Feuding chip rivals Intel Corp. and Advanced Micro Devices Inc. on Thursday agreed to settle all of their outstanding legal complaints, with Intel paying AMD $1.25 billion and agreeing to abide by a set of rules for how it conducts business.
The agreement, which also includes a renewed five-year cross-licensing pact, comes as Intel announced the selection of A. Douglas Melamed as its general counsel, according to people familiar with the matter. Mr. Melamed, a partner at WilmerHale in Washington, has decades of antitrust experience.
The company faces increasing scrutiny from government regulators regarding alleged anticompetitive practices. Intel and AMD make nearly all the chips used to run computers and servers, though the much larger Intel controls roughly 80% of the market.
AMD shares rose $1.07, or 20%, to $6.39 in late-morning trading on the New York Stock Exchange. Intel shares fell three cents to $19.81 on the Nasdaq Stock Market.
Legal and regulatory battles have increasingly been turning against Intel. Roger Kay, president of Endpoint Technologies Associates, which tracks the field, said that by settling, Intel may have alleviated some of the pressure regarding the cases brought by others.
"It was only going to get more expensive the farther down the litigation road they went, and this takes a lot of wind out of the sails of the other suits," Mr. Kay said. "Intel may have just reduced its legal tab by a number of billions of dollars."
The settlement was sorely needed for AMD, which has struggled with mounting losses and high debt levels related to its acqusition of graphics-chip maker ATI Technologies. With the lawsuit and other legal disputes now behind it, the company removes a serious investor concern, said Wedbush Morgan analyst Patrick Wang.
"AMD's liquidity issues are going to be taken away," Mr. Wang said. "This is something that is going to take away a major overhang for investors."
For its part, AMD said "the game has changed" in the chip business because of its strategies..
"We are optimistic that [the settlement] will usher a new era for our industry," said Dirk Meyer, AMD's chief executive officer, in prepared remarks.
Besides the money, the company pointed to provisions in the deal that affect how Intel does business in selling the chips that serve as brains in computers.
"We recognize that it will take time for people to understand how the operating conditions in processor business have changed—but make no mistake—they have changed," Mr. Meyer said.
He added: "Today marks the beginning of a new era...one that confirms that the game has changed for AMD."
Besides the private antitrust case that AMD filed against Intel in a Delaware federal court, Intel has faced investigations in South Korea, Japan, Europe and in the U.S. by the Federal Trade Commission and the New York attorney general.
This year, the European Commission levied the largest antitrust fine in its history against Intel for anticompetitive practices.
Mr. Melamed, meahwile, has 30 years of experience in antitrust law, according to his biography on the WilmerHale Web site. The site says Mr. Melamed worked at the Justice Department, where he was acting assistant attorney general in charge of the antitrust division, between October 1996 and January 2001.
Intel's board selected Mr. Melamed Wednesday night, one person said.
Mr. Melamen was tentatively offered the position two weeks ago but didn't accept it right away, according to a longtime acquaintance. He is a "very intellectual" antitrust specialist, with a reputation as being "very technically and academically'' inclined, the acquaintance said.
As Intel's top lawyer, Mr. Melamen will prove very helpful in navigating its current legal problems because "he knows every player around the world in antitrust,'' this acquaintance added.
Mr. Melamed fills a position that had been vacant since September, when longtime general counsel Bruce Sewell left the company for Apple Inc.—Don Clark, Dionne Searcey and Joann Lublin contributed to this article.