January 10, 2011 / 9:29 PM / in 7 years

Intel pays Nvidia $1.5 billion in license dispute

SAN FRANCISCO (Reuters) - Intel Corp said it is paying graphics chip designer Nvidia Corp a $1.5 billion licensing fee, settling a legal dispute over a license to make chipsets and boosting Nvidia’s shares.

Under the agreement, Intel, the world’s largest microchip maker, will be allowed to use some patents belonging to Nvidia.

“Impressive, it’s a big number,” said Doug Freedman, an analyst at Gleacher & Company.

Many investors had expected a settlement, but it had been unclear how much Intel might pay Nvidia and the $1 billion payment was not built into the value of Nvidia’s stock, said Kevin Cassidy, an analyst at Stifel Nicolaus.

Intel sued Silicon Valley neighbor Nvidia in 2009 and Nvidia counter-sued in the fight over chipsets, which are groups of integrated circuits that connect to the microprocessor in a PC.

In 2004, Intel agreed to let Nvidia, which specializes in graphics processors, design chipsets for its microprocessors, while it would be able to use some of Nvidia’s technology in its own chipsets.

But in its suit filed in a Delaware court, Intel said the agreement did not extend to new microprocessors it later launched with a new component called integrated memory controllers.

Nvidia’s shares jumped 4.45 percent after hours after closing up 3.83 percent. Intel’s shares were down 0.2 percent after hours.

Nvidia, which had about $2 billion in cash at the end of October, argued the license did apply and chief executive Jen-Hsun Huang has said Intel was competing unfairly.

After the Santa Clara, California-based companies launched their suits, Nvidia wound down its chipset business.

It has redeployed its chipset engineers to its mobile unit, which Nvidia is heavily betting on to take advantage of the tablet and smartphone booms.

Intel has been under attack from regulators and rivals for years over aggressive pricing and sales tactics in marketing its chips.

Intel’s microprocessors are the brains in 80 percent of the world’s personal computers, making compatibility with Intel architecture key for smaller chip makers.

Last week, Nvidia’s shares surged 29 percent as the company’s new Tegra 2 mobile chip impressed investors at the Consumer Electronics Show in Las Vegas.

Intel’s microprocessors are the brains in 80 percent of the world’s personal computers, making compatibility with Intel architecture key for smaller chip makers.

In August, Intel settled a U.S. Federal Trade Commission complaint accusing it of using its market dominance to unfairly stifle competition.

Reporting by Noel Randewich and Dan Levine; editing by Andre Grenon

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