Why Intel's Settlement With AMD Is All for Show

A billion-dollar settlement between two chip-makers doesn't really mean that much to commentators

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Microchip maker Intel wrote its success story in the 1990s thanks to the "Intel Inside" campaign and "Pentium Processor" brand, but it's faced stiffer headwinds this decade, with hungry competitors and a swarm of anti-trust suits. But on Thursday, Intel got a boon when the company finally settled its longest running, multinational, multi-lawsuit legal battle with primary competitor AMD. Intel will pay AMD $1.25 billion within a month, avoiding the greater cost of taking the matter to trial.

Unfortunately for Intel, the company remains a juicy target for government trust-busters. They continue to eye Intel's 80% share in the global microchips market, and strong-arm business tactics. For these and other reasons, many analysts think the deal is not as landmark the companies claim.

  • Light Blow At TechCrunch, Erick Schonfield says the deal is landmark in the sense that it is "as close to an admission of guilt we'll ever hear from Intel." But he wants readers to understand that $1.25 billion settlement isn't a harsh punishment for Intel, as the company made $104 million a day last year alone: "At that rate, Intel brings in $1.25 billion every 12 days. It can absorb the settlement pretty easily," he notes.
  • Straw Man  GigaOm's Stacey Higginbotham's short post has substantive arguments for why Intel comes out on top. She acknowledges that anti-trust investigations over Intel's pricing will continue, but notes that AMD and Intel have already agreed to cross-license their technology for the next five years, allowing them to tap into one another's advances without legal trouble. As to why Intel wants to keep AMD around, she offers: "Intel can't really afford to let AMD die because it then becomes a monopoly, and governments love to interfere with monopolies. So in a sense, Intel is propping AMD up only to knock it down again in the competitive market."
  • Cuts Losses  In Ars Technica, John Trimmer thinks he understands why the companies agreed to the settlement: it prevents bigger losses in court. For Intel, this amounts to de-facto approval of its business methods: "The business practices that Intel has agreed to avoid are undoubtedly the same ones that have been getting it in antitrust hot water lately, so they've probably been discontinued already," he contends, "The formal agreement may help Intel argue that its misbehaving days are in the past, which can help with both settling existing cases and avoiding future ones" As far as AMD is concerned, he says that the substantially smaller chip-maker was racking up enormous legal bills and needed Intel's cash settlement to ease anxious investors still reeling from the company's buyout of third-tier competitor ATI.
  • Cuomo's Crusade  Writing for Daily Finance, Sam Gustin reminds readers that Intel hasn't agreed to change any of its business practices. On the contrary, company spokespeople repeatedly reiterated that the terms of the agreement do not affect Intel's pricing policies, which are still disputed by many in the industry. This fact is well known to New York Attorney General and likely gubernatorial candidate Andrew Cuomo, who just last week filed a lawsuit against the company. As Gustin notes, Cuomo's political legitimacy is predicated on his image as no-nonsense trust-buster: "Intel may have buried the hatchet with AMD, but Cuomo -- eyeing the governor's mansion -- appears to remain on the warpath."
  • Business as Usual? ZDNet's Larry Dignan is also hesitant to believe Intel is suddenly willing to tolerate increased competition to play fair: "The message is that there will be a new era of peace between Intel and AMD. For those of us following the industry for years, color me a touch skeptical on that one." He does credit the deal with resolving many of the complaints filed against Intel by AMD and European regulators, as it prohibits the company from discounting business customers that abstain from AMD dealings. But, in the end, he says its simply still to early to say what impact the "historic peace-treaty" will have on the industry in the long run.
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