Intel takes out $1.25bn insurance policy
'We did nothing wrong and we won't do it again'
Intel's take on today's settlement of its multiple legal entanglements with rival AMD is simple: we didn't do anything wrong, we're not going to change, and we think $1.25bn is a reasonable amount to spend to avoid trial - and, possibly, to guard against even more-serious legal challenges.
Or, as Intel executive vice president and chief operating officer Andy Bryant told reporters during a Thursday-morning conference call: "The risk/reward relationship said that this was better than taking [our] chances in front of a jury."
Intel chief executive Paul Otellini agreed with Bryant's assessment. In his prepared statement he noted: "The vast majority of antitrust cases are settled out of court, not because the company being sued believes it acted wrongly, but because antitrust lawsuits are massively complex, and because under US law, damages triple. These cases can be extremely expensive, and the risk is very high."
And the AMD legal imbroglio has certainly been, in Otellini's assessment, "massive." He noted that up to today the suit has involved 200 million pages of documents, 2,200 hours of depositions, and what he referred to as "thousands of pages" of expert reports filed with the court.
But despite the fact that Otellini insists: "We have competed fairly and legally," he argues that a $1.25bn payout is better than going to trial.
"Antitrust cases are incredibly complex," he told a reporter. "And it's a jury trial, which has its own vagaries. And the damages out of a jury trial in antitrust are trebled. And so while it pains me to write a check at any time, in this case I think it made a practical settlement, and it was a good compromise between the two companies and in may ways it was a small multiple of the potential damages that could be awarded in a jury trial."
Not that Intel did anything wrong, mind you. As Otellini explains it: "For some number of years now, AMD has been arguing that Intel's behavior in the marketplace violated a number of laws and regulations around the world. Intel, on the other side, has argued that we have not - and we continue to believe that we have not - violated any laws in these areas, or regulations."
But whether or not Intel might be found to have broken a law or skirted a regulation, Otellini believes: "It makes a lot of sense, I think, for us to stipulate that we won't do things that we both agree are wrong - and we did so in this agreement."
In other words, from Intel's point of view, the company is agreeing not to do something it hasn't done. "We won't do those things, we haven't done those things, and therefore there's no difference carrying forward," as Otellini put it.
When Bryant was asked what changes the agreement will bring to Intel's business practices, he quickly responded, "No changes at all." But just as quickly he softened that assertion by saying: "I don't want to say that there's absolutely no change in what we're doing - we have met with the EU, we have changed some business practices because of that," and, in the understatement of the day, he added, "there are issues around pricing that we think that the regulators may want to talk with us about."
Then, in a marvelous logical pirouette, Bryant insisted: "The things that AMD were concerned about in the contract are things that we don't do and we readily agree to not do because we don't."
Putting aside this "we'll stop doing what we're not doing" line of reasoning, Bryant also skirted the nuts-and-bolts issue of how the agreement might affect PC pricing. "There are no changes to pricing practices as a result of this contract," he said.
Which is more than reasonable, seeing as how Bryant readily admitted that: "It's against US law for the two of us to come to any - or even have discussions about - how to price products."
But he did leave the door ajar a bit when discussing how government input might affect pricing, noting: "If regulators want to talk to us about pricing, we will certainly engage with the regulators about what they believe is and is not appropriate pricing practices."
However the pricing questions play out, one thing is for certain: Intel will be careful not to price AMD out of the market. Without a healthy competitor, Intel could open itself up to charges of monopolistic practices, and possibly face a court-ordered break-up of its current monolithic research, design, manufacturing, sales, and support self into its constituent parts.
Intel is smarter than that. It knows that the $1.25bn it agreed to pay today for insurance against the possibility of facing a jury out for corporate blood is not only a fair bet against that eventuality, but also an investment in the health of AMD, a company whose continued existence will keep even bigger legal problems at bay. ®
I agree with you that AMD64 is a critical bargaining chip for AMD, however remember that the "traditional" cross-licensing agreement was struck back when AMD owned it's own fabs, and specifically prohibited AMD from fabbing x86-based chips with other companies.
5 years from now AMD will be more or less completely disentangled from Global Foundries. Whereas AMD is a competitor to Intel as a semiconductor design outfit, Global Foundries is a competitor to Intel's semiconductor fabrication side.
As strange as it may sound, because AMD is fabless, and because each of those companies own critical pieces of IP related to x86/x64 tech, you may well see an agreement five years hence whereby AMD CPUs are only allowed to be fabbed at Intel-owned plants. This is especially likely if AMD were limited in some way by the agreement to be one process generation behind Intel. (And why not? AMD has been for ages, and it’s worked so far.) It would allow Intel to stretch the life of their fab gear, keeping a given fab on a particular process for potentially an extra 18 months before having to invest in a process shrink.
As long as Intel were to make the chips they want, and not charging them through the nose, AMD shouldn’t really care who make thier chips. Intel would win by keeping AMD a process step behind, ensuring that AMD is still “competition,” but not posing too real a threat. Meanwhile, I would remove a major player from TSMC and Globalfoundries, all the while ensuring their IP doesn’t leak to those companies, which seems for some reason to matter to Intel.
It will certainly be interesting to see what starts happening around the time that agreement is up for renewal. Remember that Intel has proven that they play the long game. Wheels within wheels with these "people".
Smarter than you think
AMD got the money and can now relax its lawyers. The EU are *still* going to persue intel through the courts and although *direct* litigation from AMD has now ceased it is not going to stop the anti-trust cases. Intel will still need to fight in the courts but only on one side now - not both.
AMD is now two arms remember, I assume that the cross licencing will work on both arms giving free reign to whoever to build in global foundaries - the main sticking point for AMD and the reason intel went for AMD big time. So all the far east companies that dont pay intel tax can now build via AMD "for a small cost".
It is pointless holding out for maybe 5billion in 5 years time with no business in the meantime opposed to 1.25b now and assurance that you can carry on and sell from both arms of your business with impunity.
This is good for AMD.
This got me when I read it earlier on the BBC's site; the thing that gets me is why AMD allowed them off the hook - if you've got them by the jugular; why release them from the it for such a silly amount.
The thing is Intel has been doing this for a while and AMD has been hemorrhaging money as a result, they should just have pursued it though anti trust cases in Europe and US.
I'm considering buying an AMD for my next system as it looks like they have finally caught up and I would rather have AMD around as they keep Intel in check otherwise I believe Intel would have a clear monopoly.