World and Nation

Settlement Between AMD and Intel Will Not End Their Woes

The giant chip maker Intel, facing antitrust challenges around the world, announced Thursday that it would pay $1.25 billion to settle its long-running disputes with its smaller rival, Advanced Micro Devices.

The settlement, covering both antitrust and patent claims, ends the computer industry’s most bitter legal war.

But the truce may not be enough to turn around the fortunes of AMD, which has struggled to come up with chips that give it any significant technological or performance edge over Intel, which supplies about 80 percent of the microprocessors that sit at the heart of personal computers.

At least in the short term, the settlement also does not end Intel’s antitrust problems. Governments in Europe, the United States and Asia have accused the company of systematically using large rebates and co-marketing arrangements to persuade computer makers to use its chips instead of those made by AMD.

The regulators contend that Intel’s tactics have not only hurt competitors, but also effectively forced customers to pay higher prices. On Thursday, both the European Union and the New York attorney general’s office said they would continue to press their cases against the company.

Still, legal experts say the agreement resolves some of the antitrust issues surrounding Intel and could dissuade other government agencies from bringing cases against the company.

The Federal Trade Commission, for example, has been investigating the big chip maker for the past year but has taken no action. “This private settlement has probably taken a lot of wind out of the sails” of the FTC’s case, said Herbert Hovenkamp, an antitrust expert and law professor at the University of Iowa.

The agreement between the two Silicon Valley companies mainly covers AMD’s claims that Intel rewarded computer makers that used only Intel chips and punished those who bought from AMD. Intel contends that it never engaged in tactics to exclude AMD from the marketplace but agreed in the settlement not to do so in the future.

The pact provides for quarterly meetings between the companies and programs for mediating disputes over exclusionary practices. The firms will also cross-license each other’s patents for five years.

But it’s unclear whether the deal will truly change the competitive dynamics between the companies. AMD, founded 40 years ago, rose to prominence as a maker of Intel-compatible chips, but it has had difficulty producing notably better products than Intel and often ended up in devastating price wars.

Dirk Meyer, the chief executive of AMD, said the settlement opened the door to a “transformation in the way our industry operates,” though he admitted change would not be immediate.

Thomas M. McCoy, AMD’s executive vice president for legal affairs, said his company’s long-time goal had only been fair competition. “We’re not looking for any help, just do not hurt us,” he said.

Intel executives said that settling the case was a pragmatic business decision, a careful weighing of risks.

The jury trial in AMD’s antitrust case against Intel was scheduled to begin in Delaware next spring. If things had gone against Intel, the chip maker could have been hit with triple damages, executives said.