After AMD: Intel's Next Big Battle

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Intel continues to face litigation and scrutiny from regulatory bodies over allegedly anticompetitive practices. Most recently, New York State Attorney General Andrew Cuomo said Intel illegally used billions of dollars in payments to dissuade computer makers from using AMD chips. AMD and other critics say the largesse limits AMD's market share gains. The Federal Trade Commission and the European Commission are also examining Intel's pricing practices.

AMD agreed to drop its own civil lawsuit and said it will stop pushing regulators to closely examine the larger chipmaker's marketing practices. But the smaller chipmaker said it will continue to object to them if asked or subpoenaed by regulators for comment. CEO Paul S. Otellini denies Intel has done anything illegal. "Throughout this process, we have not wavered in our contention that Intel acted within the boundaries of the law," Otellini said during a conference call.

Other, Pending Litigation

The FTC, which had been expected to file a lawsuit before yearend, doesn't have the authority to level fines, but can push for changes in corporate behavior. In the agreement announced Nov. 12, Intel agreed to certain practice changes that might mollify the FTC.

Under terms of the agreement, Intel must train its sales organization to follow new ground rules of competition with AMD. Those rules bar Intel from placing conditions on sales that would block AMD from the market. The two companies will meet monthly to discuss disputes, and each must abide the ruling of a mediator who would settle irresolvable issues.

The outcome of the New York lawsuit, filed on Nov. 4, is more difficult to predict. It was likely to draw on testimony presented in an AMD lawsuit that's now been dropped. As a result, Cuomo could withdraw his lawsuit—or hold out for a cash settlement.

Earlier this year, the European Commission fined Intel €1.06 billion ($1.45 billion) related to allegations that the company abused its monopoly position in the European market for computer chips. "Intel has an ongoing obligation to comply with the Commission's May 2009 decision," a European Union spokesman said in a statement. Intel is appealing the decision, though its pricing practices are still being monitored by the EC, says Andy Bryant, Intel's chief administrative officer.

AMD Free to Spin Off GlobalFoundries

In reaching the settlement, AMD gives up the opportunity to collect billions of dollars more in damages had it won a jury trial. But it saves millions of dollars in legal fees. AMD, which has offices in Austin, Tex., and Sunnyvale, Calif., also gets badly needed cash and more room to maneuver as it tries to create more competitive offerings against Intel.

The settlement also paves the way for AMD to spin off its chip-manufacturing subsidiary, GlobalFoundries. After AMD moved to become a leaner company that turns to outside parties to manufacture its chips, Intel in March threatened to withdraw a cross-licensing deal that makes it easier for PC makers to build machines based on both companies' processors. AMD now is free to go to an independent GlobalFoundries to have its chips made, saving it from bearing millions in manufacturing costs each year. Intel gets to use that same cross-licensing deal to continue to use AMD chip technology in its products. "It will take time to understand how operating conditions in the processor business have changed," AMD CEO Dirk Meyer said on a conference call. "But make no mistake, they have changed."

Edwards is a correspondent in BusinessWeek's Silicon Valley bureau.

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