Analysts Weigh In On Intel's Security Issues

Intel Corporation INTC's x86-based processor chips have a "fundamental design flaw" that necessitates a revamp of the Linux and Windows kernels, The Register reported. 

The design flaw could reportedly compromise security at the hardware level.

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Intel shed 4.48 percent Wednesday, while Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA gained 6.19 percent and 7.20 percent, respectively.

At the time of writing, Intel was down an incremental 2.49 percent at $44.13. AMD was rallying 5.41 percent to $12.18 and Nvidia was gaining 0.63 percent to $213.81. 

Even as programmers embark on overhauling the open-source Linux kernel's virtual memory system, the Register said Microsoft Corporation MSFT is expected to release a patch Tuesday that would make needed changes to its Windows operating system.

These updates to Linux and Windows OS will affect the performance of Intel products, with a 5-30 percent slowdown expected, according to The Register. 

Intel In Firefighting Mode

Responding to the news, Intel said the issues do not have the potential to corrupt, modify or delete data.

"Recent reports that these exploits are caused by a 'bug' or a 'flaw' and are unique to Intel products are incorrect. Based on the analysis to date, many types of computing devices — with many different vendors' processors and operating systems — are susceptible to these exploits," Intel said.

Credit Suisse: Sell-off An Overreaction?

The sell-off related to the speculation of security issues appears to have been an overreaction, Credit Suisse's John Pitzer said in a note. 

The analyst does not find the current valuation of the stock to be "particularly compelling."

The flaw "exploits 'speculative execution' techniques to circumvent privileged provisions to observe but not alter sensitive data [and] memory," Pitzer said of Intel's explanation of the problem. 

The issue is not unique to Intel CPUs and is likely to be addressed with software, firmware and eventually hardware updates, the analyst said.  

See also: Chips On The Table: An Aggressive Semiconductor Idea

The issue is not likely to result in extraordinary financial impact or changes to product timing, Pitzer said. 

Credit Suisse said its recent checks for the calendar fourth quarter suggest upside to its estimates and Street estimates for Intel's revenue and earnings per share.

Credit Suisse has a Neutral rating and $42 price target on Intel.

Tigress Financial Sees Further Downside

With Intel and several leading tech companies announcing they have taken steps to defend against cyberattacks, Tigress Financial's Ivan Feinseth said the security flaw will remain a major issue. 

"I do not believe the weakness in the stock is a buying opportunity," Feinseth said.

Tigress remains Neutral on Intel, and Feinseth said the stock could trade lower even if the security problems are rapidly fixed. 

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Navin Shenoy, corporate vice president and general manager for the client computing group at Intel, holds a processor. Photo courtesy of Intel Corp.