H-P Finds Memory Flaw in Notebooks

Updated from 2:13 p.m. EDT

Hewlett-Packard (HPQ) announced a worldwide "voluntary memory module replacement program" Friday for owners of certain H-P and Compaq laptop computers.

Shares of the No. 2 PC maker fell 21 cents, or 1%, to $20.81 Friday while rivals IBM (IBM) slid 44 cents or 0.5%, to $89.55 and Dell (DELL) lost $1.10, or 3.2%, to $36.02.

Late Friday, Merrill Lynch analyst Steve Mulinovich issued a note reaffirming earning estimates for H-P, declaring "H-P's recall of certain laptop memory modules [Friday] will have no material effect on H-P's financial performance."

Milunovich similarly believes "financial impact will be immaterial for [IBM and Dell] as well" if they are forced to recall similar modules. (Merrill has done investment banking business with IBM and H-P and is seeking it from Dell.)

Earlier Friday, Hewlett-Packard said a "design flaw in certain industry-standard memory modules supplied by third parties," was detected during normal product testing. "Under certain conditions, these memory modules can cause the notebook to experience blue screens, intermittent lockups, or memory data corruption."

The affected notebooks include several models in the Compaq Evo and Presario lines, as well as the H-P Compaq Business Notebook nx7000 and H-P Pavilion zt3000. H-P will provide replacement memory modules for affected laptops at no charge, the company said.

Newswires reported the third-party providers include Micron Technology (MU), Infineon Technologies (IFX), Samsung and Winbond Electronics.

Micron shares rose 40 cents, or 2.8%, to $14.77 Friday while Infineon gained 16 cents, or 1.2%, to $13.21.

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