In analyzing the case, please respond to the following questions .docx

In analyzing the case, please respond to the following
questions:
1. Consider the following dates in the evolution of the Pentium
chip flaw during 1994:
June 30: Intel discovered the flaw
October 31: Dr. Nicely posted information about the flaw
on the Internet and started an active discussion group
November 24: Article in Electrical Engineering
Times appeared, a story has been broadcast on CNN and articles
have appeared in the New York Times and Boston Globe
December 12: IBM announces that it has stopped shipments of
its computers with the flawed Pentium chip
At any of these dates, did Intel have a contingent liability as
defined by FAS No. 5?
2. At the end of the December 17 meeting, what should Intel
management do? Should they expand their Pentium chip
replacement program by (i) covering more individuals; and/or
(ii) providing or paying for some or all of the (non-chip)
incidental costs of replacing the defective chips?
3. Independent of your answer in question 2, assume that in
December 1994, Intel’s management decided to expand its
program by offering to supply a replacement chip to all
purchases of a defective Pentium chip, regardless of how they
use it. Intel will provide a new chip free of charge, but will not
pay for any other costs. What expense/liability should Intel
reflect on its 1994 financial statements?
4. How would your answer to question 3 change if Intel also
offered to pay for the labor and direct incidental costs in
addition to offering to supply a new chip to all individuals?
5. After the December 17 meeting, how should Intel’s
management communicate its decision to the financial markets?
Should Intel file a form 8-K?
6. On December 20, 1994, XYZ corp. had a chemical spill in a

field adjacent to their factory. They completed and paid cash
for the immediate clean up prior to their December 31 year-
end. However, they have consulted with an environmental
engineering firm that indicated that there is a 90% chance that
XYZ will have to perform a further clean up in six months. The
cost of such a clean up would most likely be $100,000. If the
weather is perfect during the clean up, it could cost as little as
$95,000. On the other hand, there is a small chance that soil
contamination could spread, increasing the costs to $150,000.
Should XYZ recognize a liability in their 1994 financial
statements? Assuming they do, what amount should be
recognized? How would XYZ record such a liability on their
books? What impact would the subsequent cash payment have if
the liability were settled for the amount accrued? What if the
actual clean-up costs are more or less than was accrued in 1994?
Running head: MARKETING PLAN: COFFEE SHOP
1
COFEE SHOP
2
M2A2 Marketing Plan: Find Your Marketing Template
Product/Service: COFFEE SHOP
Student’s Name
BUS 351 - Marketing Concepts and Application

Student’s Address
Student’s Telephone Number
Student’s Email Address
Instructor’s Name
Table of Contents
Executive Summary 3
Product/Service 4
Purpose 4
Audience 4
Product Life Cycle 4
Marketing Environment 4
Competitive Forces 4
Economic Forces 4
Political Forces 4
Legal Forces 4
Technological Forces 4
Sociocultural Forces 4
Marketing Objectives 4
Marketing Management 4
Marketing Mix (4 Ps) / (7 Ps) 4
Product 4
Price4
Place 4
Promotion 4
Marketing Segmentation 4
Target Market 1 4
Target Market 2 4
SWOT Analysis 4
Strengths 4
Weaknesses 4
Opportunities 4

Threats 4
Competitor Analysis 4
Advertising Strategy 4
Budget 4
References 4
TRINTEX COFFEE PRODUCTION
Executive Summary
This is a new company that deals with the sale of coffee
products and sandwiches for breakfast in the morning. This
paper is portrays the marketing plan that aims at promoting the
sale of coffee at Trintex coffee company (De Pelsmacker,
Driesen & Rayp, 2015).
PRODUCT/SERVICE
The product for sale in this case is the sale of coffee products.
The varieties of coffee products including hot and cold drinks
and chocolate is combine with snacks and sandwiches for sale
especially in the morning.
The first reason why my coffee products example exhibits
effective influences of the 4 Ps/7 Ps is that the products are
designed to satisfy consumer needs. Another reason is that I
offer discounts which make the products affordable to

