Why Intel's $1.25 billion AMD deal may not get Andrew Cuomo off its back

Intel, the world's largest microchip maker, said Thursday it has agreed to pay $1.25 billion to Advanced Micro Devices (AMD), its much smaller archrival, to settle an epic legal dispute with AMD that had its origins in the mid-'80s. Although Intel (INTC) itself admits the settlement doesn't require it to change its practices, the move may well be an olive branch directed at New York Attorney General Andrew Cuomo (pictured), who just last week launched a massive antitrust lawsuit against Intel. The chipmaker also continues to face regulatory scrutiny from Europe to Asia.

In Cuomo's case, the investigation may be as much about bolstering his political credentials as competition in the Empire State. "It's common political wisdom that Andrew Cuomo wants to be the governor of New York," says Steven Greenberg, a pollster at Siena College in Albany, N.Y.

"He ran seven years ago, pulled out a week before the election and is widely believed by political insiders -- and probably among the broader electorate -- to want the job," Greenberg tells DailyFinance, though he notes that Cuomo has publicly said he's focusing on his current job, of course.

Still, Cuomo seems to be trying to bolster his tough-on-Corporate-America credentials at a time when public antipathy to Wall Street is at an all-time high, thanks to the financial meltdown, economic recession and government bailouts. Last week, he accused the giant chipmaker of using "bribery and coercion" as well as "illegal threats and collusion" to hurt rivals in violation of state and federal law. In particular, the lawsuit accuses Intel of using its market power to hurt AMD.

Cuomo has accused Intel of paying IBM (IBM) $130 million to bribe Big Blue to stall adoption of AMD's Opteron chip, as well as threatening to scuttle joint projects with IBM if the computer giant used AMD's chips. Intel could face hundreds of millions in penalties.

Under Scrutiny Around the World

Cuomo's probe is one of many currently underway into Intel's business practices. The company is challenging a $1.5 billion fine from European regulators, and South Korea has also fined it.

EU spokesman Jonathan Todd says the European Commission "takes note" of Intel's settlement with AMD, but that it doesn't change Intel's duty to comply with European antitrust law.

In a perhaps more ominous sign for the chipmaker, however, its settlement with AMD doesn't seem to be changing Cuomo's lawsuit, Reuters reported, citing a source familiar with the matter.

By contrast, the Federal Trade Commission said Thursday it would review its ongoing antitrust probe of Intel, in light of the AMD settlement. "Certainly, we plan to review the settlement between Intel and AMD in their private litigation," FTC Chairman Jon Leibowitz told Dow Jones. "The FTC has an ongoing independent investigation of Intel's practices so we cannot comment further at this time."

No Basic Changes

If the AMD settlement is indeed a gambit by Intel to get the Empire State's top cop off its back, it could easily fall short. That's especially so given the company's admission that the deal doesn't require it to change certain practices now under scrutiny.

"There are no changes to pricing policies as a result of this contract," Intel officials repeatedly told a conference call with analysts. The terms of the agreement calls for Intel and AMD to forge a new five-year cross-licensing agreement over patent rights. The companies will forego any claims stemming from previous disputes. And they agreed to "abide by a set of business practice provisions."

Intel officials denied that the move was a response to Cuomo's probe, saying the two companies began talks in the spring. Still, officials from both companies seem to argue that the settlement undercuts various regulatory investigations. "Now that the issues between the private parties are settled, I think that should provide some degree of comfort for the regulators," Intel CEO Paul Otellini told analysts.

Otellini was pressed by reporters about why his company is paying $1.25 billion if it didn't do anything wrong and isn't making any material changes in its business practices. "While it pains me to write a check at any time, in this case I think it was a practical settlement, and in many ways it was a small multiple compared to the potential damages in a jury trial," Otellini said.

Looking for a "Healthy Normal Relationship"

Ottelini also challenged Cuomo's case. "Many of the documents are taken broadly out of context," Otellini said. "When the full nature ofthe emails is exposed, I think you will see another way to interpret the emails. We're anxious to talk about our side of the story." He added: "We continue to believe we have not violated any laws."

"With this agreement, we are trying to reset the relationship with Intel," AMD CEO Dirk Meyer said on a conference call Thursday morning. "We are withdrawing all complaints against them. We're going to put this behind us." Meyer said the relationship between Intel and AMD had been "really emotional, intense and acrmonious for all too many years." AMD shares leaped up around 20% in midday trading on Thursday, to around $6.40. Intel's were basically flat, perhaps indicating investors don't see the end of Intel's legal trouble.

In what must have be music to Intel's years, Johnson said AMD wants "healthy normal relationship between competitors when they have a disagreement. We want to resolve our differences before they spill into the court or the public affairs domain."

Intel may have buried the hatchet with AMD, but Cuomo -- eyeing the governor's mansion -- appears to remain on the warpath.

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