Intel, AMD settle $1.25 billion antitrust suit
Microprocessor prices could increase in wake of the settlement
Jim Carbone -- Purchasing, 11/12/2009 3:35:41 PM
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Electronics buyers may see small prices increases in the short-term for microprocessors following Intel’s agreement to pay competitor Advanced Micro Devices (AMD) $1.25 billion to settle its 4-year-old antitrust lawsuit and patent disputes.
In 2005, AMD had filed a lawsuit against Intel, alleging that Intel had improperly used rebates and subsidies to keep computer makers and retailers from doing business with AMD.
Under the settlement, Intel will pay $1.25 billion and AMD will drop all litigation, including the antitrust case in U.S. District Court in Delaware and two cases pending in Japan. Intel has also agreed to abide to a “set of business practice provisions†according to a joint release issued by the two companies. Details of the provisions were not released, but presumably they address alleged anti-competitive practices by Intel. The two companies also agreed to a five-year patent cross-licensing agreement.
The settlement was viewed by some analysts as good news for computer OEMs using either Intel or AMD processors.
“It is a good thing for the industry because it means more money goes into innovation and new products rather than to lawyers and PR,†says Martin Reynolds, vice president at researcher Gartner Inc. in an interview with Purchasing.com. It also means more profit for AMD. "Computer system manufacturers can expect a small increase in microprocessor prices," he says. That will lead to more profit for AMD.
In competing with Intel, AMD didn’t have trouble selling all the processors it made. “Its problem was getting a good price for them, so with Intel being less aggressive on the price, it makes room for AMD to make profit,†says Reynolds.
With the settlement, microprocessor prices will still decline over time but price competition will be more “rational. Neither company will sacrifice more profit than it should to compete,†says Reynolds.
It was not clear what impact the agreement would have on other antitrust investigations and actions against Intel, but some analysts say it makes it harder to prosecute Intel. Last week the New York state attorney general’s office filed an antitrust lawsuit against Intel in federal court, charging the company engaged in unfair competitive practices.
The Federal Trade Commission (FTC) has also been investigating Intel, concerning alleged antitrust violations and in May the European Union fined Intel $1.45 billion for antitrust violations. Intel is appealing the decision.
An EU spokesman said the agreement between the two companies would have no an impact on the EU’s decision to fine Intel, but Intel is appealing the case.
“With the EU, what happens is anyone’s guess,†says Reynolds. “Intel will do what it can to get part of its $1.45 billion back. The New York case has lost its big witness so I suspect that case will fade,†says Reynolds. The same thing may happen with the FTC case.
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