consumers. Given the fact that the marketing mix has an
effective influence on my coffee products, there is need to
adjust the current marketing so as to increase sales and also to
increase product awareness to the consumers. Since the
marketing mix has an ineffective influence on my coffee
products, my first suggestion to make it effective is to
determine client needs. This is because this will help in creating
a high demand for the coffee products.
My second suggestion to make my coffee products effective is
ensuring effective communication with clients. This is because
effective communication will lead to feedback which will then
be used to improve the product. The current PLC stage for my
coffee product is growth stage. The first reason as to this these
coffee products are at this stage is that the market has accepted
my coffee products. Another reason as to this these coffee
products are at this stage is that the sales of my coffee products
is increasing. The growth stage is normally characterized
through a strong boom in sales and income, and due to the fact
the company can begin to advantage from economies of scale in
production, the profit margins, in addition to the general amount
of profit, will boom.
For the coffee products to advance to maturity stage, I
recommend quality improvement and rebranding of the coffee
products. Should it be that the products are declining, they
should be saved. This is because saving the product will help in
retaining and improving the market share (extension strategy).
Such practice as this is normally used to expand the piece of the
overall industry for a given item or administration and
subsequently keep it in the development period of the
showcasing item lifecycle as opposed to going into decay.
Augmentation procedures incorporate rebranding, value
reducing and looking for new markets. Rebranding is the
making of another search and feel for a built up item keeping in
mind the end goal to separate the item from its rivals. At its
least difficult, rebranding may comprise of making refreshed
bundling to change the view of the item.

PRODUCT LIFE CYCLE
Coffee products are known to be bought in the morning and in
the evening of every day. Hence sale of coffee is continuous
and the business will continue for a long time in the market.
However new coffee brands have to be introduced to keep the
pace for competency and competition with the various coffees
selling companies (De Pelsmacker, Driesen & Rayp, 2015).
AUDIENCE
The target market is big for coffee shop. Mostly workers in the
morning hours take coffee products before going to work. This
includes professional workers and other workers working in
various fields.
PRICE
The price of a coffee mug goes for $5. Black coffee is sold at
$7 while chocolate will sell at $ 9. The snacks will be sold
depending on the quality and size but the price will be ranging
from $5 to $15.
BUSINESS AND LEGAL SYSTEM INSTRUCTION
This includes the legal rules surrounding the business.
Various legal terms set by the government must be identified
and kept to avoid causing conflict. Moreover, internal business
rules and ethical codes must be developed to regulate employee
behavior.
MARKETING OBJECTIVES
The aim of this plan is to develop a good business plan
that will oversee the development and launching of the coffee
business. We are dedicated to create a promotional strategy that
will enable the sale of coffee products (De Pelsmacker, Driesen
& Rayp, 2015).

References:
De Pelsmacker, P., Driesen, L., & Rayp, G. (2015). Do
consumers care about ethics? Willingness to pay for fair‐trade
coffee. Journal of consumer affairs, 39(2), 363-385.
Cohen, W. A. (2014). The marketing plan. John Wiley & Sons.
9 - 1 0 1 - 0 7 2
R E V : O C T O B E R 4 , 2 0 0 2
_____________________________________________________
_____________________________________________________
______
Research Associate Lisa Brem prepared this case under the
supervision of Professors Gregory S. Miller and V.G.
Narayanan. This case draws on
material from “The Intel Pentium Chip Controversy (A) and (B),
“HBS Nos. 196-091 and 196-092, prepared by Research
Associate James Evans
under the supervision of Professor V.G. Narayanan. HBS cases
are developed solely as the basis for class discussion. Cases are
not intended to
serve as endorsements, sources of primary data, or illustrations
of effective or ineffective management.
Copyright © 2001 President and Fellows of Harvard College.

