INTEL ADOPTS UPON-REQUEST REPLACEMENT POLICY ON PENTIUM(tm) PROCESSORS WITH FLOATING POINT FLAW; WILL TAKE Q4 CHARGE AGAINST EARNINGS SANTA CLARA, Calif., December 20, 1994 -- Intel today said it will exchange the processor for any owner of a Pentium(tm) processor- based system who is concerned about the subtle flaw in the floating point unit of the processor. The company has been criticized in recent weeks for replacing processors on the basis of need rather than on request. Intel will take a reserve against fourth quarter earnings to cover costs associated with the replacement program. The flaw can produce reduced precision in floating point divide operations once every nine billion random number pairs. Intel said that while almost no one will ever encounter the flaw, the company will nevertheless replace the processor upon request with an updated version that does not have the flaw. This offer will be in effect for the lifetime of a user's PC, which means that users can conclude they do not currently want a replacement, but still have the option of replacing the chip in the future if they wish. Intel is making a rapid manufacturing transition to the updated version, and expects to be able to ship sufficient replacement parts to meet demand during the next few months. "The past few weeks have been deeply troubling. What we view as an extremely minor technical problem has taken on a life of its own," said Dr. Andrew S. Grove, president and chief executive officer. "Our OEM customers and the retail channel have been very supportive during this difficult period, and we are very grateful," Dr. Grove said. "To support them and their customers, we are today announcing a no-questions-asked return policy on the current version of the Pentium processor. "Our previous policy was to talk with users to determine whether their needs required replacement of the processor. To some people, this policy seemed arrogant and uncaring. We apologize. We were motivated by a belief that replacement is simply unnecessary for most people. We still feel that way, but we are changing our policy because we want there to be no doubt that we stand behind this product." Intel will send a replacement processor to PC users who choose to do the replacement themselves, and will offer telephone technical assistance. Call 1-800-628-8686 for details. Intel also said it planned to contract with service providers to do replacements at no charge for PC owners who prefer to bring their PC's to a service location. Details will be provided in the next few weeks. Finally, Intel said it would work with its OEM customers to provide replacement for PC users who prefer to work with the manufacturer of their system. The company said it would take an unspecified but material charge against fourth quarter earnings to cover costs associated with the replacement program announced today. Intel said it was unable to determine the amount of the reserve, but said an estimated total will be provided on or before January 17, the date of Intel's 1994 financial results announcement. Following this release is a copy of an advertisement that will appear starting on December 21 in major newspapers in North America. Intel, the world's largest chip maker, is also a leading manufacturer of personal computer, networking and communications products. Advertisement ============= December 21, 1994 To owners of Pentium(tm) processor-based computers and the PC community: We at Intel wish to sincerely apologize for our handling of the recently publicized Pentium processor flaw. The Intel Inside(R) symbol means that your computer has a microprocessor second to none in quality and performance. Thousands of Intel employees work very hard to assure that this is true. But no microprocessor is ever perfect. What Intel continues to believe is an extremely minor technical problem has taken on a life of its own. Although Intel firmly stands behind the quality of the current version of the Pentium processor, we recognize that many users have concerns. We want to resolve these concerns. Intel will exchange the current version of the Pentium processor for an updated version in which this floating-point divide flaw is corrected for any owner who requests it, free of charge anytime during the life of their computer. Just call 1-800-628-8686. Sincerely, Andrew S. Grove President & CEO Craig R. Barrett Exec. Vice President & COO Gordon E. Moore Chairman of the Board Questions and Answers ===================== Pentium(tm) Processor FPU Flaw December 20, 1994 Partner to Press Q&A Prepared by Ursula Herrick BACKGROUND: This morning Intel issued a press release announcing that Intel will be changing their replacement policy on the Pentium(tm) processor floating point flaw so that users who want a chip replacement can get one with no questions asked. Intel is making this move due to the continuing controversy that has led to concern among PC users. KEY MESSAGES: - Intel has done extensive testing and characterization of the flaw and has concluded that almost no one will ever encounter this flaw. - Intel is changing their replacement policy to address the concerns of their customers. This change in policy will give users the option to decide for themselves whether or not they want a replacement chip. Press inquiries for Intel should be directed to Intel Press Relations at 408-765-1433. Investor Relations inquiries should be directed to Gordon Casey at 408-765-1679. QUESTIONS & ANSWERS: Q1. What did Intel announce today? A1. Intel announced that the company will institute a "no questions asked" replacement policy for end users. Essentially, Intel will no longer ask users to explain why they need a replacement chip. Rather, beginning today, if users want an exchange, they can obtain one. Intel will run ads this week in the Wall Street Journal, USA Today and NY Times. Q2. What made Intel change policy? A2. Intel changed their policy because this minor technical problem has taken on a life of its own and some users are quite concerned. Q3. Does this change in policy mean the flaw is worse than Intel indicated or that it affects more users than Intel thought? A3. Neither. Intel still believes that this flaw is minor. The policy change reflects user concern and is intended to give users the option of deciding for themselves if they want a replacement chip or not. Q4. How can users obtain replacement parts? A4. Users can call Intel directly [in U.S.] at 1-800-628-8686 where Intel will offer on-line support and instruction for the user to do chip replacement; for those who would prefer Intel will have a number of arrangements with service centers who will do free chip replacement for users; or, users can work with the manufacturer of their system. Q5. Will replacements be free-of-charge for end users? A5. Intel's replacement policy is to exchange free-of-charge a new Pentium processor. In exchange, all the user does is send their original unit back to Intel. For those users who call and request, Intel will send them a part and take a credit card number as security until Intel receives their original unit. Intel will work with OEMs to help with the replacement costs. Q6. By offering a replacement policy, does this mean that anytime someone finds a bug or Intel issues an errata, the part can be replaced unconditionally? A6. No. This policy only deals with the floating point divide issue and is not a general replacement policy. This is a unique case. However, this issue has clearly created a situation for the industry and Intel will work with the industry to establish how to handle errata in the future.