Analysis: Intel, AMD end a bitter business and technical battle

Computerworld - The settlement reached today by Advanced Micro Devices Inc. (AMD) and Intel may not simply resolve some of the business issues the two companies have had; it might even encourage them to cooperate on some shared technical issues, say analysts. In fact, Intel's $1.25 billion payment to AMD may, in the end, turn out to be only a small part of what the accord delivers.

Until now, the relations between AMD and Intel have often dripped with hostility as the two chip makers fought on both a business and technical level, at least according to AMD's allegations. AMD had charged that Intel designed its compiler "purposely to degrade" an application's performance when it ran on an AMD platform. Intel denied that charge.

During a conference call earlier today, AMD chief legal counsel Tom McCoy said the settlement covers certain technical practices, and he cited the compilers in particular. McCoy noted that the agreement will keep Intel from artificially impairing its products.

In seeking these technical agreements, AMD wasn't looking for Intel's help, said McCoy. "Intel has no obligation to help us; they have an obligation not to do things that are simply designed to hurt us," he said.

But AMD and Intel may find it advantageous to help each other, said Martin Reynolds, an analyst at Gartner Inc. He believes that the settlement will lead to improved cooperation between Intel and AMD on x86 platform issues and faster advancement of virtualization improvements on this shared architecture.

Virtualization is still relatively inefficient when it comes to I/O, said Reynolds. With that in mind, "a common standard that makes virtualization more efficient at the I/O level would move it forward," Reynolds said.

The two companies have an incentive to make the x86 platform as attractive as possible, particularly as vendors try to convince customers to upgrade as the economy recovers from its deep dive.

"Both companies had incentives to settle," said Shane Rau, an analyst at IDC. The PC and server markets are starting to recover "and getting this lawsuit out of the way now removes that distraction."

AMD gains the most, say analysts, because it can focus on its product line rather than trying to navigate whatever obstacle course it believes Intel set before it.

"It sounds like AMD will now be able to get its products to its customers and they will be free to introduce those products gated only the by ability of AMD and its partners to execute," said Nathan Brookwood, an analyst at Insight64 in Saratoga, Calif.

Intel still faces a new antitrust case filed by New York Attorney General Andrew Cuomo and a probe by the U.S. Federal Trade Commission (FTC). Neither is expected to be affected by the Intel-AMD deal.

Michael Salinger, a former director of the FTC's Bureau of Economics and now a finance professor of Boston University School of Management, said the AMD settlement is unlikely to have any bearing on the FTC investigation.

"Ultimately, what the antitrust authorities care about is consumers, so peace between competitors doesn't necessarily resolve the antitrust issues," said Salinger.

Read more about Processors in Computerworld's Processors Topic Center.