Barret:Intel should have done better on new chip
07:13 PM ET 08/29/00
UPDATE 1-Intel should have done better on new chip-CEO
(Recasts lead, adds Intel CEO comment paragraphs 1, 2, 7,
19 and 20)
By Nicole Volpe
NEW YORK, Aug 29 (Reuters) - Intel Corp's Chief
Executive Craig Barret said on Tuesday that the company had
fallen short in the development of its newest and fastest chip,
which the chipmaker was forced to recall on Monday.
"We should have done a better job," he said, speaking to
Reuters in Buenos Aires on Tuesday, during his tour of South
America. "We know what the problem is and are in the process of
fixing it to ship new product."
The recall of the 1.13 gigahertz chip was not expected to
hurt the chipmaker's financial results, but this latest in a
series of technical snafus would damage its reputation,
analysts said on Tuesday.
"While the financial impact is negligible it makes Intel
look bad to their customers," U.S. Bancorp Piper Jaffray
analyst Ashok Kumar wrote in a note to clients. "The company is
announcing products they cannot ship, and it turns out, do not
even work properly."
CHIP INTRODUCED IN JULY
Intel, whose processors are the brains of 80 percent of
personal computers, only introduced the new chip in July. It
said Monday it had discovered the chip could fail under a
certain combination of data, voltage and temperature
conditions.
The new chip, Intel's fastest, is targeted at a niche
market of computer hobbyists and "power users," whose computers
are running the most taxing applications.
"I don't think we did as good a job as we might in that we
overlooked a few obscure applications," said Barret.
Intel said the recall would have no material effect on
sales or earnings.
Shares were little changed by the news, closing up 3/16 to
74-1/16 on Nasdaq.
An Intel spokesman said the chip had only shipped to "a
handful of customers," including International Business
Machines Corp. and Dell Computer Corp. , but
declined to comment on exactly how many chips had been shipped.
"We estimate that the company has shipped less than 10,000
units and, as such, the financial toll is negligible," said
Kumar. "Also, given that these products populate high-end
systems priced at about $3,000, the opportunity cost is
minimal."
NOT INTEL'S FIRST RECALL
While the recall was small in size, it was not the first.
In 1995, Intel recalled its first Pentium due to a flaw, in
what was cited by then-chief executive Andrew Grove in his book
"Only the Paranoid Survive" as a defining event for the company
as it became a household name.
Last year, Intel recalled its Intel 820 chipset due to a
design flaw in technology provided by Rambus Inc. In
May, Intel recalled defective motherboards -- the internal
chassis that hold memory components in personal computers.
Salomon Smith Barney analyst Jonathan Joseph said that the
small size of the current recall made it "no big deal."
"This is not a black eye, this is a nit," he said. "The
magnitude of this recall is infinitesimal. It is in no way
comparable to the 1995 Pentium recall."
But Kumar said the implications of the recall were more
serious than its size would suggest. He blamed Intel's race
against AMD to the claim to the fastest chip as part of the
problem.
"This is another sign that the 1.13 gigahertz chip is
pushing the envelope for an architecture developed for 2
gigahertz speeds," he said, noting that Intel had missed the
transition to copper interconnects on its 0.18 micron process,
and was using a core that was five years old.
"Essentially they are pushing an aging architecture to keep
pace with AMD's Athlon, to have bragging rights to the fastest
processor," he said. "Intel should have introduced the P4 a
long time ago. Their research and development budget is much
larger than AMD's. That they can't keep pace with such a small
competitor as AMD speaks volumes about the company."
Intel's Barret, however, said that the chip's trouble was
not due trying to pace AMD.
"I don't think it was an issue of getting it out before the
competition," he said, adding that the company's Pentium 4
would be available in October or November.
CUSTOMERS MAY GROW IMPATIENT
But Kumar warned Intel's flawed chip could test the
patience of its customers.
"Intel having this reoccur on a constant basis is just
stretching the relationships with OEMs," he said, referring to
original equipment manufacturers such as IBM and Dell.
However, those computer makers, which both received
shipments of the faulty chips, said they did not yet see cause
to alter their relationships with Intel.
IBM had begun shipping some Aptiva desktop computers with
the chips, a spokesman said.
"We don't know exactly what we are going to replace these
chips with right now," said IBM spokesman Tim Blair, adding
that IBM was working on how to get parts back from customers.
Dell Computer Corp. had planned to ship products
with the new chip last Friday, and was told by Intel to hold
off, a Dell spokesman said.
"We were taking orders starting July 31 and anticipating
shipment on August 25, when some of issues began to come up,"
said Dell spokesman Tom Kehoe. "We found out on Monday we would
not able to ship them at all, so we will be offering a
one-gigahertz system to those who have placed orders."
Dell, which relies solely on Intel for its processors,
would not have any material impact on sales or earnings, and
was not considering a change in their relationship with Intel,
Kehoe said.
((--New York Newsdesk (212) 859-1700)) |
