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Analysis: Intel-AMD Truce is Fraught with Complications, Chip Price War Looms
Image courtesy of Aurorawdc.com
Steve Johnson, San Jose Mercury News
November 19, 2009
Nov. 19 – Can Intel and Advanced Micro Devices, Silicon Valley’s version of the long-squabbling Hatfields and McCoys, really get along?
The two chipmakers certainly sounded sincere when they ended their antitrust legal wrangling on Nov. 12. Calling their relationship for more than 20 years “challenging and often acrimonious,” their settlement vowed to alter that by “wiping the slate clean” and resolving future gripes “in a constructive manner.”
Although no one believes the two tough competitors will become fast friends, some analysts say the legal costs of their incessant bickering forced a truce and that they can coexist as peaceably as those once-rancorous rivals, Microsoft and Apple. Other analysts are skeptical, but the companies insist they are serious about getting along.
“Everyone should be very skeptical” about peace being maintained, said Tom McCoy, AMD’s executive vice president for legal, corporate and public affairs. “We’ve had what I call tribal warfare for decades. But you know, at some point people have to put a stake in the ground and say, ’We’re going to at least try to make a pivot.’ Time will tell.”
Because the settlement details steps the companies must take to resolve disputes before going to court, including holding quarterly meetings, “this will be very helpful going forward,” added Intel spokesman Chuck Mulloy. “It’s less expensive to get along.”
The companies’ legal brawling dates to 1987, when Sunnyvale-based AMD
and Intel of Santa Clara locked horns over AMD’s right to use certain designs for making microprocessors, the brains of personal computers and other devices. AMD won a $10 million judgment back then. But the animosity continued. Claiming Intel was now hindering its ability to sell chips to computer makers, AMD in 2005 filed a lawsuit that was among the matters settled Nov. 12.
U.S., Asian and European authorities also have launched investigations into Intel’s practices, resulting in the European Commission’s recent $1.45 billion fine, which Intel has appealed. It’s unclear what impact the settlement might have on those regulatory inquiries, especially one by the Federal Trade Commission and another by New York Attorney General Andrew Cuomo, who filed an antitrust lawsuit against Intel on Nov. 4. But some experts expect Intel, which denies wrongdoing, will try to use the deal to persuade those agencies to back off. Intel spokesman Mulloy said only that his company would meet with FTC officials this week to discuss the settlement.
The genesis of the Nov. 12 deal was another legal spat involving Intel’s claim that AMD had violated a technology sharing agreement in spinning off its chipmaking operations in March. When that disagreement wound up in mediated talks in Maui in April, the two firms’ lawyers decided to also try to resolve AMD’s suit over its sales to PC makers. “The working relationship of the AMD and Intel negotiating teams was very professional, very constructive,” McCoy said. “Relationships were in fact forged.” Yet working out the thorny issues was tough, and McCoy said he wasn’t sure a deal had been struck until the day it was signed by the companies’ CEOs.
