Intel and AMD have had a troubled relationship in recent years. The latter sued Intel for antitrust violations, with allegations that have been picked up by others including U.S. and European regulators, while Intel has claimed AMD violated a licensing agreement for x86 technology with its GlobalFoundries spinoff. In a surprise announcement, however, the companies revealed today that they have now put an end to all legal actions.

As part of the agreement, Intel will pay its rival the hefty sum of $1.25 billion and has agreed to abide by a set of business practice provisions. For its part, AMD will drop all pending litigation worldwide. The two companies also forged a five-year cross-licensing agreement that gives them access to each other's key chip technology, while abandoning claims of breaches under previous agreements.

Besides getting a huge chunk of cash to help offset their mounting losses, this means AMD is now free to produce all of its processors in third-party fabs. The formal agreement may additionally help Intel argue that its misbehaving days are in the past, as the company is still appealing a $1.45 billion fine from European regulators and facing an antitrust case in the U.S.