Intel's FTC Settlement is Full of Surprises

As expected, the Federal Trade Commission has closed its proceedings against Intel (Nasdaq: INTC  ) after reaching a settlement. There are no fines involved, and the whole affair comes across as a slap on the wrist in many ways. But in others, the agreement goes to some surprising lengths.

Everyone knew that Intel would promise not to behave badly toward chip rival Advanced Micro Devices (NYSE: AMD  ) , lest the FTC should impose monetary damages for a breach of agreement. In short, system builders including Dell (Nasdaq: DELL  ) and Hewlett-Packard (NYSE: HPQ  ) shall not face any pricing penalties from Intel for building too many AMD-based systems, nor should they miss out on promotions on that basis.

AMD got some unexpected concessions out of this deal, though:

  • Intel must modify its license agreements to make it easier for AMD to enter a merger or joint-venture agreement down the line. I don't know that IBM (NYSE: IBM  ) or Hewlett-Packard (NYSE: HPQ  ) are itching to add desktop, laptop, or additional server processors to their already bulging portfolios, but now the option is clearly open. Let the buyout rumors begin, I suppose.
  • The industry-standard PCI bus must be supported by Intel's processors and chipsets for another six years. This matters because AMD's graphics-chip business would suffer if Intel decided to redesign the standard graphics card interface or remove it altogether, in the interest of protecting its own integrated graphics solutions.
  • That provision benefits graphics specialist NVIDIA (Nasdaq: NVDA  ) even more than AMD. NVIDIA also gets the full benefit of all the protections that are headed AMD's way.

Intel, AMD, and the FTC have all proclaimed their satisfaction with this deal, which puts an exclamation point to many outstanding issues. NVIDIA will continue to battle Intel in court, however -- the company would like to have its chipset business back, or else remove Intel's right to use certain NVIDIA-made patents. Don't look a gift horse in the mouth, guys!

It's good to see a return to sanity in the processor industry. If Intel did -- and the company won't admit to any of this -- use monopolistic tactics to keep the competition down over the last decade, we should now be back to fair competition on an even playing field.

And even Intel agrees that this settlement "will allow us to continue to compete and to provide our customers the best possible products at the best prices." Milton Friedman and Adam Smith would be so proud.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Intel is a Motley Fool Inside Value pick. NVIDIA is a Motley Fool Stock Advisor recommendation. The Fool owns shares of and has written puts on Intel. Motley Fool Options has recommended buying calls on Intel. Try any of our Foolish newsletter services free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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