Intel is to pay smaller rival Advanced Micro Devices $1.25 billion to settle claims that the computer-chip giant violated antitrust and patent laws, the companies said.
The move comes just days after Intel was sued by New York state for antitrust violations and follows a $1.5-billion fine slapped on Intel by the European Commission for antitrust offences. Regulators in Europe and the US said the civil settlement would not derail their legal actions against the Silicon Valley pioneer.
In addition to the financial settlement with AMD, Intel agreed to abide by a new set of business practises and to a cross-licensing agreement for five years.
"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," the companies said in a statement Thursday.
Intel chips power more than 80 per cent of PCs, and the company has had a contentious relationship with AMD since the 1980s. AMD filed suit in 2005, alleging that the company abused its dominant market position, in part by offering customers massive discounts and rebates if they refrained from buying AMD products.
AMD shares jumped by more than 20 per cent following the announcement of Thursday's settlement, and company chief executive Dirk Meyer said the settlement "changes the game", by allowing AMD to compete on a level playing field on the strength of its products and customer relationships.
He warned against expecting overnight changes.
"I think it's going to take a period of time for the market to operate in a more open fashion," he said in a conference call to discuss the deal.
Intel said the settlement made sense to avoid the risk of a trial.
"While it pains me to write a check at any time, in this case I think it was a practical settlement," Intel chief executive Paul Otellini said on a call with analysts. "And it was a good compromise between the two companies. And in many ways it was a small multiple of the potential damages that could be awarded in a jury trial."
Government regulators pledged to keep up their antitrust cases against Intel, despite the settlement.
The European Union said that Intel "has an ongoing obligation to comply with the (European) Commission's May 2009 decision and with EU antitrust law", and that the body "continues to vigorously monitor Intel's compliance with its obligations" under the ruling.
US Federal Trade Commission Chairman Jon Leibowitz issued a statement saying his office plans to "review the settlement between Intel and AMD in their private litigation", while noting that the agency "has an ongoing independent investigation of Intel's practices".