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Intel to Pay AMD $1.25 Billion; the Antitrust Cost Keeps Rising

Intel (INTC) will pay AMD $1.25 billion to settle all the antitrust and patent infringement suits that have been flying about. But this isn't going to come close to letting Intel put antitrust issues behind, and some of the biggest prices the company will pay are yet to come.
In a joint statement the two companies commented, "While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development."Under terms of the agreement, AMD and Intel obtain patent rights from a new 5-year cross license agreement, Intel and AMD will give up any claims of breach from the previous license agreement, and Intel will pay AMD $1.25 billion. Intel has also agreed to abide by a set of business practice provisions. As a result, AMD will drop all pending litigation including the case in U.S. District Court in Delaware and two cases pending in Japan. AMD will also withdraw all of its regulatory complaints worldwide. The agreement will be made public in filings with the Securities and Exchange Commission.
Sounds all well and good, but this is only going to be a drop in the bucket. Already Intel is trying to argue its way out of the roughly $1.44 billion fine that EU regulators have levied. And there's the antitrust suit brought by the State of New York, which at first blush seems to have some pretty strong evidence that the chip company paid its customers handsomely to curtail AMD's market effectiveness.

But forget all that, because now the real costs get racked up. The real news was that AMD CEO Dirk Meyer was razzing the company, saying that everything going on proves that AMD hadn't done better because of antitrust shenanigans. Combine that with Dell's admission that it needed extra money from Intel because the latter's chips weren't as compelling as the former's and you have a Intel marketing hell.

And now the last stage: PC vendors get completely wary of being sucked into the investigatory void and start shifting a significant portion of their purchasing to AMD. Forget fines and forget legal fees. That's going to be the real price tag for years of allegedly using money and influence to keep a competitor constrained, and it will be a number with a whole lot of zeros.

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