Advanced Micro Devices (NASDAQ: AMD) is riding high after the successful launch of its third-generation Ryzen CPUs, but it wasn't long ago that the company's products were seriously inferior to chips from rival Intel. AMD's ads for some of those inferior products spawned a lawsuit alleging false advertising.
Before Ryzen, AMD's PC processors were based on the Bulldozer architecture, which debuted in 2011. The company advertised some of those chips as having eight cores, but the unique design of Bulldozer meant that pairs of cores shared certain resources. This design turned out to be a disaster for AMD, giving Intel chips an insurmountable advantage in single-threaded performance and leading to severe market-share losses.
As reported by The Register, a tech news website, AMD has now agreed to settle this false-advertising lawsuit for $12.1 million. If 20% of purchasers make a claim, that amounts to about $35 per chip.
The financial impact of this settlement is small -- AMD's adjusted profits will be measured in the hundreds of millions of dollars this year. But it puts to bed a very difficult period for the perennially second-place chip company. The Bulldozer architecture was a risky bet, and not only did it not pay off, but it also made the company a nonfactor in the CPU market for many years.
AMD's newer Ryzen CPUs, and its EPYC server CPUs, have turned the tables, leading to market-share gains and solid profitability. With the lawsuit settled, Bulldozer can finally be left in the past.
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Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of Intel and has the following options: short September 2019 $50 calls on Intel. The Motley Fool has a disclosure policy.
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