Intel: Flaws Inside

Can Intel (Nasdaq: INTC  ) ever catch a break? With all its missteps in recent months, I swear the chip maker has an evil twin. Last Friday brought more bad news: A manufacturing flaw in one of its newest chip sets could cause computers to crash or fail to boot. The announcement comes on the eve of the introduction of Intel's Nocona chip, which can run both 32- and 64-bit software, and is aimed at the popular Opteron chip from Advanced Micro Devices (NYSE: AMD  ) .

Intel believes that very few of the problem chip sets -- launched one week ago to handle communication between a central computer processor and functions controlling audio and video, among other things -- actually reached consumers. The chip maker says it has been working with manufacturers such as Dell (Nasdaq: DELL  ) and Hewlett-Packard (NYSE: HPQ  ) to replace the faulty parts.

Frankly, it's doubtful that much, if any, damage has been done, and Intel should be applauded for getting out in front of the issue before it became a crisis. But that doesn't mean shareholders shouldn't be concerned. After all, this isn't the first time Intel has stubbed its toe in recent months. For example, Intel missed earnings estimates in April.

The timing of the recall isn't terribly encouraging either. With News.com reporting that the Nocona chip is to debut today, Intel doesn't need the distraction. And the new processor is important, for it represents Intel's best hope to date to cause discomfort to AMD in powering smaller-scale servers.

The new Nocona and rival Opteron are designed to handle data in both 32-bit and 64-bit chunks. Most PCs bundle data in 32-bits, but servers, designed for much meatier processing jobs, are better suited for 64-bit portions. For Opteron, the combo approach has proven attractive, with HP, IBM (NYSE: IBM  ) , and Sun Microsystems (Nasdaq: SUNW  ) all offering it in some system models. (Some of these same firms are likely to sign on to Nocona, as well.)

What's the bottom line? Simple: Intel is flawed. But so what? Every business is. Each company has a secret side -- an evil twin -- that likes to eat cookies in bed and ignore fiscal discipline. Intel is no different. Of course, the best companies keep their dark sides under control, and, despite some great quarterly results, Intel's Mr. Hyde has been frolicking in public a lot lately. Will someone please page Dr. Jekyll?

Fool contributor Tim Beyers may not be Intel's biggest fan, but he loves tech stocks. Tim owns no interest in any company mentioned, and you can view his Fool profile here.


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