Intel Says Chip Glich Hasn’t Led Decline in Sales : Computers: But some corporate buyers are delaying Pentium PC purchases, and some vendors are worried.
Although Intel Corp. and some personal computer vendors continued to maintain Monday that the widely publicized flaw in the Pentium computer chip is not hurting sales, evidence is mounting that corporate computer buyers are delaying their purchases of Pentium PCs, and consumers are beginning to take a second look.
Meanwhile, investors grew increasingly nervous about the Pentium problem, driving Intel shares down $1.69 to $57.81 on the Nasdaq exchange Monday. And a new study by a Stanford University computer scientists became the latest indication that the problem is worse than Intel has reported.
The flaw in Intel’s flagship microprocessor can cause errors in some division calculations. Intel contends that only a few highly sophisticated computer users would be affected, but others--including IBM Corp., which last week stopped shipping Pentium machines--dispute that assessment.
Many are furious that Intel kept the problem a secret until it was disclosed by a Virginia math professor last month. And the company exacerbated the problem with what many regard as an arrogant refusal to acknowledge the seriousness of the issue or replace the chips unconditionally.
PC vendors and retailers have worried that the Pentium flap, coming in the midst of the Christmas shopping season, would spook individual consumers, who have flocked to computer stores in large numbers for the first time this year.
That does not appear to have happened thus far. “We’ve seen steady week-to-week gains,” said David Goldstein, president of Channel Marketing Corp., a Dallas marketing research company that monitors retailers’ computer sales almost daily at this time of year. Goldstein said overall PC sales are up 32% to 33% from last year, while sales of Pentium-based machines are climbing at an even more rapid pace.
But anecdotal evidence suggests that some potential Pentium buyers are turning elsewhere.
“It seems like we had more people interested in the Pentium before,” says a salesman at Office Depot, which sells PCs along with office equipment. “More people are asking for the 486 now,” he said, referring to Intel’s less-powerful chip. Bloomberg Business News reported that J&R; Music World in New York and other retailers have seen a slowdown in Pentium sales.
And corporate buyers clearly are holding off. David Wu, an analyst at S.G. Warburg, said large buyers have put off purchases of Pentium computers until February, when Intel comes out with its corrected chips.
Scott Smith, general manager for desktop products at AST Research, confirms that corporate customers have put off purchases until new, bug-free chips are delivered. “Corporate customers say they would rather hold off until January,” he says.
In part, corporations are worried about possible liability arising from incorrect work done with the faulty PCs. Intel itself is also facing a number of lawsuits from customers who say their work--and the value of their PCs--has been compromised.
And two state attorneys general have even jumped into the fray. Connecticut Atty. Gen. Richard Blumenthal raised the possibility of legal action against Intel if the company does not adequately respond to consumer concerns.
Florida Atty. Gen. Robert Butterworth followed with his own letter to Grove raising a long list of issues, including the question of whether the chip might currently be used in areas that affect public safety, such as the designs of bridges and buildings.
Japan’s Ministry of International Trade and Industry said it has also contacted Intel to examine whether Intel may have misled consumers by not disclosing flaws in the chip when they were first discovered in June.
Intel spokesman Howard High said the Pentium flaw would not have safety implications for designers of large structures, because “there aren’t many people building bridges (needing) the precision of 9 digits.” Intel claims its chip only causes errors in the 9th digit of a number.
