Federal Trade Commission Approves Digital-Intel Deal

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April 23, 1998 (12:00 AM EDT)

Federal Trade Commission Approves Digital-Intel Deal

By Kelly Spang,

The Federal Trade Commission approved the settlement between Digital Equipment and Intel, but added its own modification to protect the future of Digital's Alpha processor.

As expected, the FTC said Thursday it would not block the settlement, but the Commission also did not outright approve the proposed deal. The commission voted five-to-zero to accept the consent agreement.

The settlement, announced in October after six months of legal battles, provides that Intel (company profile) would buy Digital Semiconductor's manufacturing facilities for $700 million. Although Digital (company profile) will retain its Alpha design team, and control over the Alpha technology, under the deal, Intel would serve as a foundry for the Alpha processor.

It is Intel's hand in the Alpha pot that concerned the FTC.

As a condition of its approval of the deal, the FTC is requiring Digital license its Alpha technology to other semiconductor manufacturers beyond Intel. In particular, the commission named Advanced Micro Devices and Samsung Electronics as potential Alpha licensees.

In February of this year, Digital announced it would give Samsung Electronics an Alpha architectural license, allowing Samsung access to Alpha intellectual property, including patents and future implementations, so the semiconductor maker could develop its own line of Alpha products.

In addition, Digital is also required to certify IBM or other "commission-approved" companies to produce Alpha chips as an alternative source to Intel's production, according to the FTC.

"The commission's order is designed to ensure that Alpha remains a viable competitive alternative to Intel's chips, by sending a strong message to the market that other major chip makers are now committed to Alpha's future," said chief executive Robert Pitofsky in a prepared statement. "By protecting competition, the commission has preserved consumer choice, and encouraged innovation in the market for microprocessors."

The sale, as outlined by Maynard, Mass.-based Digital and Santa Clara, Calif.-based Intel, would have threatened competition by placing Alpha solely in Intel's hands, according to the FTC. Because Intel is Digital's largest competitor for microprocessors, the FTC determined the sale, as originally proposed, would threaten the future development of Alpha, according to the commission's statement.

Also, as part of the settlement, the two companies reached a 10-year patent cross licensing agreement, and Digital committed to port its 64-bit Unix operating system to Intel's IA-64 architecture, as it becomes available.