To order copies or request permission to reproduce materials,
call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163,
or go to http://www.hbsp.harvard.edu. No part of this
publication may be
reproduced, stored in a retrieval system, used in a spreadsheet,
or transmitted in any form or by any means—electronic,
mechanical,
photocopying, recording, or otherwise—without the permission
of Harvard Business School.
G R E G O R Y S . M I L L E R
V . G . N A R A Y A N A N
Accounting for the Intel Pentium Chip Flaw
What we view as an extremely minor technical problem has
taken on a life of its own.
—Andrew S. Grove, Chief Executive Officer, Intel Corp.1
In December 1994 IBM stopped shipping personal computers
containing the Intel Pentium
microprocessor. It supported this action with analysis provided
by the IBM Research Division, which
indicated that “common spreadsheet programs, recalculating for
15 minutes a day, could produce
Pentium-related errors as often as once every 24 days. For a
customer with 500 Pentium-based PCs,
this could result in as many as 20 mistakes a day....”2
Andrew Grove, Intel’s president and CEO retorted quickly:
“[b]ased on the work of our scientists
analyzing real world applications, and the experience of
millions of users of Pentium processor-based
systems, we have no evidence of increased probability of

encountering the flaw...You can always
contrive situations that force this error. In other words, if you
know where a meteor will land, you
can go there and get hit.”3
Although Mr. Grove's opinion of the Pentium “bug” was clear,
IBM's action forced Intel's top
management to address a tough question: Should Intel undertake
a broad recall of Pentium Chips?
History
Microprocessing chips are the “brains” of computers sold for
both home and business use. Intel
was the first, the biggest, and regarded by many as the best
microprocessor-maker in the computer
industry. Intel's 1993 gross margin of 63% and net margin of
26% were clear indications of the
strength of the company (see Exhibit 1 for Intel's recent
financial statements). Intel's success was
based on constant innovation, huge spending in marketing,
production and cycle-time improvement,
1Aaron Zitner, “Consumers get break on computer chip,” The
Boston Globe, December 21, 1994, p. 1.
2Bart Ziegler, “IBM, Intel Continue Their Wrangling Over
Liability for Pentium Repair Bill,” The Wall Street Journal,
December
14, 1994, p .B6.
3[[Intel]] [email protected], “Tell us what you think!,”
Copyright (c) 1994, Intel Corporation. All rights reserved.
For the exclusive use of K. Gilmore, 2017.

This document is authorized for use only by Krystal Gilmore in
MBA Financial Accounting Online taught by Susan Kulp,
George Washington University from January 2017 to July 2017.
101-072 Accounting for the Intel Pentium Chip Flaw
2
and relentless challenging of copycat competitors by
“pummeling rivals in court.”4 Intel’s first
microprocessors for computers, the 8086 and 8088 (sold in the
first IBM personal computer), were
followed by its 80186 (used primarily in controllers), 80286,
80386, and 80486 editions, each with
markedly more memory and processing speed than the previous
generation (see Exhibit 2). By 1993,
when the first Pentium was introduced, a number of
competitors—including AMD, Cyrix, and
NexGen—were already producing clones of Intel’s 486. These
competitors were getting faster at
cloning Intel's designs, and the 486 clones appeared on the
market much faster than the clones of 386
and 286 chips.
The Pentium had been designed with more testing than any
previously produced manufactured
product.5 “They ran the hell out of all the software they could
find,” said Joseph Costello, CEO of a
chip-design software maker.6 A full year of testing involving
trillions of random mathematical
processes was performed to detect any problems with the chip
before and soon after it went on the
market; a quadrillion more were performed in the year after

