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AMD settlement expected to hit Intel's net profit in Q4

AMD settlement expected to hit Intel's net profit in Q4

A financial analyst sees lower profit in Intel's fourth quarter, while the company itself sees a lower tax rate

The cash portion of Intel's legal settlement with Advanced Micro Devices (AMD) could shave as much as US$800 million off Intel's net profit in the fourth quarter, according to investment banking firm Credit Suisse.

Credit Suisse lowered its earnings per share estimate for Intel to $0.29 in the fourth quarter from $0.43 previously, in a report issued late Thursday.

Intel, the world's largest chip maker, will expense the $1.25 billion legal settlement from antitrust litigation with rival AMD in the fourth quarter, the chip maker said in a statement.

Intel expects the $1.25 billion expense to raise its spending in the quarter to $4.2 billion from $2.9 billion previously. Spending on Intel's accounting statement includes research and development as well as general and administrative expenses. Legal fees normally fall under general and administrative expenses in accounting.

The expense will also lower Intel's tax rate to around 20 percent from 26 percent previously, the company said.

Intel did not calculate the impact of the settlement on its net profit.

The legal settlement between Intel and AMD also includes a five-year cross-license agreement and ends all claims of breach of contract from a previous license agreement, the two companies said Thursday. They also agreed to a set of business practice provisions as part of the settlement.

AMD's stock rocketed 21.8 percent after news of the deal broke to end regular trading on Thursday at $6.48 on the New York Stock Exchange.

Intel stock fell 0.8 percent on the Nasdaq Stock Market to end at $19.68 Thursday.


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