SAN FRANCISCO — Intel Corp. will pay $1.25 billion to make peace with Advanced Micro Devices Inc., as the companies whose microprocessors run nearly all personal computers finally found common ground in a bitter and colorful dispute that has caused international antitrust trouble for Intel.
The settlement announced Thursday sent AMD stock soaring and ended a 4-year-old lawsuit in which AMD accused Intel of abusing its dominance of the chip market to keep a lid on AMD's market share. Intel has about 80 percent of the microprocessor market and AMD has about 20 percent.
According to the lawsuit, Intel penalized computermakers for using AMD's chips or offered them financial incentives — payments that a Toshiba Corp. manager likened to "cocaine." Executives from Gateway complained that Intel's threats of retaliation for working with AMD beat them "into guacamole."
Intel has defended its practices, saying it simply offered rebates to big customers, which allowed them to pass lower PC prices to consumers.
But despite Intel's stance that it did nothing wrong, the AMD lawsuit, which was scheduled to go to trial in Delaware in March, was one of Intel's biggest headaches. Squashing the case removes the possibility that Intel would be on the hook for even more if it lost at trial, Intel CEO Paul Otellini said.
"While it pains me to write a check at any time, in this case I think it was a practical settlement," Otellini said on a call with analysts. Intel shares fell 16 cents, 0.8 percent, to close Thursday at $19.68.
The settlement will help AMD whittle its $3.7 billion in debt. Its shares jumped $1.16, or 22 percent, to close at $6.48. But even before Thursday, AMD's complaints had their desired effect: Antitrust regulators in several countries have filed cases against Intel based on AMD's accusations — cases that won't disappear because of the settlement.
The U.S. Federal Trade Commission is investigating Intel, and regulators in Europe have fined Intel a record $1.45 billion.
Intel has paid the fine but is appealing it. EU spokesman Jonathan Todd said Thursday that the European Commission "takes note" of Intel's settlement with AMD but that it does not change Intel's duty to comply with European antitrust law.
Last week, New York Attorney General Andrew Cuomo filed a federal lawsuit accusing Intel of using "illegal threats and collusion" to dominate the chip market "with an iron fist." In 2005, Japan's Fair Trade Commission found that Intel violated antitrust rules there. Intel accepted that ruling without admitting wrongdoing.
Intel can easily absorb the AMD settlement.
The company made enough money in just the first nine months of this year to pay the European fine and the AMD settlement and still have nearly $1 billion left over.
Since AMD sued Intel in 2005, Intel's profit has totaled $28 billion.
In that same time, AMD has lost more than $7 billion.
AMD has long blamed many of its problems on Intel's behavior.
It's not clear how much Intel's tactics will change under Thursday's pact. Intel agreed to "abide by a set of business practice provisions," and AMD said the changes resolve its concerns "to a great extent." But Intel says that as part of the deal, it will refrain from giving financial incentives to companies that limit their use of AMD chips — which the company had always said it wasn't doing anyway.
Under the terms of the new agreement, AMD and Intel entered into a new, five-year cross-licensing deal. Intel dropped claims that AMD breached the earlier agreement. And AMD is dropping all litigation against Intel.
"It is a pivot from war to peace," said Tom McCoy, AMD's top lawyer.