Intel rattles saber over AMD's manufacturing spin-off plan

IDG News Service - Intel Corp. has asked for a meeting with Advanced Micro Devices Inc. to discuss how the latter's plan to spin off its manufacturing operations may affect technology cross-licensing agreements between the two chip rivals.

AMD disclosed the meeting request as part of a broader regulatory filing that it submitted to the U.S. Securities and Exchange Commission on Thursday. In the filing, AMD said it received a letter from Intel on Tuesday saying that Intel officials want to talk about issues such as whether the planned spin-off would qualify as a licensed subsidiary under the cross-licensing deals.

While Intel and AMD compete fiercely in the chip market, they also have signed licensing agreements related to x86 processors that allow both companies to use certain technologies without fear of being sued by one another.

But now AMD is splitting itself into two companies through the spin-off of its debt-laden manufacturing plants. AMD itself will continue to design and sell its chips, while manufacturing will be handled by a new entity to be called The Foundry Co. That company will be majority-controlled by an investment firm owned by the government of Abu Dhabi in the United Arab Emirates, while AMD will hold a 34% stake — an ownership position that was reduced from the original plan of 44% because of a drop-off in the value of AMD's stock.

AMD described Intel's letter and meeting request as "another attempt by our competitor to cause uncertainty" as the scheduled closing of the spin-off deal draws nearer. The formation of The Foundry Co. is expected to be completed next month if AMD shareholders approve the spin-off at a Feb. 16 meeting.

Intel's meeting request is "in no way a condition" to the closing of the Foundry deal, AMD Chief Financial Officer Bob Rivet said yesterday during a conference call on the company's fourth-quarter financial results. The spin-off will be "consistent with the terms of all our IP licensing agreements," Rivet added, referring to intellectual property.

Intel spokesman Chuck Mulloy said that the chip market leader isn't trying to derail the formation of The Foundry Co. "Our concern has nothing to do with whether or not the company gets formed," Mulloy said. "It has to do with what are our rights, and what are our rights after the company is formed. The letter was sent to address our intellectual property concerns."

Nathan Brookwood, an analyst at research firm Insight64 in Saratoga, Calif., said that the meeting request probably isn't a big reason for concern on the part of AMD.

"I think Intel has been pretty clear in saying they're not trying to scotch this deal," Brookwood said. "And AMD is saying, 'We don't care because Intel doesn't have a leg to stand on anyway.'"

The cross-license agreements between the companies come up for renewal in a couple of years, he noted, adding that Intel may simply be hoping to leverage the concerns it has raised to negotiate better terms when the time comes to renew the licensing deals.