IBM Halts Pentium Pc Shipments

ARMONK, N.Y. - International Business Machines Corp. said it's halting shipments of computers based on Intel Corp.'s Pentium processor because of concern that a bug in the chip could be more serious than previously stated.

The move by the world's largest computer maker could trigger a war of loyalty among computer chip companies and personal computer makers. Intel reiterated that it has no plans to recall the flawed chips.

"Who do you believe, IBM or Intel? That is what it will come down to," said analyst Erik Jansen of Alex. Brown & Sons Inc. "It comes down to an issue of trust . . . and the world will trust IBM."

While Intel's description of the flaw, disclosed late last month, is "technically accurate," IBM said it is concerned about the frequency of Pentium-related problems.

IBM said its research indicates that a user running a common spreadsheet program on a Pentium machine could run into incorrect calculations as often as once every 24 days, far more often than the error every 27,000 years that Intel has estimated.

News of IBM's move sent Intel's stock price down $4.25 to $58.50 before trading was halted at midday.

Intel, however, said IBM's move is "unwarranted" and that it stands behind its own test results.

"You can always contrive situations that force this error," said Andy Grove, president and chief executive of Intel.

Industry consultant Sam Albert, however, asked, "If IBM's facts are correct, can an Intel recall be far behind?"

If Intel were forced to recall all the Pentium chips shipped this year - which is estimated to be as many as 5.5 million - it could shave as much as $1 a share off fourth-quarter earnings, analysts said.

Intel has said it is only producing samples of the corrected chip, and replacements are in short supply. It will replace them only for users likely to be affected by the so-called floating-point error. The error affects complex mathematical calculations most often used by scientists and engineers.

IBM sells five PC models as well as several server models that use the top-of-the-line chip. But IBM said the percentage of Pentium-based systems among its total PC shipments is "relatively small." Most of Big Blue's PCs run on the older 486 processor.

"IBM tends to be ultra-conservative" when dealing with customers, said analyst Roxanne Googin of Gruntal & Co., and this move may be only a public relations maneuver.

Indeed, IBM's move could help sales of computers using the PowerPC, a chip jointly developed by IBM, Motorola Inc. and Apple Computer Inc., as well as sales of 486 machines. IBM uses Intel competitor Cyrix Corp.'s 486 clones in many of its computers.

"This can only help" IBM, Albert said. "This will put a downer on Pentiums. The consumer will think twice before buying it."