UPDATE 5-Intel agrees to end chip war with rivals

By Alex Dobuzinskis and John Poirier

LOS ANGELES/WASHINGTON, Aug 4 (Reuters) - Intel Corp (INTC.O) has agreed to stop using threats and unfair discounts to block its rivals, resolving a costly, high-profile legal battle over accusations it illegally smothered competition for over a decade.

The world's largest chip maker -- which managed to settle the U.S. Federal Trade Commission complaint without paying a cent -- also pledged to grant rivals access to its leading processor technology for six years. [ID:nN04267572]

Shares in graphics chip maker Nvidia Corp (NVDA.O), which along with Intel arch-foe Advanced Micro Devices Inc (AMD.N) first brought the complaint to the top U.S. trade body, jumped 4.25 percent. Nvidia has sued Intel for anti-competitive practices in a still-pending trial.

"Intel has got to be happy that they were able to minimize the damage and get it over with," said Patrick Wang, an analyst with Wedbush Securities.

The settlement had been expected. Shares of Intel closed barely changed at $20.73 on Nasdaq.

Urged on by AMD and Nvidia, the FTC accused Intel in December of using its market dominance to unfairly stifle competition. Intel makes 80 percent of the world's microprocessors.

The deal bars Intel from retaliating against computer makers if they do business with non-Intel suppliers. It also agreed to give makers of complementary products such as graphics chips access to its central processing units for the next six years.

"It's a landmark settlement that really will have a striking effect on improving competition in the market," said David Balto, a former FTC policy director.

Raymond James analyst Hans Mosesmann said Nvidia "can point to" the FTC settlement when it goes to trial against Intel.

"What is interesting is that a governing body in the U.S. has joined other countries (Korea, Japan, and the European Union, for example) in pinning Intel as the bully," he said in a client note.

"The message is that Intel should be more constrained in its dealings with OEMs (original equipment manufacturers), ODMs (original design manufacturers), the channel, and its competitors. We are watching you."

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Intel has been under attack from rivals for years over its aggressive pricing and sales tactics in marketing the chips that essentially make up the "brains" of personal computers.

In 1999, the FTC settled a complaint against Intel, accusing it of cutting off access to its technology for three customers -- Digital Equipment Corp, Intergraph Corp and Compaq Corp. Two of the three companies are now defunct.

It has run afoul of regulators elsewhere. The European Commission has fined Intel 1.06 billion euros ($1.4 billion) for shutting out AMD, a decision Intel is appealing. Regulators in South Korea and Japan have also taken action against Intel.

Intel, which has denied any wrongdoing, said on Wednesday the agreed-upon changes in its business practices would not have a material impact on its financial results.

"The settlement enables us to put an end to the expense and distraction of the FTC litigation." Doug Melamed, an Intel senior vice president, said in a statement.

The company is now barred from offering deals to computer makers in exchange for their promise to buy exclusively from Intel. It is also required to change its intellectual property deals with AMD, Nvidia and chip maker Via.

Officials said they halted a deceptive practice involving "compilers," a software tool to help write code so software can communicate with a computer's microprocessor. FTC Chairman Jon Leibowitz said Intel configured its compiler so software ran more slowly on processors made by AMD and others.

"Intel surreptitiously made it look as though that slow-down was AMD's fault," he said.

AMD stock held steady on Wednesday, ending 1 cent higher at $7.52 on the New York Stock Exchange.

Wang said AMD's delayed release for its new Llano processors underscored its competitive disadvantage, regardless of the FTC action.

"Just because you have a referee there making things equal, doesn't mean AMD is going to win this basketball game. It's extremely important they execute," Wang said.

Ed Snyder, managing director of Charter Equity Research, agreed Intel will emerge largely unscathed.

"It's not going to have any impact on their microprocessor business because they're so far ahead of their only other real competitor, which is AMD," he said. "What it would affect is some of their graphics processors and other things that they bundle with the microprocessors."

Officials at AMD and Nvidia praised the deal. AMD settled its own dispute against Intel for $1.25 billion in November.

AMD's critical remaining concern was Intel's use of all-or-nothing discounts to deny competitors access to the marketplace. The FTC's order clearly and firmly prohibits such abuse," AMD said in a statement.

A suit is still pending between Nvidia and Intel.

