FTC OKs Intel’s Purchase of Digital’s Chip-Making Business

Intel Corp. on Thursday received U.S. approval to buy Digital Equipment Corp.’s chip-making business for $700 million on the condition that Digital license its Alpha technology to two other companies and take steps to allow a third to produce the microprocessor.

The Federal Trade Commission said the settlement will ensure that Intel, already the dominant maker of microprocessors for personal computers, doesn’t gain exclusive control over the Alpha chip. Advanced Micro Devices Inc. and Samsung Corp. will get licenses to the chip, Digital said.

The settlement clears the way for an agreement that gives Intel access to a modern chip-making plant, rids Digital of a money-losing business and resolves a thorny patent fight between the two companies.

“From our point of view, it does not change the deal we had with Digital at all,” Intel spokesman Chuck Mulloy said.

The agreement doesn’t directly affect the FTC’s broader antitrust investigation of Intel’s business practices. Among other things, the agency wants to know whether Intel is using its microprocessor dominance--the FTC says its sales account for about 90% of the market--as a lever to gain control of other markets.

“This does not indicate anything one way or another about the broader investigation,” FTC Chairman Robert Pitofsky said.

Intel shares fell 81 cents to close at $83.25 on Nasdaq; Digital shares rose 50 cents to $56.19 on the New York Stock Exchange.

Under the agreement announced Thursday, Digital will license Alpha technology to AMD and Samsung, allowing those companies to develop future versions of the microprocessor.

“Samsung and AMD have the ability and expertise to drive Alpha into volume applications,” Digital Chairman Robert B. Palmer said. “They have indicated their desire to do so and make Alpha the industry standard for high-performance 64-bit computing.”

Digital also agreed to begin the process of certifying another company, possibly IBM Corp., to manufacture the chip.

Digital, based in Maynard, Mass., agreed to sell its chip-making business to Intel last year as part of a multifaceted settlement of a patent infringement lawsuit. Under that agreement, Intel will acquire Digital’s manufacturing plant in Hudson, Mass., and its semiconductor business.

In return, Santa Clara-based Intel agreed to make the Alpha microprocessor for Digital alone. Digital will retain the intellectual property rights to the Alpha chip and can purchase the chips from other companies, in addition to Intel.

Steve Newborn, a Washington antitrust lawyer who represents several Intel critics, said the Digital settlement wasn’t a major concern among companies pressing for FTC action against Intel.

“I don’t even think a lot of people were complaining about this one,” Newborn said. “I’m surprised they had as long an investigation as they did.”