'Intel Is a Mess': Flaws, Stock Sale To Overshadow Results
For Intel, 2018 has been nothing short of a nightmare. Even if Intel reports strong quarterly earnings later Thursday, it might not be enough to restore the luster of the semiconductor leader that's been dulled by controversies involving a pair of chipset flaws and the legitimacy of a $24 million stock sale by Chief Executive Brian Krzanich [pictured above].
The flaws, called Spectre and Meltdown, and Krzanich's late 2017 stock sale aren't expected to sink Intel's fourth-quarter earnings results, which come out after Thursday's stock-market close. But for Intel, the brouhaha over both matters will likely cast more of a shadow over the company's reputation than whatever Intel says about its latest earnings and sales.
"Intel is a mess," said Rob Enderle, director of tech research and consulting firm the Enderle Group. "Much of what the firm is doing is smoke and mirrors. If things keep going the way they are, then they are likely to discover what rarely occurs: negative brand equity."
In a Jan. 15 "Security-First Pledge" on Intel's website, Krzanich said Intel had issued updates for at least 90 percent of Intel CPUs introduced in the past five years, and would issue updates for the remaining CPUs by the end of the month. Then, the giant Santa Clara-based chip maker will focus on issuing updates for older products. He said Intel is learning that its software and firmware patches have varied impacts on performance, and he committed to keeping customers updated on patch progress and performance.
"Our customers' security is an ongoing priority, not a one-time event," Krzanich said in the statement. "To accelerate the security of the entire industry, we commit to publicly identify significant security vulnerabilities following rules of responsible disclosure and, further, we commit to working with the industry to share hardware innovations that will accelerate industry-level progress in dealing with side-channel attacks."
When Intel reports its fourth-quarter results Thursday, Wall Street analysts estimate the company will turn in a profit of 87 cents a share, on $16.34 billion in sales.
Intel itself has said it believes it will earn 86 cents a share, on sales in a range of $15.8 billion to $16.8 billion. Among the main areas that will get a lot of scrutiny Thursday will be Intel's data-center business, which analysts estimate will report sales of $5.09 billion, or about 9 percent more than the same period a year ago.
The financial impact on its quarterly results from the Spectre and Meltdown flaws is estimated to be small.
"We believe recent concerns about chip security flaws related to Intel are overblown and have largely been addressed," said Angelo Zino, of CFRA Research. "Krzanich addressed the issues at the Consumer Electronics Show in Las Vegas and stated that the company has not yet received any information that the two security exploits have been used to access customer data."
But the extent of the flaws -- estimated to potentially affect virtually every single modern PC, server and mobile device on Earth -- and the public perception about Intel allowing such flaws to occur, and being almost unable to stop them, have created a sense the chip company has given up on trying to fix the matter.
Of course, Intel is trying to solve the problem. But this week, the company seemed like it couldn't even do that correctly, as it urged people to stop installing Intel's own security patches on the grounds that the patches caused computers to operate erratically.
And then there's the impact of Krzanich's stock sale on Intel's reputation.
Late last year, Krzanich sold off half of his Intel stock holdings. He also exercised all the vested stock options he owned, in deals that made him $25 million. The moves brought his ownership stake to the minimum level he is required to maintain according to his employment contract.
Intel said Krzanich's stock sale was part of a pre-arranged plan. However, the timing of the sales, which came near when Intel is said to have first learned about the Spectre and Meltdown flaws, has raised some concerns about whether Krzanich might have violated federal rules on trading stocks based on corporate inside information.
"They are trying to make the huge CEO stock sale look like it was programmatic," Enderle said. "Which is, at best, misleading given it was authorized in October after the problem was known to Intel but before it was announced to the world."
© 2018 San Jose Mercury News under contract with NewsEdge/Acquire Media. All rights reserved.
Image credit: Walden Kirsch/Intel Corporation.
Posted: 2018-01-25 @ 2:49pm PT
Intel has been turning its focus from PC based biz to data centric biz. Its investments of late have been towards that end and it seems to be showing results. Still, when it comes to next quarter performance, chip flaws are a deterrent. We need to wait and watch how it's going to impact its profits.