SAN FRANCISCO (Reuters) - Intel Corp will pay rival chipmaker Advanced Micro Devices Inc $1.25 billion to settle all outstanding legal disputes, in a move that could weaken antitrust authorities' cases against Intel.

Shares of AMD jumped 20 percent yesterday on news of the payment, which analysts expect the loss-making chipmaker to use to pay down some of its $3.2 billion of debt. Intel shares edged higher.

The settlement ends a global campaign that AMD has been waging against its larger rival that stretches back 12 years.

Regulators in Asia, Europe and the US have taken action against Intel because of complaints by AMD that its business is being damaged by alleged anti-competitive behaviour. Intel, the world's top chip company, makes 80 percent of the central processing units at the heart of personal computers.

Joanne Feeney of FTN Equity Capital Markets said the deal could stave off the US Federal Trade Commission's pending decision to take action against Intel.

"It eliminates a large amount of uncertainty for both companies. $1.2 billion is a lot of money and I believe AMD will use it to accelerate their debt payment," she said.

FTC Chairman Jon Leibowitz said the commission will review the settlement.

AMD said it will withdraw all its regulatory complaints worldwide and drop all pending litigation, including a case in the US District Court in Delaware and two cases pending in Japan.

Intel and AMD also sealed a five-year cross licence deal and said they would give up any claims of breach from their previous licence agreement.

AMD executives said on a conference call the settlement creates a "level playing field" and that the company would seek "continued vigilance" from competition agencies worldwide.

They called the deal a move from "war to peace", though noted that some narrow issues on Intel rebates remain.

"It will take time for people to understand how operating conditions in the processor business have changed. But make no mistake, they have changed," AMD CEO Dirk Meyer said.

AMD reported a net loss of $128 million for the third quarter, its 12th consecutive quarter in the red.