Tech Check

Published: Thursday, 12 Nov 2009 | 10:54 AM ET

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It's a pretty big check for a company that's done nothing wrong. At least that's the early read from the big news this morning that Intel and rival Advanced Micro Devices set aside years of bitter litigation, settling their anti-trust suits, and resolving all outstanding legal issues.

Oh, and Intel will also write AMD a check for $1.25 billion.

On its face, the check makes it seem as though Intel's

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[INTC  Loading...      ()   ] business practices and the wrath and fines and settlements they incur have become a simple cost of doing business.

That's ugly.

And the ripples might make it uglier still. Not only does the cash embolden AMD

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[AMD  Loading...      ()   ], strengthen the company, give it resources to compete even more effectively, raise AMD's market cap by a whopping $900 million, or almost 30 percent, it could torpedo Intel's appeal of the $1.45 billion fine the European Union levied against the company.

We contacted the EU this morning, and officials had this to say:

1. The Commission takes note that Intel and AMD have settled all their litigation and that Intel is paying AMD compensation of $1.25 billion.

2. Intel has an ongoing obligation to comply with the Commission's May 2009 Decision (read more here ) and with EU antitrust law.

3. The Commission continues to vigorously monitor Intel's compliance with its obligations under the May 2009 Decision.

A source close to New York Attorney General's case tells CNBC that the Intel-AMD settlement will not affect the ongoing case the AG has against Intel.

Meantime, Intel will take the entire charge in its fourth quarter, which will swell expenditures to over $4 billion, from the $2.9 billion expected.

I asked a source at Intel why the company settled. It's no surprise, he told me, that Intel faced treble damages in the Federal case with AMD had it lost, not to mention corresponding costs to continue to fight it, so settling seemed to be the most cost-effective, expedient thing to do.

The good: Intel and AMD settle everything, including the two, ongoing complaints in Japan. And that's huge. The two companies extend by five years their patent cross-licensing agreement. That's big for AMD. Intel also agreed to certain "business practice" provisions, presumably to stop making threats against chip industry customers to steer clear of AMD products, something AMD has complained loudly about.

The bad: Intel takes a hard punch to the public relations gut. It doesn't admit wrongdoing, but sometimes money speaks a whole lot louder than words. This hurts Intel's reputation. Intel doesn't admit wrongdoing, sure, but settling prevents a true verdict to be rendered. And according to this source, settling avoids a tripling of damages, so it's clear that Intel thought it had a pretty good chance of losing, and the settlement cuts its losses.

Shareholders on both sides will like this news from a financial standpoint. Intel eliminates a thick, bad overhang on the company and its shares. AMD gets a major shot in the arm.

I still believe that Intel had a good case on its side, that chip and PC prices have fallen dramatically; innovation in the marketplace has increased dramatically. Consumers have been the winners. But at what cost? If Intel has bullied its way through the market, somehow stifled competition, then it ought to pay. And it needs to eschew the concept of fines and settlements as costs of doing business.

Business is one thing; Intel's good name and standing in the community is quite another.

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