Roanoke Times Copyright (c) 1995, Landmark Communications, Inc. DATE: TUESDAY, December 13, 1994 TAG: 9412130078 SECTION: BUSINESS PAGE: B8 EDITION: METRO SOURCE: THE NEW YORK TIMES DATELINE: LENGTH: Medium
Intel shares dropped $4, to $58.75, before trading was halted at Intel's request for more than two hours so that it could respond to IBM's announcement. IBM said it had stopped shipments because its own internal research showed that a flaw in the Pentium would cause math errors far more often than Intel had acknowledged last month, when the problem first was disclosed.
Intel shares rallied after the company defended its chip, closing at $60.375, down $2.375.
In a later conference call with securities analysts, Andrew S. Grove, Intel's president and chief executive, questioned the validity of IBM's testing methodology as a substitute for real-world use. ``If IBM's contention was right, the problem would have shown up thousands of times; it hasn't,'' he said.
Shares in Gateway 2000 fell 37.5 cents, to $22, while Dell Computer ended at $39.625, down $1.25. Both are big users of Pentium chips, as is Compaq Computer, whose stock fell 87.5 cents, to $39. Like IBM, Compaq has been slower to adopt the new chip throughout its product line. But none of these companies said they would halt shipments as did IBM, which fell 87.5 cents, to $70.625.
Shares in Apple Computer, the one major personal computer manufacturer that uses no Intel microprocessors, rose 25 cents, to $36.50.
David Wu, an analyst with S.G. Warburg, said he was unconvinced by IBM's report on the Pentium chip. He said he viewed the announcement as a misguided attempt to show support for customers.
``An investor today had a miraculous chance to get onto Intel at $58 that you would not have had if IBM had not tried this public relations ploy,'' he said. ``IBM does not have a big market share in Pentium, and they want to appear the good guys.''
``You definitely buy Intel at this price,'' said Michael Murphy, editor of the California Technology Stock Letter.
Daniel L. Klesken, an analyst with Robertson Stephens & Co., reiterated a previous ``buy'' rating on Intel, calling the Pentium problem a temporary glitch.
``The IBM announcement creates uncertainty, but uncertainty presents an opportunity,'' he said. ``I don't think the issue is anywhere near as great as the 4-point drop in the stock would suggest.''
Klesken said the likelihood of a mass recall by Intel was extremely small, noting that there are more than 3 million Pentium machines in circulation and that replacing every chip would cost about $2.5 billion. ``They can't do that,'' he said.
by CNB