Now that AMD and Intel have settled, the fight really begins

AMD logoLast Friday, AMD and Intel reached a historic settlement that leaves AMD with a fighting chance. Here's a look at the settlement, and at what AMD faces when its employees clock in on Monday.

This past Friday, Intel and AMD announced a settlement in their acrimonious antitrust dispute, with AMD clearly coming out on top to the tune of $1.25 billion in cash and a host of concessions. Both companies hosted conference calls that Friday morning, and later in the day the released excerpts from the agreement that makes up the non-cash portion of the deal, in which Intel agrees to a number of conditions that should make life much easier for AMD and its fab spinoff, GlobalFoundries.

A hard reset

"With this agreement, we are trying to reset the relationship between AMD and Intel," said an AMD exec on the conference call. And a hard reset it is, given what Intel has conceded.

The first thing that the two parties have agreed on is that Intel won't engage in the sorts of anticompetitive practices that were outlined in AMD's suit and in the NYC Attorney General's suit of the week before. The lawsuits and Friday's settlement go into specifics of the different types of proscribed behavior, but they all boil down to accusations of Intel strong-arming OEMs and ODMs into either not using AMD CPUs in their systems, or into severely handicapping their AMD-based products by launching them late or placing hard limits on the number of them that are shipped.

Intel allegedly had a variety of mechanisms for carrying out such strong-arming, some of which we've described previously. All of them involved either the granting or withholding of monetary inducements—i.e., giving cash kickbacks (dressed as rebates and other incentives) to OEMs for playing along, or withholding money or technical help to OEMs who flirt with AMD a little too much.

The key point, according to AMD, is that "Intel will not be able to condition doing business with them on not doing business with us."

To ensure that Intel toes the line and to keep these issues from spilling back over into the courts again, Intel and AMD have set up arbitration and audit mechanisms for checking compliance and resolving future disputes.

On the Friday conference call, Intel executives claimed that they had never done any of this alleged bad behavior to begin with, so it was no problem for them to agree not to do it going forward.

"We continue to believe that we've not violated any laws or regulations in these areas," said an Intel spokesperson. "However, it makes a lot of sense for us to stipulate that we won't do things that we both agree are wrong... from our side, we won't do those things, we haven't done those things, so there's no difference carrying forward."

And if it wasn't clear that Intel plans to brazen it out and insist that it's agreeing to refrain from activities that it never engaged in anyway, different executives repeated this line with varying levels of intensity throughout the call. In the Q&A, a reporter from the Financial Times asked, "So this involves no changes at all in Intel's behavior, full stop?" One of the Intel execs replied, "No changes at all."

Intel is double-plus insistent that the only new thing that this agreement brings to the table are the compliance and arbitration mechanisms, which are, of course, in place to ensure that Intel doesn't do what it hasn't been doing, and thus they don't really mean anything.

But no one should expect Intel to take any other position, because the chipmaker still has antitrust proceedings against it in progress, so any admission of guilt on its part would immediately bring the full force of the law down on it from the quarters where it's still threatened.

Benchmarks and fabs

There are other components to the agreement besides the alleged inducements, and these are also important to AMD. One of the clauses stipulates that Intel won't attempt to rig compilers and benchmarks—either Intel's own or those of a third party—to "artificially impair" AMD's chips.

Also critical for AMD are the licensing portions of the agreement. AMD's licensing agreement with Intel had previously forced GlobalFoundries to remain a "subsidiary" of AMD, or else the fab would lose its license to fabricate x86-compatible processors. Under the settlement, however, AMD can now fully and finally spin off GlobalFoundries as a completely separate entity, without having to worry that the new fab will lose AMD as a customer.

It's a little late, but here's hoping

The AMD that scored Friday's victory is, in many ways, a shadow of the AMD of earlier years. A combination of major execution missteps and the economic downturn have contrived to greatly weaken the AMD side of the merged AMD/ATI entity. AMD has cut staff, gutted its R&D budget, thrown its promising Imageon line overboard, and generally behaved like a starving character in a Stephen King novel (eating one's own limbs and such) in its recent effort to attain the barest sliver of profitability—$35 million in the green this past quarter, AMD's first profitable quarter in years.

In short, over the course of the past two years, AMD has essentially retreated back into its core businesses—x86 server and desktop CPUs, and GPUs—and is now attempting to rebuild from there. Before Friday's settlement, their odds were passing slim. But the company that opens its doors Monday has at least a fighting chance, if Bulldozer and Bobcat can deliver the goods in 2011.

Source: ars technica

Tags: AMD, Intel

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