Intel yesterday paid Advanced Micro Devices $1.25 billion ($755 million) in an attempt to end years of bitter conflict over sales tactics.

The world’s biggest chipmaker made the settlement with its fiercest rival to squash a costly antitrust case due to come to a US federal court next year. Advanced Micro Devices (AMD) said that it would end its 12-year global campaign against Intel and withdraw all litigation and regulatory complaints worldwide.

Paul Otellini, Intel’s chief executive, said: “While it pains me to write a cheque at any time, I think we have made a practical settlement and a good compromise between the two companies.”

Intel continued to insist that its controversial tactics, aimed at persuading computer makers such as Dell to use only Intel chips, were fair and legal. It said its policy of rebates and volume discounts would continue unchanged, but that the company had agreed to a set of “business practice provisions”.

Under the deal, disputes over sales tactics will be resolved in regular talks between AMD and Intel executives rather than through the courts.

Those tactics have led to antitrust cases worldwide. The biggest case is in Europe, where regulators have fined Intel a record $1.45 billion for what they described as Intel’s illegal moves to bully PC makers into using Intel chips rather than AMD’s. Intel will continue its appeal against the fine.

A spokesman for the European Union said yesterday that the European Commission “takes note” of Intel’s settlement with AMD, but that it did not change Intel’s duty to comply with European antitrust law.

Intel makes about 80 per cent of all the microprocessors that serve as the brains in PCs and servers. AMD controls most of the rest of the microprocessor market.

Under the terms of the agreement, AMD and Intel will enter a five-year cross-licensing deal, allowing AMD, which is struggling to deal with $3.7 billion in debt, to proceed with restructuring its manufacturing arm.

Investors greeted the news warmly, sending AMD shares up almost 22 per cent to $6.48. Intel’s shares were almost unchanged, off 16 cents at $19.68.

Dirk Meyer, AMD’s chief executive, said the deal marked the start of a new era for the company. “It is an important milestone for us, for our customers, our partners and, most important, for consumers and businesses worldwide. We are optimistic that it will usher a new era for our industry.”

Intel will continue to fight an $18.6 million fine in Korea as well as a federal lawsuit filed last week by Andrew Cuomo, New York attorney-general, who accused Intel of abusing its market dominance to “rule with an iron fist”, which the US Federal Trade Commission is also investigating.

Costly trial

Intel and AMD have spent tens of millions of dollars on the lawsuit filed by AMD in 2005. The case has involved 200 million pages of documents and 2,200 hours of depositions.

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