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Intel Says It Will Replace Defective Circuit Boards

Chip maker's shares drop 9% upon news that 1 million motherboards sent to manufacturers may be faulty and could ruin files.


Intel Corp. said Wednesday that it shipped nearly 1 million computer circuit boards that could contain a defect that destroys important files, news that caused its shares to slump 9%.

The Santa Clara-based company, the world's largest chip maker, sells a variety of parts that go into a computer, including the motherboard, the primary component on which the processors, main memory and support circuitry rest.

Some motherboards shipped since November have a defective "memory translator hub" that experiences problems in moving signals between a cheaper form of random access memory called SDRAM and the 820 Intel processor, said spokesman Michael Sullivan.

Electrical problems "can cause some systems to intermittently reset, reboot and / or hang," Intel said, and "can under extreme conditions, potentially cause data corruption." Intel said it would replace the affected motherboards.

The motherboards were shipped to a variety of computer manufacturers, including major customers such as Dell Computer Corp. and Compaq Computer Corp. The 820 chipset and potentially defective memory translator components also were sold to companies who build their own brand of motherboard components, making it difficult to assess the extent or source of the problem, Sullivan said.

"We've been taking a look at this and trying to find out exactly what the cause [is] . . . but the fact of the matter is we really can't identify a root cause," he said.

The company urged consumers who have bought computers since November to contact their manufacturer if they've experienced problems or to go to Intel's Web site to determine whether the component that may need replacing is present in their system.

Individual motherboards cost slightly more than $100, and Intel warned that the problem could have "a material effect" on profits, depending on the replacement rate.

The company's shares tumbled $10.06, to $106.88 amid a general retreat on Nasdaq as investors fretted about interest rate increases and potential problems with technology leaders such as Intel.

J.P. Morgan analyst Terry Ragsdale said the problem, if fixed in a short period, should have little effect on Intel's bottom line.

"The question is, if it takes them a while to fix it, will that affect their ability to sell microprocessors?" Ragsdale said. "That's probably unlikely since most users who are buying the high-end [820] chip want the high-end memory to go with it."

The news of the defect came on the same day that Intel released design details of its upcoming Itanium processor on the Internet--the first time the company has done so.

Intel hopes to use the Itanium chip, due out this year, to break into the market for high-powered servers and workstations serving increasingly popular corporate networks that look to navigate Web sites with speed.

By opening the source code for its chip for the first time, Intel hopes software developers will offer improvements to the processor before its final release.

To determine whether you have the affected motherboard, contact

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