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Intel Takes $475 Million Charge To Replace Flawed Pentium; Net Declines

January 17, 1995

SANTA CLARA, Calif. (AP) _ Intel Corp. on Tuesday took a $475 million fourth-quarter charge to replace its flawed Pentium microprocessors, a move that dragged down profit 37 percent.

But strong demand for the Pentium and Intel’s 486 chip during the holiday season pushed up revenue 35 percent.

Intel, the world’s largest maker of computer chips, earned $372 million, or 86 cents a share, for the three months ended Dec. 31, compared with $594 million, or $1.35 cents a share, for the final quarter of 1993.

Revenue was $3.23 billion, up from $2.39 billion a year ago. It was the first time Intel’s quarterly revenue exceeded $3 billion.

The company said the one-time charge, amounting to 70 cents a share, should be enough to cover all costs stemming from replacing the early versions of the Pentium chip that had a flaw that causes them to botch some obscure division calculations.

``The Pentium processor divide problem has been a learning experience for Intel,″ said Andrew S. Grove, Intel’s president and chief executive officer.

Intel was widely criticized for its initial handling of the flaw, which is in an estimated 3 million to 4 million personal computers.

The company did not immediately not immediately publicize the flaw when it was found last summer. After a professor found the flaw in October, Intel responded by requiring computer users to demonstrate their need for a replacement chip.

But following complaints, Intel reversed course last month and said it would replace the chip free of charge, no questions asked.

Industry analysts at that time estimated the move could easily cost the company several hundred million dollars.

For 1994, the charge reduced Intel’s profit by less than one percent. The company earned $2.288 billion, or $5.24 cents a share, compared with $2.295 billion, or $5.20 cents a share.

Annual revenues rose 31 percent to $11.52 billion from $8.78 billion in 1993.

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