that. However, the rollout of any new
microprocessor was unavoidably risky since chip-testing
technology was a generation behind chip-
making technology.
In addition to detailed testing, Intel had strategically prepared
this new chip for market with the
increased trademark protection available to a name, the
“Pentium,” rather than using the 80586
moniker. Intel began to steer the market toward this newer,
faster chip—and away from competitors’
clones of prior models—by attempting to convince personal and
corporate computer users that the
486 was outmoded. With an advertising blitz estimated at $150
million, the company advertised the
logo Intel Inside® and the name Pentium in every available type
of media. By the end of September
1994, Intel had shipped nearly two million Pentium chips to
computer producers (see Exhibit 3).
The Flaw Discovered
Early in the summer of 1994, mathematics professor Dr.
Thomas Nicely of Lynchburg College in
Virginia discovered inconsistencies in his calculations
performed on his Pentium-driven PC. Nicely
was trying to prove that PCs could do mathematical work
heretofore only performed on larger
systems and thus was involved in intense and continuous
number crunching far beyond that of a
typical user. Nicely discovered the division flaw occurred only
with rare combinations of numbers,
and was not in his software, but in the processor of his
Pentium.7
The problem arose in the floating-point processing unit of the

chip, which handled numbers
expressed in scientific notation. At the end of October, Nicely
published a note on the Internet
querying other users about the Pentium flaw. A discussion soon
emerged at the Internet news group
“comp.sys.intel.” The tone quickly changed from a calm
discussion of arcane technical tests to
flaming accusations and threats aimed at Intel.
4Don Clark, “Intel Balks at Replacing Pentium Chip Without
Asking Owners Any Questions,” The Wall Street Journal,
December 14, 1994, p. A3.
5Jim Carlton and Stephen Kreider Yoder, “Computers: Humble
Pie: Intel to Replace Its Pentium Chips,” The Wall Street
Journal,
December 21, 1994, p. B1.
6Robert D. Hof, “The ‘Lurking Time Bomb’ of Silicon Valley,”
Business Week, December 19, 1994, p. 118.
7As one example of the flaw, the solution to the following
calculation, 4,195,835—( (4,195,835 / 3,145,727)) x 3,145,727,
should
be zero, but a computer with the flawed Pentium chip provides
an answer of 256: Walter S. Mossberg, “Intel Isn’t Serving
Millions Who Bought Its Pentium Campaign,” The Wall Street
Journal, December 15, 1994, p. B1.

Accounting for the Intel Pentium Chip Flaw 101-072
3
On November 7, 1994, an Electrical Engineering Times article
by Alexander Wolfe, based on the
Internet discussions, prompted Intel’s response that it had
uncovered the flaw during tests the
previous June. However, Intel had run a series of tests and
concluded that an error would occur only
once every nine billion random calculations, or every 27,000
years for most users. Further, Intel had
remedied the problem for the next planned version of the
Pentium, but had not informed customers
who had purchased a flawed processor. Following the article,
Intel offered to replace the flawed
chips, but only on a limited basis: users first had to demonstrate
that the flaw was likely to occur in
the work they performed on their computer. The Internet
discussion group continued to “flame” the
company on-line and eventually attracted the attention of
reporters. On November 22, 1994, CNN
broadcasted a story that revealed the chip flaw for the first time
to the general public, Intel’s own
computer-making customers, and the rest of the media.
On November 24, the beginning of the Thanksgiving holiday
weekend, the front-page of the New
York Times Business Section headlined “Flaw undermines the
accuracy of Intel’s Pentium.”8 The
Boston Globe carried the same story on its front page, and the
news continued to unfold over the next
month. By November 25 Intel’s stock had dropped two
percentage points from its high in late

September.
The mounting consumer pressure to fix the Pentium flaw was
hitting PC manufacturers as well as
Intel. But who would take responsibility for fixing the flaw?
Dell, a computer manufacturer, began
advertising its Pentium with a built-in computer fix to remedy
the latent flaw. On November 28,
Sequent, a mainframe manufacturer, stopped shipping Pentium
machines until a software solution
could be installed.9 On November 30, IBM—a major Intel
customer—announced that it would
replace the Pentium processor in any of its machines at the
customer’s request. IBM, however, did
not have Intel’s support to fulfill such a promise and ran the
risk of having to purchase replacements
on its own account.
As the second week of December passed, the media coverage
began to abate and Pentium flaw
stories lost their front-page status. December Pentium sales
continued to increase as planned, but
several thousand Pentium owners were calling Intel daily. Intel
rallied over a thousand of its
employees to respond to these calls and carefully assess whether
the users were performing functions
that would be at risk of engaging the flaw in the floating point
unit.10
On December 12, 1994, IBM, without prior notice to Intel,
dropped a bomb by halting shipments
of their Pentium PCs. News coverage and consumer fears re-
ignited. IBM claimed that further
testing had revealed the bug to be more common than Intel had
reported. On certain spreadsheet
programs, IBM researchers claimed the problematic number

