Intel CEO Brian Krzanich was delighted to report that Intel had a record year in the company’s quarterly earnings call with analysts yesterday. Of course, he also had to acknowledge the Spectre and Meltdown chip vulnerabilities revealed earlier this month in perhaps the ultimate good news-bad news moment.
Like any good salesman, Krzanich led with the good news. “2017 was a record year for Intel and fourth quarter results were outstanding. Well ahead of the forecast we outlined in October, based on the strength on both our PC-centric and data-centric businesses.”
Then came the not-so good news on Spectre and Meltdown, which he valiantly tried to sweep aside in his opening remarks. “We’ve been around the clock with our customers and partners to address the security vulnerability know as Spectre and Meltdown. While we made progress, I’m acutely aware that we have more to do, we’ve committed to being transparent keeping our customers and owners appraised of our progress and through our actions, building trust,” he said.
He added that the company is working on a more permanent solution for later this year. “We’re working to incorporate silicon-based changed to future products that will directly address the Spectre and Meltdown threats in hardware. And those products will begin appearing later this year,” he said.
For those of you not aware of Spectre and Meltdown, they are a series of serious chip vulnerabilities that affect many modern chips including Intel and its competitors. They could allow hackers to access the chip kernel, the area that is supposed to protect the most sensitive information like passwords and encryption keys.
What’s more, the fixes to resolve, which have come in bunches from every corner of the tech world in recent weeks, could cause some significant computer processing slow-downs. It didn’t help Intel’s case that their first attempts at patching the issues were seriously buggy.
Nor did the fact that Google revealed that it had informed Intel In June 2017, months before it leaked out . In addition, Krzanich sold a substantial amount of stock in November, and filed the intent to sell long after he knew about the issue. Even though it was all legal, it certainly didn’t look good.
In spite of all this, the fact is that Intel had a good quarter with revenue of $16.35 billion exceeding analyst’s predictions, but that was for the period that ended 12/31/2017. The Spectre and Meltdown story broke on January 3rd.
Surprisingly only one analyst asked about the impact of Spectre and Meltdown on the company moving forward. Vivek Arya from Bank of America asked a question without mentioning the vulnerabilities by name. “For [the] first one, Brian, I’m curious. Are you baking in any effect on sales of cost of pricing for many resolution on the processor security issues?” Krzanich responded, “From a cost standpoint, we’ve baked in and we’ve talked about that we don’t expect any material impact of this security exploit on our spending or product cost or any of that. So that’s how we baked that in.”
It’s worth noting that there are several lawsuits pending against Intel over the chip issues. Krzanich addressed that in his remarks. “However, these circumstances are highly dynamic and we updated our risk factors to reflect both the evolving nature of these specific threats and litigation as well as the security challenge more broadly.”
While acknowledging the obvious issues ahead, the company surprisingly doesn’t see any substantial impact from the security problems. And in spite of all the negative news in recent weeks, the stock surged in after hours trading up $6.71 and was up slightly over that after the opening bell.
Whether Intel can escape from this unscathed financially remains to be seen, but at least for now Wall Street is not punishing the company for its transgressions, perhaps believing that Intel can resolve the chip security issues satisfactorily in the coming year.