The move saved the company but, understandably enraged Intel, which sued for contract and patent violation. AMD countered by charging Intel with monopolistic behavior …and the war was on.
It has been raging ever since, with Intel acting like an angry bull trying to shake off the ferocious badger clamped to its back, and AMD hanging on for dear life. At least that was the public image. In reality, for all of their feuding, the two companies desperately needed each other. AMD wouldn't have existed without having Intel's innovations, from one processor generation to the next, to build upon and modify. It also essentially survived on Intel's leavings -- much of its revenue came from companies, such as Compaq, that didn't want to work with Intel.
Intel's need for AMD was more subtle. The company so dominated this multibillion-dollar industry, often with hardball tactics, that it was at constant risk of having the Justice Department or similar international agencies pursue it on anti-trust charges. Having a nice, not-really-threatening foil like AMD served Intel's interests nicely: It could always point at it's neighbor and say, "See? We're just fighting to survive in a highly competitive market."
As for us consumers, we needed the two companies because, simply, AMD kept Intel honest. As long as the smaller chip company existed, the far-more important and innovative Intel had to stay in a perpetual crisis mode, pushing the technology forward, maintaining Moore's Law …and making all of us the beneficiaries.
But having a company earn nearly a billion dollars per year in revenues using your own product patents was a constant irritation for Intel, especially its fiery CEO Andy Grove. Hence the lawsuit, which dragged on amid claims and counter-claims for 12 years. It was only after Intel's senior management, weary of the distraction and worried about Intel's growing image as a bully, finally mutinied in 1996 and brought the suit to an end in a comparatively fair agreement in which Intel retained its patents, and AMD got the right to sell its latest generation of Intel clones.
No one really thought the feud was over, though. After all, AMD was now a billion-dollar company and had developed the capacity to create its own products. And that's just what it did -- and, to the astonishment of the tech world, actually produced a superior processor to Intel with its 1999 introduction of the Athlon chip.
The miraculous Athlon, and its immediate successors, would prove to be the high-water mark of the AMD story. Intel may have stumbled in its product development (underscoring the importance of having an AMD) but ultimately succeeded -- where AMD didn't -- in the transition from its founders to a new generation of leaders.
And, by the middle of the decade, AMD was in trouble. In October 2008, the company announced it would spin off its manufacturing operations in a deal with the Abu Dhabi government.
AMD is still in trouble, although Intel was no longer cheering at the news. The chip giant now understood the value of competition …especially as a fading AMD put a predatory Intel in high relief. Worse, a dying company is a desperate company and AMD's growing accusations about Intel's behavior drew a ready audience in Washington, and especially in the E.U., where there is always an interest in taking down successful U.S. companies.