combinations were not random and
occurred much more frequently. Calculations for a continuous
15 minutes per day could produce an
error once every 24 days. Intel’s stock plummeted $2.50 within
an hour of IBM’s announcement. (see
Exhibit 4).11
Intel had to decide how to respond to customer demands: should
they offer to replace the
defective Pentium chips of all concerned users with no-
questions-asked. In the week following IBM’s
announcement, an Intel crisis team assembled by Grove and
made up of several dozen Intel
8John Markhoff, “Circuit Flaw Causes Pentium Chip to
Miscalculate, Intel admits,” The New York Times, December
24, 1994, p.
B1.
9Don Clark, “Technology and Health: Intel Finds Pumped-Up
Image Offers a Juicy Target in Pentium Brouhaha,” The Wall
Street Journal, December 5, 1994, p. B5.
10Robert D. Hof, “The Education of Andrew Grove,” Business
Week, January 16, 1995, p. 31.
11Peter Lewis, “IBM Deals Blow to a Rival As It Suspends
Pentium Sales,” The New York Times, December 13, 1994, p.
A1.

4
employees drawn from all parts of the company met before and
after work each day to analyze and
resolve the consumer crisis on their hands.12 An all-day
meeting instigated by Grove on Monday,
December 17, was “marked...by passionate discussion, the
decision to change the policy on the
Pentium replacements was adopted and rescinded several
times.”13
Costs of Replacement
Clearly, Intel was faced with the prospect of replacing some of
the defective chips. Questions
remained as to how many of the chips would be replaced, how
the replacement would be
accomplished, and whether Intel would pay for the labor costs
to replace the chips, in addition to the
cost of the new chip itself.
Intel had to decide how wide a recall it would offer. It could
continue its current policy of
providing replacement chips only to customers that
demonstrated a need (which one analyst
estimated to be about 5% of chips sold),14 loosen these criteria
but still require some demonstration of
need, or bow to public pressure and unconditionally replace
chips on-demand. Of the approximately
six million flawed chips sold in 1993 and 1994, one-third were
used in businesses.15 Presumably
these users would have a higher rate of return than personal

users under almost any recall plan.
The actual cost of producing the replacement chip and the
accompanying heat sinks (the devices
that release heat from operating chips) was estimated to be
between $50 and $100 per chip. Other
replacement costs, which included the actual labor and
incidental costs, were estimated to range from
$31 to $750 and average over $400 per chip replaced.16 The
amount paid out by Intel depended on
what method it used to implement the repair. Intel could pay
for the entire cost of accessing the unit,
the direct labor to replace the flawed chip, and any shipping or
transportation costs incurred by
customers. Alternatively, Intel could send the replacement chip
to the customers, leaving them to
decide how to replace the chip. Another possibility was to
negotiate with computer manufacturers
and sellers to offer discounted or free replacement service to
end-user customers. In any case, the
end user seeking replacement would have to bear some costs.
One information technology
consultancy estimated that “[t]he amount borne by companies in
a typical scenario will be $289 per
system, including administrative, labor, and downtime costs.”17
Other Potential Costs
Intel had other costs to account for as well. It had produced
almost eight million flawed chips, so
in addition to the six million chips currently in computers it
would need to account for the two
million chips in inventory.18
12John Markoff, “ Intel’s Crash Course on Consumers,” The

