Shares of Intel Tumble After Announcement of Recall

Intel (INTC Quote), the world's largest chip maker, said Wednesday that it would recall and replace up to a million motherboards, or computers' main circuit boards, because of defective memory translator hubs that could cause computers to freeze or reboot without warning.

The news weighed on Intel's stock, which fell 10 7/8, or 9%, at 106 1/16 Wednesday amid a broader selloff in technology stocks in the Nadsaq.

The defect could lead to computers freezing and rebooting, and in extreme cases data could be erased on files. The affected computers have the memory translator hub, which translates signals from SDRAM memory, not RDRAM, to Intel's 820 chipset.

Hewlett-Packard(HWP Quote), which uses the combination of the memory translator hubs and SDRAM, could not say whether it would have a large impact on their customers. Representatives from other top computer manufacturers Dell(DELL Quote), Compaq Computer(CPQ Quote) and Gateway(GTW Quote) said their computers were not affected by the problem.

"We are putting aside money in reserve," said Michael Sullivan, a spokesman for Intel. "We don't know what it will cost, and depending upon the return rate it could be material for us. If it approached several hundred million, it would be significant for us." Sullivan estimated the replacement cost of a motherboard to be around $100 each.

Sullivan said the company became aware of the problem recently within the last few weeks when a customer reported problems.

"We certainly did have quality control screens," Sullivan said. "I guess it's more than obvious that this process wasn't sufficient to get to the problem before it went out."