Big Dog Doomberg posted an article screamingly titled
INTEL FACES FIRST LAWSUITS RELATED TO “SPECTRE” AND “MELTDOWN”
In any situation like this, the first question to always ask is “who benefits?” and in this instance I’m pretty confident that Doomberg is probably short Intel for some ungawdly number of shares! Doomberg, how dare you use your position in such a transparent attempt to drive down the price of Intel stock!
And then we have this from CNBC — AMD is big winner from chip flaw fiasco as more than $11 billion in Intel stock value is wiped out.
Let’s look at Intel’s chart over the last few weeks. Do you see investors running for the hills? I don’t either.
Product liability as related to security vulnerabilities is a very new and grey area. I am not an attorney nor do I play one on the Internet. However, in any lawsuit of this type, the question is “what is the dollar amount lost?” In this instance, the class action suits are based on whether the revealing of this flaw reduces the value of the product that was purchased and whether the company knew or should have known that this would be the case.
This then goes to “timeliness” since a company can’t instantly recognize an issue, announce that they’ve found the cause of the issue, fix the issue, and deliver new products to the marketplace. On the other hand, if they don’t react in a timely manner, there could be some liability. There are other types of potential liability such as if a person is injured due to a hacker taking advantage of a vulnerability which is still a possibility here.
IoT products (Internet of Things) such as are controllers in automobiles are susceptible to hacking and there is considerable concern over potential liability in this area. An IoT device could be as simple as a refrigerator with a Wi-Fi connection. If someone hacked your refrigerator and you lost all the food in it, who is liable?
So back to Intel. Let’s say you make servers and use Intel processors and now you’re concerned about this vulnerability. On Monday morning, a pointy haired boss says “OK folks! We’re switching to AMD!” What would need to happen? Well, even if you ordered chips from AMD today, you couldn’t have them until April or so. And then you just plug them into the circuit board, right? Of course not. All the boards need to be redesigned and whatever reasons you decided not to use AMD in the first place are still going to be there meaning you’re probably on the path to a more secure but inferior product.
Or you can just call in your Intel sales rep and scream at him for a couple hours. That’s what I would do! It’s so much less work and so much more satisfying!
What will Intel probably do? Odds are they fix the vulnerability and introduce a new chip along with some added capabilities. Everyone will go “wow, that’s awesome.” What about all the old products that will need to be replaced? “If you can’t fix it, feature it!” New products will come rolling out and you can either buy them or risk the vulnerability. You’re going to buy them.
Intel is going to sell an outrageous number of chips!
Sure they’ll be lots of yelling and screaming about how unfair all of this is and there might be a Congressional investigation but the end game will just be a call for better overall security against hackers and a call for the federal government to do something.
How will the class action suits end? Probably the same way these all end. If you bought an Intel processor between Date A and Date B and you have a receipt, you can return a card for a $20 credit against a new computer with Intel processor. You won’t even bother and will throw out the card but the attorneys that prevail in the lawsuit will make millions of dollars.
There is precedent here, by the way. There was a $475 million charge for the Pentium FDIV bug in 1994 and the $700 million charge for the Cougar Point chipset problem in 2011. A lot of money to be sure but recall that Intel’s market cap is currently worth $116 billion.
By the way, do you think Intel just might have liability insurance against this kind of thing? You betcha they do! Intel will be just fine. AMD may see a bit of a bump in sales for which investors may well be rewarded.
Mark does not have a position in either AMD or INTC and wishes Doomberg well in covering his short!