For example, let's say the cat you want to skin is making $1 billion. You could build a great business, offer customers a great deal, and grow it all over the world... like Intel. Or you could sue Intel because you don't have the innovative muscle, like AMD.
Don't knock AMD. It worked. Intel has agreed to pay AMD $1.25 billion to settle all the legal problems AMD has created for Intel. And Intel has agreed to license technology to AMD.
Yes, you read that correctly. As part of the deal, the two rivals will cross-license technology for the next five years. Other things being equal, do we wonder which company is more innovative? Do we wonder which company will benefit most from licensing the other's technology?
Over the years, AMD has made a good business out of suing Intel. As I wrote in the April issue of Extreme Value...
AMD wouldn't even be enough of a company to fight Intel without Intel's help. Back in the early 1980s, IBM chose Intel's x86 chips for its personal computers, which would run the Microsoft DOS operating system. IBM wanted a second supplier, and Intel picked AMD, giving AMD access to Intel's 286-chip technology. Intel then created the 386-chip, of which it wanted to be the sole supplier. AMD accused it of trying to establish a chip monopoly, a dispute that was settled out of court three years later. AMD sued Intel again in 1991 and was awarded $10 million and a royalty-free license on any patents used in AMD's 386-like processors... which seems to have done it no good at all.
Looks like AMD is still in the business of suing Intel. And business is good. I bet you anything this latest settlement does AMD shareholders zero good over the next several years. I wonder what AMD will do for a living next?