Intel Identifies Chipset Error; Revises Guidance

Intel says the Serial-ATA (SATA) ports within the Cougar Point chipsets may degrade over time. This could in turn impact the performance or functionality of SATA-linked devices such as hard disk drives and DVD drives. The chipset is used in PCs with Intel's latest Second Generation Intel Core processors, also known as Sandy Bridge. Intel unveiled the Sandy Bridge at this year's Consumer Electronics Show to much fanfare.

Since it's a support chipset, Intel says production of Sandy Bridge processors will not be halted.

The company says it will begin to deliver an updated version of the chipset in late February and expects to recover full volume production by April. Intel says it will work with its original equipment manufacturers to accept the return of the affected chipsets. It says systems sold to an end customer with the Second Generation Core i5 and Core i7 quad core based systems are among the possibly impacted.

As a result of the design flaw, Intel expects this issue to reduce revenue by approximately $300 million. The company will discontinue current iterations of the product and begin manufacturing new versions. Total cost Intel estimates will be approximately $700 million.

Intel has taken the chipset design as well as a few recently completed transactions, including Infineon Technologies AG Wireless Solutions and McAfee, into consideration for a revised outlook for the upcoming quarter and year-end financials.

First-quarter revenue expectations have now been changed to $11.7 billion, plus or minus $400 million, compared to the previous guidance of $11.5 billion, plus or minus $400 million. Spending is now expected to be approximately $3.6 billion, versus the previous estimate of $3.4 billion. For the year, spending and revenue growth are both revised upwards.

Intel's stock was only slightly affected by the news; while it dropped from the Friday close of $28.26 in early trading it recovered to $28.24 by noon.

In the company's last earnings call, Intel had focused on the threat in the mobile space from ARM.

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