CAN INTEL REPAIR PENTIUM PR? IBM, FDA STEPS ONLY ADD TO INTEL WOES

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In a series of public relations missteps, Intel Corp. is watching its $40 million fourth-quarter "Intel inside-Pentium" brand-building investment bleed away.

IBM Corp.'s decision last week to halt shipment of its personal computers with flawed Pentium chips fueled the firestorm, bringing corporate and consumer attention to Intel's problems.

Then, the Food & Drug Administration announced it was looking into whether the chip may have led to inaccurate data supplied by pharmaceutical manufacturers seeking approval for drugs.

And individuals and states began filing suits, with charges ranging from securities fraud and false advertising to violation of state consumer protection laws. Intel denied the accusations.

But Compaq Computer Corp. said its internal testing came closer to Intel's analysis of the chip flaw than to IBM's. Compaq believes most customers will be unaffected and will continue shipping Pentium-based PCs.

Intel has directly contacted large companies and retailers, its biggest customers. But Intel has done little to soothe the consumer market where it has spent so much money on brand building.

Intel's broadcast and print campaign from Dahlin Smith White, Salt Lake City, has tried to convince consumers the Pentium chip inside the computer is what counts.

So far, ads haven't addressed growing concern about the flawed chip.

"From a public relations standpoint, the train has left the station and is barreling out of Intel's control," said Stephen Jones, senior VP, Hi Tech Communications, a San Francisco public relations agency. "Intel needs to have a segmented messaging platform to address the problem and solve it."

Robin Goodman, senior VP-technology division at crisis managers Makovsky & Co., New York, said Intel must "re-establish their openness. ... They could have seized control of the problem by being up front."

In contrast, "IBM's strategy is brilliant. They are following the example Johnson & Johnson set over the tampered Tylenol, which Intel should have done. Intel is batting 1.000; they have done nothing right," said Seymour Merrin, president, Merrin Information Systems, Mountain View, Calif.

"The decision ... was made to give all customers a chance to evaluate the data and decide whether they want shipment," said G. Richard Thoman, senior VP-group executive overseeing IBM's PC operations, in an internal memo to U.S. PC employees.

However, not everyone buys IBM's altruistic motive. IBM helped develop PowerPC, a Pentium competitor, and only about 5% of IBM PCs have Pentium chips.

"It is hard to believe that IBM's motives are totally for customer protection," said Phil Lemmons, editor in chief of PC World.

Said Ms. Goodman, "I think IBM is trying to put a question in the customers' minds."

Prodigy Services Co.'s bulletin boards are going "wild" with discussion about the issue, said Carol Kopp, news manager.

Prodigy posted a Dec. 15 article by Walter S. Mossberg of The Wall Street Journal, which took some heavy shots at Intel. It was the first opinion piece to run as a lead item of Prodigy's news highlight section. IBM co-owns Prodigy.

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