid to AMD.

12:25 pm EST · Intel's business conduct agreement, we learned from Intel this morning, will not extend to the practice of volume rebates with OEMs such as HP and Dell. Without acknowledging any wrongdoing -- in fact, while continuing to defend its prior business practices with all OEMs, including Dell and HP -- Intel executives today stated they now openly promise not to do in the future any of the exclusionary tactics which AMD accused it of doing, while saying it never did so anyway.

Or maybe not. When directly asked by a Financial Times reporter this morning whether Intel's take on the agreement means it's not changing anything with regard to its business conduct, Intel Chief Administrative Officer Andy Bryant heaved a great, audible sigh, and responded emphatically, "No changes at all. Again, I'm just gonna say the same thing over again, so bear with me: AMD believes we have conducted business in some fashion that they believe is inappropriate. We have said we don't do what they actually accuse us of doing. We are confident that -- in fact, it's in the contract, we wrote down exactly what those provisions are, what we will and mostly what we won't do, and then those can be monitored at any time."

Then after what sounded like a pause for Intel CEO Paul Otellini to pick up where he left off, suddenly Bryant decided he needed to correct a little something: "I don't want to say there's absolutely no change to what we're doing. We have met with the EU, we have changed some business practices because of that. There are issues around pricing, which we think that the regulators may want to talk to us about -- we'll talk about those things. So I don't want to say we're not changing any of our business practices. The things that AMD was concerned about in the contract are things that we don't do, and we readily agreed to not do, because we don't."

The patent cross-license agreement reached today is a five-year extension of the existing agreement -- an extension that had been threatened by Intel's concern over AMD's restructuring. Specifically, if GlobalFoundries were to split completely from AMD ownership to become independent, AMD's sharing of x86 technology necessary for GF to produce chips would violate the previous licensing agreement.

That's important, because GF plans to do business with other companies; and GF's other current co-owner -- Abu Dhabi government-run investment firm ATIC -- reached an agreement last month to acquire Chartered Semiconductor. That makes GF, which was once just a manufacturing company, into a full-scale CPU innovator and manufacturer on the order of what AMD was in 2007. Chartered doesn't exactly expect its IP to be shared with Intel; and Intel would not want the reverse.

But borrowing the term "peace" from his AMD counterpart this morning, Intel's Andy Bryant told reporters that Intel was usually at peace with foundries, so striking an independent deal with GF wasn't too much of a problem. Intel isn't worried about losing its x86 IP, and is trusting GF just like it previously trusted AMD. This enables AMD to complete the last part of its restructuring: separating GF completely as an AMD subsidiary, into a firm that is majority-owned by ATIC, and minority-owned by AMD. That resolution also officially took place this morning.

Both Intel and AMD are expected to file paperwork with the Securities and Exchange Commission today, either or both versions of which should detail the complete agreement between the two companies. Betanews will continue reporting on today's breakthrough as we learn more.