In a culimation of talks that began in spring '08, Intel has just agreed to pay $1.25 billion (cash, due in 30 days) to its biggest rival chipmaker Advanced Micro Devices, Inc. (AMD) and agreed to a set of "business practice provisions" aimed at staving off future antitrust complaints. The agreement settles a federal case in Deleware and two in Japan, and AMD has agreed to drop all of its antitrust and patent suits worldwide and effectively end the complaints it's registered for five years. It's the latest blow to Intel, who has been fined $18.6 million by by Korea's Fair Trade Commission and $1.45 billion in May by the European Union.
When European commissioner for compeition Neelie Kroes read aloud the judgment then, he ended by adding, "Finally, I would like to draw your attention to Intel's latest global advertising campaign, which proposes Intel as the 'Sponsors of Tomorrow.' Their Web site invites visitors to add their 'vision of tomorrow.' Well, I can give my vision of tomorrow for Intel here and now: Obey the law."
For Intel's then chief of sales and marketing Sean Maloney (now executive vice president), it was the equivalent of twisting the knife in Intel's gut, he recently told Fast Company. "That was almost the most emotional thing about the whole day," he said. "We were bracing ourselves for what was going to happen and then this sarcastic remark."
In a conference call following the announcement of the settlment Thursday morning, AMD CEO and president Dirk Meyer said "This signals the beginning of a new era. It's a pivot from war to peace." A few significant issues, however, remain unresolved — AMD will continue to ask regulators to look into Intel's retro-active discounts and some of the company's pricing structures, AMD officials said. Intel co-founder Andy Grove added in a separate conference call Thursday, "One of the examples they [Intel] gave is if a customer doesn't buy a certain amount from us, we punish that customer." He insisted Intel didn't do that and will continue... not doing it. "They believe we conduct business in certain ways we dont believe we do," Grove said.
So, if Intel did nothing wrong, why pay $1.25 billion? "Anti-trust cases are incredibly complex," Intel CEO Paul Otellini said, "and it's a jury trial, which has its own vagaries ... While it pains me to write a check at any time, in this case, I think it made for a practical settlement. It was a good compromise between the two companies. In many ways, it was a small multiple of the potential damages that could be awarded in a jury trial." Grove added that paying a settlement was "better than taking a risk with a jury trial in a complex case."
Going forward, both companies have agreed to written rules to be filed with the Federal Trade Commission that ban many of the contentious practices. Disputes, additionally, will be handled in mediation and outside of courts, both company heads said Thursday.
At the of the day, Intel has consistentely continued to whup AMD in quarterly results. And the payment, though steep, would seemingly remove the knife from Intel's gut. AMD's Meyer, himself, acknowledged Thursday that "the industry isn't going to change like a lightswitch." But the settlement does consititute half of a one-two punch by AMD, on it surely sees as its ultimate nerd's revenge.
On Wednesday, the ailing chip maker also debuted its Fusion chip.
It takes the central processor (the CPU) and the graphics processor (the GPU) and alchemically combines them into one four-core "APU," or "accelerated processing unit." If none of that made sense, think of it this way: why put your eggs in two baskets when one basket is cheaper, and ... uses less battery power?
If the basket analogy fits, it's because AMD spent $5.4 billion acquiring GPU-maker ATi in 2006 in the hopes of producing this very wonder-chip. While the Fusion will arrive first with four processing cores, a power-sipping two-core version will come later, and AMD says it hopes to have a 12-core chip on the market by 2012. Most popular Intel chips, by comparison, are dual-core; its high-end chips like the Xeon have four cores.
Since Fusion chips will be small—32 nanometers, as opposed to the standard 64 used by most x86 chips—AMD says they'll be equally at home in desktop machines as in battery-powered netbooks. That could allow AMD to shrink its product line, saving on production costs and allowing it to plow ahead with more Fusion R&D. (Intel's influsion of $1.25 billion in bonus cash won't hurt that effort, either.) Using Fusion chips would also save computer-makers money, because they'll be able to buy one chip instead of two.
The only issue left to be resolved: memory. Graphics cards not only contain dedicated processors, they also house dedicated RAM to prevent graphical work from loading up a computer's main memory. Fusion-equipped computers would need to support more RAM to have equivalent performance. Example: the MacBook Pro I'm typing this on has 4GB of main memory but also has two dedicated graphics cards with a total of 512MB dedicated memory. Fusion motherboard-makers will need to support upwards of 6GB or 8GB of RAM to maintain parity.
The Fusion will begin shipping in 2011.
The full text of Intel's News Release: AMD and Intel Announce Settlement of All Antitrust and IP Disputes SUNNYVALE/SANTA CLARA, Calif. – Nov. 12, 2009 – Intel Corporation and Advanced Micro Devices (NYSE: AMD) today announced a comprehensive agreement to end all outstanding legal disputes between the companies, including antitrust litigation and patent cross license disputes. In a joint statement the two companies commented, "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." Under terms of the agreement, AMD and Intel obtain patent rights from a new 5-year cross license agreement, Intel and AMD will give up any claims of breach from the previous license agreement, and Intel will pay AMD $1.25 billion. Intel has also agreed to abide by a set of business practice provisions. As a result, AMD will drop all pending litigation including the case in U.S. District Court in Delaware and two cases pending in Japan. AMD will also withdraw all of its regulatory complaints worldwide. The agreement will be made public in filings with the Securities and Exchange Commission.