Intel to take $200m charge in 2Q

Defective motherboards mean Intel have to fork out, but luckily they're raking it in with the other hand

Intel said late Tuesday it will take a second-quarter charge of $200m, or two cents a share, to replace defective motherboards. However, it also said its earnings from interest and other investments will be more than triple what it expected.

Intel shares closed up 1 13/16 to 138 5/16 ahead of the news.

Company officials now say it expects other income of about $2.3bn in the quarter, up from the $725m it predicted earlier this quarter.

It said users of the company's 820 chipset motherboards, which hold all the chips that run a PC, had problems with their machines shutting down, freezing up or losing data.

First Call consensus expects Intel to earn 71 cents a share in its second quarter.

On Monday, a pair of analysts raised their earnings estimates on the chipmaker.

Ashok Kumar at US Bancorp Piper Jaffray, who has a 'strong-buy, aggressive' rating on the stock, upped estimates for the June quarter from $7.9bn and 70 cents a share to $8.15bn and 73 cents a share. He also revised revenue estimated on the second half from $17.7bn to $18.5bn, but maintained his prior earnings estimate.

Dan Niles at Lehman Brothers also increased his 2000 and 2001 EPS estimates on Intel, noting that the company can now produce up to 15 percent more processors in the third and fourth quarters, and that PC demand has noticeably increased in early June. He reiterated his 'buy' rating and $175 price target, saying Intel is one of the two best ways to play the PC market.

Last quarter, Intel hurdled the Wall Street estimate, posting a profit of $2.73bn, or 78 cents a share, on sales of $8bn.

Intel shares surged to a 52-week high of 145 3/8 in March after bottoming out at 54 7/8 last June.

Thirty-one of the 35 analysts following the stock rate it either a 'buy' or 'strong buy'.

Exactly what kind of scenario can knock Intel -- or any large company for that matter -- off track? Arguments such as those put forth by Bill Gates and Andy "Only the Paranoid Survive" Grove insist that any high-tech company can be put out of business overnight. John Dvorak thinks this is quite clearly nonsense. Go to AnchorDesk UK for the news comment.

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