New York Times, December 21, 1994, p. D1.
13Ibid.
14Aaron Zitner, “Pentium flaw not expected to damage Intel
financially,” The Boston Globe, November 30, 1994, p. B1.
15Don Clark, “Intel Balks at Replacing Pentium Chip Without
Asking Owners Any Questions,” The Wall Street Journal,
December 14, 1994, p. A3.
16Brian Gillooly, “The Real Cost—Intel’s ‘free’ Pentium
replacement plan may end up costing large users a bundle,”
InformationWeek, January 9, 1995, p. 34.
17Ibid.
5
The potential of lawsuits from consumers, computer
manufacturers, and shareholders loomed as
an imminent threat. The Wall Street Journal reported that “at
least 10 suits in three states” accusing

Intel of securities fraud, false advertising, and violation of
consumer protection laws, had been filed
seeking “hundreds of millions of dollars in damages.” Some
suits also looked to force Intel to replace
the flawed chips. In addition, attorneys general of four states
were in the process of filing suits
against Intel on the grounds that the company violated unfair-
trade-practices laws. 19
Intel also had to assess the impact on its brand name. The
company had spent $500 million from
1992 through 1994 on the “Intel Inside” campaign, which was
designed to make the Pentium a
household name to personal computer consumers. The brand
equity Intel had built through the
years was estimated by advertising industry analysts to be worth
$6.4 billion.20 Clearly the negative
publicity surrounding the flaw had damaged Intel’s reputation,
but the extensive coverage in the
popular press had increased its name recognition
substantially.21
Finally, Intel had projected 1995 Pentium sales of between 22
million and 25 million units,22 a
large increase over 1994 projections. Intel claimed that it could
replace any defective chips while
continuing to meet demand for new orders. In fact, Intel’s new
high production Fab 10 facility in
Leixlip, Ireland, could produce an estimated 12.5 million
Pentium chips per year,23 more than twice
the approximately six million defective processors Intel sold in
1993 and 1994.24 Further, Intel had
opened or expanded five semiconductor facilities internationally
in 1994. Unfortunately the reality of
Intel’s manufacturing and upgrading processes required some
Intel plants to continue producing

defective chips through the first quarter of 1995.25 Thus, it
was unclear whether the company could
change all production to the new chip and still meet the
estimated demand.26
Accounting for the Loss Contingency
While Intel's management struggled to determine a return
policy, financial analysts were already
attempting to predict the impact on Intel's financial statements.
One analyst put the estimated costs
of a total recall at between $400 million and $800 million,
assuming Intel replaced about 8 million
chips, including products sold and chips still in inventory.27
Another analyst suggested that about
one-quarter of Intel’s customers would respond to such a
replacement-on-demand policy and that
this would cost the company about $50 million, not including
labor.28 The financial community was
closely watching this issue, divided on its importance, and
looking to Intel to provide some guidance
on the magnitude of the charge. Further, Intel's management
would have to determine whether this
19Richard B. Schmidt, “Flurry of Lawsuits Filed Against Intel
Over Pentium Flaw,” The Wall Street Journal, December 16,
1994,
p. B8.
20Bill Snyder, “The Big Bad Brand; Intel Corp’s $80 million
marketing campaign,” PC Week, September 12, 1994, p. A1.
21Laurie Flynn, “The Executive Computer; Intel Looks Beyond
the Pentium,” The New York Times, February 26, 1995, p. 15.

22J.J. Lazlo, “Intel Corporation—Company Report,”
PaineWebber Inc., January 26, 1995, pp. 7-9; G. Christian Hill,
“Computers:
Despite Furor, Most Keep Their Pentium Chips,” The Wall
Street Journal, April 13, 1995, p. B1.
23Fahnestock & Co. Inc., “Intel Corporation,” The Wall Street
Journal Transcript, pp .113, 676.
24J.J. Lazlo, “Intel Corporation—Company Report,”
PaineWebber Inc., January 26, 1995, pp. 7-9.
25Carlton and Kreider Yoder, The Wall Street Journal,
December 21, 1994, p. B1
26Ibid.
28Zitner, “Consumers get break on computer chip,” The Boston
Globe, December 21, 1994, p. 62.
6
event was significant enough to warrant filing a form 8-K

