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Intel announces costly recall

A woman walks toward the door to the Robert Noyce Building on the Intel campus in Santa Clara, California on April 13, 2010.The chip maker is expected to report quarterly earnings after the close of regular trading Tuesday. UPI/Terry Schmitt
A woman walks toward the door to the Robert Noyce Building on the Intel campus in Santa Clara, California on April 13, 2010.The chip maker is expected to report quarterly earnings after the close of regular trading Tuesday. UPI/Terry Schmitt | License Photo

SANTA CLARA, Calif., Jan. 31 (UPI) -- U.S. chipmaker Intel said Monday an error in a new chip design would cost the company $700 million in recall costs.

Intel said it would take a charge against fourth quarter earnings for the mistake, MarketWatch reported.

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"Since this issue affected some of the chipset units shipped and produced in the fourth quarter of 2010, the company will take a charge against cost of goods sold, which is expected to reduce the fourth quarter gross margin percentage by approximately four percentage points from the previously reported 67.5 percent," the company said in a statement.

Analysts said the firm had reacted to the problem quickly and the recent acquisition of Infineon would more than offset the expected loss of revenue.

"Management is giving us bad news with some good news. Clearly a quality/design issue like this is quite serious, but Intel seems to have quickly moved to resolve the problem keeping the window of impact to under three months," said Patrick Wang, an industry analyst at Wedbush.

Analyst Craig Berger at FBR Capital said the costs associated with the recall "are relatively immaterial for Intel and 2011 earnings per share estimates should not change too materially following … the inclusion of Infineon's wireless business."

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