All: Article on DEC lawsuit settlement. As usual, Drew Pecker put a negative spin on it (even though Intel said profits within a year). What's interesting is Intel obtains StrongARM processor and now has an immediate product for consumer electronics/Windows CE market segment.
joey
Monday October 27 10:18 PM EST
FOCUS-Intel, Digital settle patent lawsuit
By Therese Poletti
SAN FRANCISCO, Oct 27 (Reuters) - Intel Corp. and Digital Equipment Corp. reached a
sweeping settlement to end their acrimonious patent dispute, with Intel buying Digital's chip making
operations for $700 million in a deal seen as a victory for Digital.
Intel will also make additional undisclosed payments to Digital over several years as part of a broad
10-year cross-licensing pact. One source close to the talks said the total sum of the settlement
between the two is valued at more than $1.5 billion to Digital, but officials and executives at both
companies would not comment.
''This agreement is a win-win for both companies and our customers,'' Digital Chairman Robert
Palmer said on a conference call with analysts and reporters.
''Digital and Intel have been doing business for more than two decades, and this agreement makes
sure our positive relationship will continue in the future,'' Palmer said.
Digital will sell its semiconductor operations, including three facilities, to Intel and it will retain its
Alpha and Alpha-related semiconductor design teams to develop future versions of the
microprocessor. For years, Digital sought to rival the Intel chip architecture with Alpha but never
succeeded. Alpha is used as a high-end processor in powerful workstation computers and servers
running the UNIX operating system and Windows NT.
Intel will manufacture and sell the Alpha technology and other non-Alpha semiconductors
developed by Digital, including its StrongArm processor, which is used in low-power portable
devices and network computers.
The companies were mum on any further financial specifics surrounding the deal, but said they
expect the arrangement to be approved by U.S. regulators within three to six months.
Analysts also said they believed the total deal was worth between $1.5 billion and $1.6 billion to
Digital, including the undisclosed licensing payments Intel is making.
Digital will also be restored as a major Intel customer and entitled to receive discounts that large
customers are due on its processors used by its PC business.
Industry analysts have compared the settlement, which had been widely expected, to Microsoft
Corp.'s $150 million investment in Apple Computer Inc. earlier this year -- a move by a dominant
company to keep one of its few rivals alive.
Digital sued Intel for patent infringement in May, alleging Intel was infringing on 10 Digital patents, in
a move that shocked the computer industry.
Intel, the world's largest chip maker, followed with a lawsuit of its own, seeking that Digital return
top-secret intellectual property documents that Digital had been privy to as an Intel partner. Digital
is also a customer of Intel, buying its microprocessors.
Analysts called the deal a victory for Digital and said it validated their patent infringement claims
against Intel.
''There was some validity (to Digital's case), or Intel would not have done this,'' Drew Peck, a
Cowen & Co. analyst said. ''As for Intel, they bought a foundry that is relatively worthless,''
because of the high cost it will incur to retool the facility with equipment to bring it on par with Intel's
current manufacturing methods.
Craig Barrett, Intel's president, said the company settled the suit to avoid long and costly litigation,
and so that it could focus on its business again. In an interview, Barret said Intel was fully prepared
to litigate the suit to the end.
''I was perfectly willing to focus on lawyers because I thought we had a fine IP (intellectual
property) position,'' Barrett told Reuters. ''But at the highest level, we wanted to find a win-win
situation,'' he said, adding that Intel gains a world-class manufacturing facility and another
endorsement of its next generation chip IA-64 architecture from Digital.
Peck and other analysts said one of Intel's biggest gains in the deal was the purchase of Digital's
StrongArm processor, which will give it a processor for portable, handheld devices running
Microsoft Corp.'s Windows CE operating system.
''This is a company that has described itself as truly paranoid, and if you are paranoid, Windows
CE made them very paranoid,'' Peck said, adding that Windows CE was not designed around
Intel's x86 core processor architecture.
Under the settlement, Intel will acquire DEC's semiconductor manufacturing operations in Hudson,
Mass., and development plants in Austin, Texas, and Jerusalem. Intel will also offer jobs to the
2,000 Digital semiconductor workers.
The companies said they would seek a court-ordered stay of the litigation between them, pending
U.S. approval.
Digital plans to develop a full line of systems based on Intel's next-generation processor
architecture, called IA-64, starting with the planned ''Merced'' chip in 1999. Digital will also
develop a version of its UNIX operating system for the IA-64 architecture.
Intel's stock fell $5.25 to $74.75 a share on the Nasdaq market, where it was the second most
active issue. DEC lost $5.31 to $45.25 on the New York Stock Exchange. |