(frequently called a "current report") with
the Securities and Exchange Commission.29
Intel's senior management would have to combine their
knowledge regarding Intel's plans and
expectations with the provisions in Statement of Financial
Accounting Standards No. 5 (see Exhibit
5). This standard requires that a charge be recognized in the
current financial statements if a loss is
both probable and estimable based on the information available
prior to a firm's financial year-end
(December 31st for Intel). The true impact on Intel would
depend not only on the size and
implementation of any chip replacement plan, but also on the
level at which customers would
actually choose to participate in the replacement program.
Thus, it could be quite some time before
the final impact on Intel was known. Accordingly, even if Intel
were to announce a replacement plan,
the difficulty in estimating its costs could lead the company to
delay financial statement recognition
of its eventual costs. However, if Intel concluded the costs
were not estimable, Statement No. 5
would still require a disclosure of the situation and discussion
of its potential impact on Intel in the
1994 notes to the financial statements. Obviously, the
determination of whether a liability exists, and
if so, the magnitude of the related expense, would involve a
large degree of managerial judgment.
While such judgment provided an opportunity to communicate
expectations to the financial markets,
it also placed management in the difficult position of
forecasting several future events. Once a
decision was made, its accuracy could be judged only through
the passage of time.

29 The 8-K or "current report" is a form filed with the
Securities and Exchange Commission and used to publicly
announce
significant events in a more timely manner than the 10-Q
(quarterly financials) or 10-K (annual financials). It is
recommended
for any significant event and required if there is a change in
control of the company, a major purchase or sale of assets, a
bankruptcy filing, a change in accountants or a director who has
resigned due to a dispute with management. It is generally
due with 15 days of the event occurrence (except for a change
in auditors, which is due within five days). A voluntary 8-K
(i.e.,
not related to one of the five required events) has no due date,
but should be prompt. See "SEC Regulation of Public
Companies," Allan B. Afterman, Prentice Hall 1995, for further
discussion.
7
Exhibit 1 Selected Intel Financial Information (all year's end as
of December 31)
(In $ millions-except per share amounts) 1993 1992 1991

Consolidated Statements of Income
Net revenues $8,782 $5,844 $4,779
Cost of sales 3,252 2,557 2,316
Gross profit 5,530 3,287 2463
Research and development 970 780 618
Marketing, general and administrative 1,168 1,017 765
Operating costs and expenses 5,390 4,354 3,699
Operating Income 3,392 1,490 1,080
Interest expense (50) (54) (82)
Interest income and other, net 188 133 197
Income before taxes 3,530 1,569 1,195
Provision for taxes 1,235 502 376
Net income $2,295 $1,067 $819
Earnings per common and common equivalent share $ 5.20 $
2.49 $ 1.96
Weighted average common and common equivalent
shares outstanding
441 429 418
(In $ millions-except per share amounts) 1993 1992 1991
Balance Sheet
Assets – Current
Cash and cash equivalents 1,659 1,843 1,519
Other current assets 4,143 2,848 2,085
Total current assets 5,802 4,691 3,604
Property, plant and equipment, net 3,996 2,816 2,163
Long-term investments and other assets 1,546 582 525
Total Assets $11,344 $8,089 $6,292

Liabilities and Stockholders’ Equity
Current liabilities 2,433 1,842 1,228
Long-term debt 426 249 363
Deferred tax liabilities and put warrants 297 180 144
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.001 par value, 50 shares authorized;
none issued
- - -
Common Stock, $.001 par value, 1,400 shares authorized;
418 issued and outstanding in 1993 (419 in 1992) and
Capital in excess of par value
2,194 1,776 -
Capital Surplus 1,640
Retained earnings 5,306 3,669 2,777
Other equity 688 373 140
Total stockholders’ equity 8,188 5,818 4,558
Total liabilities and stockholders’ equity $11,344 $8,089 $6,292
Source: Intel Corporation Annual Report, 1994, p. 15;
<http://ga.primark.com/ga/dbaseReports>, derived from
Disclosure’s
SEC Database, accessed January 24, 2001.

