Intel to Take $200 Million 2Q Charge - TheStreet

Intel to Take $200 Million 2Q Charge

The charge will cover the cost of replacing defective motherboard chips.
Author:
Publish date:

Intel

(INTC) - Get Report

, the world's largest chipmaker, said Tuesday that it would take a $200 million charge in the second quarter to cover the cost of replacing defective motherboard chips.

The charge will equal 2 cents a share after a 2-for-1 split of Intel stock takes effect next month.

The news was expected. On May 10, Intel announced that it would replace motherboards with defective memory-translator hub components. The defective MTHs caused some systems to "intermittently reset, reboot and/or hang" and, in some cases, data was corrupted, according to the company.

"This was certainly within the range that analysts have been talking about," Quinn Bolton, an analyst at

CIBC World Markets

, said of the charge. "What's important is that this is a one-time charge and will not impact the third- or fourth-quarter earnings." He rates Intel a buy and his firm has done no recent underwriting for the company.

Intel already adjusted its first-quarter revenue and inventory for products returned because of this problem. Those revisions had a gross margin impact of $53 million, or less than 1 cent a share on a post-split basis.

Also, Intel said that it expects interest and other income for the second quarter to be about $2.3 billion, significantly larger than the company's previous guidance of $725 million. The increase is largely due to higher-than-expected gains on the sale of equity investments.

The company, based in Santa Clara, Calif., will announce its second-quarter results on July 18.

Shares of Intel closed regular trading Tuesday at 138 5/16, up 7/16 or 0.32%. The stock was little changed in after-hours trading, according to

Island ECN

.