"We look forward to Intel's actions being examined further by the Delaware courts later this year," Nvidia spokesman Hector Marinez said. $1 = 0.7597 euro (Additional reporting by Kim Dixon in Washington, Editing by Edwin Chan and Richard Chang)

Intel, GE contribute assets to form healthcare joint venture

Building on a 2009 partnership, Intel and GE announce plans for a new company to be formed by combining assets of Intel's Digital Health Group and GE Healthcare's Home Health division.

By Suzanne Deffree, Managing editor, news -- EDN, August 3, 2010
Intel Corp and General Electric Co plan to form a 50/50 joint venture to create a new healthcare company focused on telehealth and independent living.

The new company will be formed by combining assets of Intel's Digital Health Group and GE Healthcare's Home Health division. The joint venture is expected to become operational by the end of the year. Financial terms were not disclosed.

The venture builds on the GE-Intel healthcare alliance announced in April 2009 around independent living and chronic disease management. At that time, the two companies said they would invest $250 million over the next five years to jointly market and develop home-based health technologies that will allow doctors to monitor patients remotely.

Once formed, the new company will develop and market products, services, and technologies that promote healthy, independent living at home and in assisted-living communities, the two companies said. Specifically, the company will focus on chronic disease management, independent living, and assistive technologies. Intel and GE Healthcare will contribute assets in remote patient monitoring, independent living concepts, and assistive technologies, such as the Intel Health Guide, Intel Reader, and GE Healthcare's QuietCare.

"New models of care delivery are required to address some of the largest issues facing society today, including our aging population, increasing healthcare costs, and a large number of people living with chronic conditions," said Intel President and CEO Paul Otellini in a statement. "We must rethink models of care that go beyond hospital and clinic visits, to home and community-based care models that allow for prevention, early detection, behavior change, and social support. The creation of this new company is aimed at accelerating just that."

The new company will have headquarters in the greater Sacramento, Calif, area. Louis Burns, currently vice president and general manager of Intel's Digital Health Group, will be CEO of the new company, and Omar Ishrak, senior vice president of GE and president and CEO, GE Healthcare Systems, will be chairman of the board.

Intel and GE made note of plans to "combine an experienced team" from the two companies for the venture, but did not detail headcount.

Intel launches new Core i5 processor family, enhanced Core i7 and Xeon 3400 processors

Intel ups Q3 revenue expectations on stronger than expected demand for MPUs, chipsets

In yet another sign that the electronics industry is returning to better economic times, Intel Corp this morning upped its Q3 revenue and gross margin expectations on "stronger than expected demand for microprocessors and chipsets."

The MPU kingpin now expects revenue for the September quarter to be $9 billion, plus or minus $200 million, as compared to the previous range of $8.5 billion, plus or minus $400 million. The better outlook bests Wall Street expectations calling for Intel Q3 revenue at a maximum of $8.55 billion.

In July, Intel reported Q2 revenue at $8 billion, then exceeding Wall Street estimates and showing sequential growth of $879 million. The quarter-over-quarter growth marked Intel's strongest Q1-to-Q2 sales increase since 1988.

Intel also said this morning that its Q3 gross margin percentage is expected to be in the upper half of the previous range of 53%, plus or minus two percentage points. All other expectations for Intel's current quarter remain unchanged.

News of the guidance revision set Intel's stock, INTC, up in early morning trading. As of 10:27 am eastern, INTC was trading at $20.34, up 4.47% from its Thursday close of $19.47. INTC's 52-week high is $23.71.

Intel's improved outlook is one of several recent signals that the electronics industry's economic situation is improving. Gartner on Wednesday reported that the semiconductor market preformed better than expected in Q2 when revenue increased 17% sequentially. On that, the market research company upped its 2009 revenue estimate, stating that the positive Q2 sequential revenue growth bodes well for the PC market, in which Intel plays heavily.

PC OEM Dell also issued a positive report on Thursday, recording improved sequential financial results for its fiscal Q2 2010. The company noted that shipments were up and that it expects seasonal demand improvements from the consumer and US federal government businesses in the current quarter. Dell also said it believes a PC refresh cycle in commercial accounts is likely to occur in 2010, with IT spending improving first in the US.

Intel is scheduled to report its Q3 financial results on October 13.