Wall Street to question Intel on Meltdown, Spectre chip security flaws

Wall Street analysts will grill Intel Corp executives on how massive security flaws in its computer chips are impacting business when the company reports quarterly results on Thursday.

Intel has said there would be no material cost to it from security flaws, dubbed Meltdown and Spectre, that were disclosed on Jan. 3 since both could be solved with software. But the real-world effects on productivity are still being determined.

"As an investor you want to know what's going to happen in the future and how it's going to impact their margins," said Kim Forrest, a portfolio manager with Fort Pitt Capital Group, which holds about 728,000 Intel shares.

She wants more information about Intel's plans for a long-term fix to the problem, including details on cost and how the changes might affect chip performance.

An Intel spokeswoman declined to discuss the results ahead of their release.

Intel has stumbled in its response to the flaws, asking customers to stop using some patches which themselves have bugs. Customers might use the flaws and Intel's response as a negotiating point to seek discounts, which could pressure Intel's operating income.

Tim Ghriskey, chief investment strategist with Inverness Counsel, says his firm will avoid adding Intel to its $2.8 billion portfolio until more details emerge on how Intel will address the flaws.

"What we really need is transparency," said Ghriskey, who said the issue could cause Intel to miss future revenue or profit targets.

It's still not clear how long it will take to resolve the problem, said Daniel Ives, head of technology research with GBH Insights.

"Investors have handicapped that it's going to be negligible damage," Ives said. "How they handle this over the next few months will dictate whether there is any long-term damage."

Wall Street analysts have said they are comfortable with Intel's assessment that the flaws will not derail earnings.

"I don't think the financial impact is going to be that material," Joseph Gunnar & Co analyst Ashok Kumar told Reuters.

Baird Equity Research analyst Tristan Gerra said he expects revenue in Intel's high-margin data center chip business to grow 7 percent in 2018, the same rate it rose in the third quarter.

If the company suggests that the security flaws could cause it to fall short of that rate, then the stock could suffer, Gerra said.