So Intel and AMD settle their antitrust litigation for a cool $1.25 Billion. With a “B.”
The timing is certainly interesting, coming so soon on the heels of New York State’s recent filing against Intel on that same topic. Toss in the European Union judgment, and you get a picture of a beleaguered Intel, fighting a battle on multiple fronts.
What does the settlement really mean for consumers and OEMs? How will it affect AMD going forward?
There are still a lot of unknowns from this brief announcement. In many ways, it’s a classic settlement – AMD gets cash, rights to some Intel patents and an agreement from Intel to stop it’s anti-competitive behavior. Intel, on the other hand, readily agrees to ceasing and desisting said behavior because, after all, both companies want “To avoid the time and expense of litigation, and without any admission of liability or fault…”
Intel is substantially larger than its arch-rival, generating around six times the revenue of its smaller competitor. It’s also very profitable, while AMD has only recently been able to pull itself closer to profitability. Still, all the litigation is a drain on Intel’s resources, a continuing pall on Intel’s reputation and a distraction from developing new technologies and products.
According to a conversation with AMD spokesperson Drew Prairie, the way to think of the agreement is as a logical extension of past agreements with Intel – and hence only applies to the CPU side of the equation. That’s an important point, which I’ll get to shortly.
Intel had recently complained that AMD’s split into a fabless semiconductor company – AMD – and a separate, manufacturing subsidiary – Global Foundries – was a violation of past patent agreements. Intel now drops that claim, which has two key implications:
- Global Foundries can now fully split with AMD, and isn’t required to be a subsidiary even in name.
- AMD can contract with any chip manufacturing company to build any AMD product.
While the legal wheels are still turning, this logically completes the split of AMD into two separate entities. This also means that Global Foundries really needs to stay competitive – it can’t rely on a captive AMD to give it business forever.
Now let’s get to the graphics question.
As I noted earlier, you can think of this settlement as a logical extension of past agreements between AMD and Intel. According to Prairie, this gives Intel no rights to AMD’s intellectual property on the graphics side. That’s pretty major, since Intel is trying to build its own GPU in Larrabee. If Intel violates any patents AMD might have that are purely graphics related, AMD would be free to pursue legal action.
There’s one other important point: AMD and Intel will continue their separate paths. There’s no bus licensing involved, so you won’t see AMD or Intel suddenly ship pin-compatible CPUs. This is by no means a return to the socket 370 era.
Consumers probably won’t see much of a difference at first. I’ve started to see an increasing number of interesting products built around AMD technologies, including the recently Dell’s recently announced Inspiron Zino HD. Given that increasing number of AMD-based PC products shipping recently, it’s likely that Intel had pulled back from whatever anti-competitive behavior it may have engaged in (that it doesn’t admit doing, mind you.)
OEMs will win, too, having a little more freedom to develop products that they see suit their own customer’s needs. AMD is pushing forward with its plans, including a renewed strategic approach that more tightly integrates GPU and CPU sides of the company. If AMD can just stick with a single core strategic message, OEMs will feel much more comfortable doing business.
If you get right down to it, though, Intel is a big winner, too. Sure, it’s out of pocket $1.25 billion, but it avoids losing to AMD in court, along with the potential of much larger punitive damages. In some ways, Intel is actually getting off cheap. And since Intel is so profitable, it can still use big discounts to lure OEMs to use Intel-based solutions.
Let’s hope that the playing field really is leveled. AMD still has a big chore ahead of it, building its Fusion products, keeping its feet in the server side and trying to keep Nvidia at bay in the GPU business. It’s a daunting task, but at least AMD can hope that this settlement means that it has a fair shot at the market now.
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Scott Gardner
November 12, 2009 at 12:15 pm (UTC -7)
Loyd, this is interesting stuff. I’m sure there are some outside lawyers who will read the public settlement terms and decide whether AMD got a good deal. I chugged through the text in the SEC filing, and a couple of things jump out:
Here’s what Intel wanted:
4.7. Past Intel Conduct. AMD agrees that, except as provided in Section 3.5, this Agreement is a full, final and fair resolution of
any and all actual, alleged, claimed or potential harm suffered by AMD or that AMD has claimed or could claim to have incurred as a result of
any Intel conduct or acts that occurred on or prior to the Effective Date, including without limitation any such conduct complained of in the
Actions (collectively ” Pre-Effective Date Conduct” ). AMD covenants and agrees that this Agreement fully compensates AMD for any and all
such harm from Pre-Effective Date Conduct, and accordingly, AMD agrees that, except as provided in Section 3.5, it shall make no complaints
to Governmental Authorities regarding any such conduct or harm.
Basically, AMD has been made whole and has been compensated for any harm. There is still the complicated question of whether consumers were harmed, but AMD is out of the picture.
The other items to consider in section 6 are that Intel only has to restrain business practices for 10 years, and all bets are off if Intel’s PC/Server/Mobile market share numbers are less than 65% for 4 quarters.
Very interesting development…
Scott
CD
November 28, 2009 at 11:46 pm (UTC -7)
Loyd, this is interesting stuff. I’m sure there are some outside lawyers who will read the public settlement terms and decide whether AMD got a good deal. I chugged through the text in the SEC filing, and a couple of things jump out:
Here’s what Intel wanted:
4.7. Past Intel Conduct. AMD agrees that, except as provided in Section 3.5, this Agreement is a full, final and fair resolution of
any and all actual, alleged, claimed or potential harm suffered by AMD or that AMD has claimed or could claim to have incurred as a result of
any Intel conduct or acts that occurred on or prior to the Effective Date, including without limitation any such conduct complained of in the
Actions (collectively ” Pre-Effective Date Conduct” ). AMD covenants and agrees that this Agreement fully compensates AMD for any and all
such harm from Pre-Effective Date Conduct, and accordingly, AMD agrees that, except as provided in Section 3.5, it shall make no complaints
to Governmental Authorities regarding any such conduct or harm.
Basically, AMD has been made whole and has been compensated for any harm. There is still the complicated question of whether consumers were harmed, but AMD is out of the picture.
The other items to consider in section 6 are that Intel only has to restrain business practices for 10 years, and all bets are off if Intel’s PC/Server/Mobile market share numbers are less than 65% for 4 quarters.
Very interesting development…
Scott
Tweets that mention AMD, Intel and the Meaning of Competition « All Topics « Improbable Insights -- Topsy.com
November 13, 2009 at 12:07 am (UTC -7)
[...] This post was mentioned on Twitter by loydcase, Gideon Guillen. Gideon Guillen said: Why Intel and AMD settlled the anti-trust lawsuit: http://is.gd/4TXEv and http://is.gd/4TXEA [...]