Oregon Public Broadcasting

Intel and its arch rival, Advanced Micro Devices, ended one of the computer industry's  bitter legal feuds Thursday.

The two computer chip makers agreed to a new set of ground rules for everything from chip architecture to business practices.

And as Kristian Foden-Vencil reports, Intel agreed to pay AMD $1.25 billion to settle a long-running antitrust dispute.

For years AMD charged that Intel has blocked computer makers from purchasing its chips -- by undercutting prices and offering rebates.

Such business practices are legal in a market with a lot of competition. But there are only two big chip manufacturers and Intel has an 80 percent market share — leading some to charge it has a virtual monopoly.

The head of AMD, Dirk Meyer, could hardly mask his pleasure at Thursday's agreement. 

Dirk Meyer: "Today marks the beginning of a new era. One that confirms that the game has changed for AMD."

Speaking from AMD's California headquarters, he thanked regulatory agencies around the world for putting legal pressure on Intel. The company is enmeshed in several lawsuits.

Dirk Meyer: "We recognize that it will take time for people to understand how operation conditions in the processor business have changed -- but make no mistake, they have changed."

At Intel's Oregon campus, there was a more sober atmosphere. Bill MacKenzie is the communications manager for corporate affairs.

Bill MacKenzie: "This resolves an issue that has been going on for quite a while between Intel and AMD and allows us both to put our focus instead of on legal maneuvering and the expenses involved, on developing innovative products."

And while $1.25 billion sounds like an enormous sum to hand over to a competitor, Intel has about $9 billion in cash.

MacKenzie says Oregon's 15,000 Intel employees have no reason to worry about their job.

Bill MacKenzie: "This won't have any impact on our current employment or other aspects of Intel's business operations at all. And actually in some respects I'd see it as a positive in that it resolves a dispute and it allows us to go forward and work on what's really important."  

While the settlement does alleviate some of the legal pressure being placed on Intel, the company has other courtroom problems. 

In Europe, Intel was recently fined almost $1.5 billion in an antitrust suit. It has paid the fine but is in the middle of an appeal. 

New York's Attorney General, Andrew Cuomo, filed another anti-trust suit. Here's what he said earlier this month.

Andrew Cuomo: "In Intel's market there were laws of supply and demand, instead it was the law of 'my way or the highway. '"

Intel's spokesman, Bill MacKenzie, says New York's case is without merit and he says the company didn't break any laws.

But the question is: given Thursday's settlement, might New York's Attorney General drop his suit?

Bill MacKenzie: "Well that would be certainly a positive result from this, but that's a decision that the attorney general would have to make."

Calls and an e-mail to the attorney general’s office were not immediately returned.

But on Wall Street, the settlement was generally regarded as good news -- especially for AMD.

Clyde Montevirgin is an equity analyst at Standard and Poor's.

Clyde Montevirgin: "They have now, or they will get, $1.25 billion in cash, which is very helpful for them considering that they were in some financial troubles. So with that money they could either use it for working capital, or they could also pay-off debt and reduce some of their financial risks there."

AMD shares jumped 21 percent on the news.  Intel shares dropped, but by less than one percent.

Clyde Montevirgin: "I think this settlement also helps to keep Intel in line. I'm not trying to imply that they're out of line, but they do have some aggressive marketing tactics and I think that with this agreement AMD will be somewhat of a watchdog in the future in case they feel Intel gets out of line."

Another part of the settlement is an agreement for AMD to use Intel's x86 chip architecture. Experts say that's good news for the computer market. 

They say it's a little like all the appliance companies in the U.S. agreeing to use the same plug -- it makes things easier for the consumer and the manufacturers, and it encourages more trade.

Meanwhile in Oregon, the first chips to come out of Intel's new 32-nanometer factory are expected in the next few months.