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Intel Dips on Chip Flaw, Krzanich Accused of Insider Trading

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Some news reports are sensationalized for maximum following like the one from the Register saying that Intel’s (INTC - Free Report) Krzanich sold off a large number of shares because he was fully aware of major security flaws that could send Intel shares down.

It’s true that the number of shares involved was significant: he exercised his option to purchase 644,135 shares at $12.985 to $26.795, subsequently selling them at a weighted average price of $44.05. He also sold an additional 245,743 shares to bring his total holding to 250,000 shares, the minimum amount required to be held by the CEO.

But it’s also true that the share sale was preplanned in accordance with the 10b5-1(c) rule that allows management to sell a portion of their holdings according to a predetermined schedule without attracting insider trading charges. An SEC filing reveals that this is what happened in this case.

Intel was apparently informed about the security gap back in June, which is why there is so much suspicion surrounding the stock sale.

A BIG Security Problem

But since millions of devices and parts of the cloud have been exposed to vulnerabilities, this is a serious matter. Moreover, the two bugs/flaws could allow programs to steal data including passwords stored in a password manager or browser, personal photos, emails, instant messages and even business-critical documents.

The first one, called Meltdown affects only Intel processors and Intel is already providing software and firmware updates for this one that could slow down your machine somewhat, but would be mostly imperceptible for most users, according to the company.

The second one, called Spectre is much harder to fix and affects Intel, Advanced Micro Devices (AMD - Free Report) and ARM-powered devices, so practically every single machine.

We now know that chip companies like Intel, AMD, Softbank-owned ARM and some operating system providers are already collaborating on an industrywide solution to the problem. Microsoft (MSFT - Free Report) has already said that it’s working on a patch, as is Alphabet (GOOGL - Free Report) and Amazon (AMZN - Free Report) . Apple (AAPL - Free Report) is also likely working on it.

Intel Says…

"Intel and other technology companies have been made aware of new security research describing software analysis methods that, when used for malicious purposes, have the potential to improperly gather sensitive data from computing devices that are operating as designed."

"Intel believes these exploits do not have the potential to corrupt, modify or delete data."

"Intel has begun providing software and firmware updates to mitigate these exploits."

"Contrary to some reports, any performance impacts are workload-dependent, and for the average computer user should not be significant and will be mitigated over time."

Putting That Into Perspective

It is a fact that technology is developing as we use it and many of the systems that we are using today are going to get better tomorrow. This happens because of ongoing research and partly also because of efforts to eliminate the problems we face today.

The fact that hardware needs to be secured was unknown a few years back. Most mobile devices didn’t even have security software until recently. So while this is a big concern, it’s heartening to note that there are no known cases of exploitation of these vulnerabilities. Hopefully then, the top technology companies that we depend on will be able to find a solution before all hell breaks loose.   

Price Action

Chip makers NVIDIA and AMD are appreciating, as if the security flaw only affects Intel technology and not others. Of course, they still do have a few things going for them, such as cryptocurrencies, which benefits them both and potential in the data center, video game, AI and self-driving car markets, which is particularly beneficial for NVIDIA.

Intel of course is taking a beating.

 

Intel shares carry a Zacks Rank #3 (Hold). But you can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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