Intel Corp paid the price for its rotten customer relations with a vengeance in its fourth quarter figures, taking a hit of $475m to cover the cost of the belated replacement-on-demand programme for the Pentium chip – a far higher figure than analysts had factored in. The company is growing so fast that the dent is very sustainable, and turnover grew a whopping 35%, shooting Intel to $11,500m annual sales, which means that it will almost certainly be bigger than Digital Equipment Corp this year. Despite the concern about Pentiums during the quarter, Intel said shipments of the chip still doubled from the third quarter, and Pentium unit sales are expected to grow strongly this quarter. It is now shipping all good parts. The $475m charge covers expected replacement costs, replacement material and writedown of the company’s inventory of the earlier versions of Pentium processors.In dollar terms, orders for the Pentium exceeded those for the 80486 for the first time. Quarterly unit shipments of boards-level computers also set a company record, Intel said, although it didn’t give figures. And sales of Flash memory products set a new record in the quarter. Overall gross profit margin fell to 52%, from 55.5% in the third quarter. Capital spending is expected to hit $2,900m in 1995, up from $2,400m and it has $3,630m cash.
