Monday, January 31, 2011

Intel restates guidance, announces Sandy Bridge chipset flaw

In what could prove to be the biggest issue with an Intel product since the floating-point bug in the Pentium, Intel has issued a press release about a problem in its new Sandy Bridge platform, and issued new forecast guidelines for 2011 based on recovery from the problem.

At issue is a defect in the Serial-ATA (SATA) ports in the chipset. According to Intel, the ports may degrade over time, affecting the performance of SATA devices such as hard drives and optical drives. This is a support chip; the actual microprocessor itself is unaffected.

Sandy Bridge is Intel's just introduced Second Generation Intel Core processor platform. Intel halted shipments of the original chipset, and is beginning to manufacture a fixed version.

Here's what Intel said in their press release:
The company expects to begin delivering the updated version of the chipset to customers in late February and expects full volume recovery in April. Intel stands behind its products and is committed to product quality. For computer makers and other Intel customers that have bought potentially affected chipsets or systems, Intel will work with its OEM partners to accept the return of the affected chipsets, and plans to support modifications or replacements needed on motherboards or systems. The systems with the affected support chips have only been shipping since January 9th and the company believes that relatively few consumers are impacted by this issue.
While few end users may be impacted by the flawed chipset, it's clear that this will impact Intel financials, but Intel believes it will not materially affect overall 2011 earnings. The company did note that the problem will cut revenue by $300 million in the first quarter. At the time of this writing, Intel stock is down about 1.16 percent to $21.21, down about $0.25.

Intel estimated it will spend $700 million to fix the problem, and since some of the affected chipsets were manufactured in Q4 2010, Intel will take a charge against the cost of goods sold for that quarter, cutting its A4 2010 gross margin percentage to about by about 4 points, down from the previously reported 67.5 percent. Intel will also take a charge in Q1 2011, so it cut its margin guidance for the current quarter and for the full year, as well.

Despite the chipset problem, Intel raised its sales guidance for Q1 and 2011 overall. The company did so as a result of its recently announced acquisition of Infineon Technologies' wireless solutions business. With both the chipset problem and the Infineon purchase taken into account, Intel now expects first-quarter revenue of $11.7 billion, up from its previous $11.5 billion guidance.

Intel also added that it expects its purchase of security software company McAfee to close by the end of Q1.

Via Intel

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