8
Exhibit 2 Intel's Microprocessor Product History
Product Name
Date
Introduced Clock Speed
Number of
Transistors
Addressable
Memory Typical Use
4004 November 1971 108 kilohertz 2,300 640 bytes Arithmetic
manipulation in
calculator
8008 April 1972 200 kilohertz 3,500 16 kilobytes Dumb
terminals,
calculators, bottling
machines
8080 April 1974 2 megahertz
(MHz)
6,000 64 kilobytes Traffic light controller, first
PC.
8086/8088 June 1978/June
1979

5 MHz 29,000 1 megabyte Portable computing/IBM
PCs and PC clones
80286 February 1982 6 MHz 134,000 16 megabyte PC and PC
clones
Intel386 DX October 1985 16 MHz 275,000 4 gigabytes
Desktop computing
Intel486 DX April 1989 25 MHz 1,200,000 4 gigabytes Desktop
computing and
servers
Pentium March 1993 60 MHz 3,100,000 4 gigabytes Desktops
Pentium October 1994 75 MHz 3,200,000 4 gigabytes Desktops
and notebooks
Source:
<http://www.intel.com/pressroom/kits/processors/quickreffam.h
tm>, accessed January 24, 2001.
Exhibit 3 Pentium Chip Sales
1993 1994 1995 (Estimated)
Unitsa ASPb Salesc Unitsa ASPb Salesc Unitsa ASPb Salesc
1Q 0.00 0 $0 0.40 625 $250 4.00 341 $1,365
2Q 0.00 0 0 0.80 528 422 5.00 326 1,630
3Q 0.05 660 33 1.50 483 725 6.00 283 1,700
4Q 0.20 665 133 3.00 375 1,125 7.01 268 1,879
Year 0.25 664 166 5.71 442 2,522 21.99 299 6,574
Source: J.J. Laslo, “Intel Corporation Company Report,”
PaineWebber Inc., January 26, 1995, pp. 7-9.
a Units in millions
b Average selling price
c Total sales in millions of dollars

101-072 -9-
Exhibit 4 Intel's Stock Price Throughout the Controversy
45
50
55
60
65
70
75
10
/1
4
10
/2
1

10
/2
8
11
/4
11
/1
1
11
/1
8
11
/2
5
12
/2
12
/9
12
/1
6
A

B C
A/ Octobe r 31: Dr. Nice ly has pos te d inform ation about the
flaw on the Inte rne t and s tarte d an active
dis cus s ion group.
B/ Nove m be r 25: Article in Electri cal Engi neering Ti mes
has appe are d, a s tory has be e n broadcas t on
CNN and article s have appeare d in the New York Ti mes
and Boston Globe .
C/ De ce m be r 12: IBM announce s that it has s toppe d s
hipm e nts of its com pute rs w ith the flaw e d
Pe ntium chip.
Intel
Daily Closing Stock Price (1994)
Data Source: Datastream International
10
Exhibit 5 Excerpts from Statement of Financial Accounting
Standards No. 5; Accounting for
Contingencies
For the purpose of this Statement, a contingency is defined as
an existing condition,

situation, or set of circumstances involving uncertainty as to
possible gain (hereinafter a "gain
contingency") or loss (hereinafter a "loss contingency") to an
enterprise that will ultimately be
resolved when one or more future events occur or fail to occur.
When a loss contingency exists, the likelihood that the future
event or events will confirm
the loss or impairment of an asset or the incurrence of a liability
can range from probable to
remote. This Statement uses the terms probable, reasonably
possible, and remote to identify three
areas within that range, as follows:
a. Probable. The future event or events are likely to occur.
b. Reasonably possible. The chance of the future event or
events occurring is more
than remote but less than likely.
c. Remote. The chance of the future event or events occurring is
slight.
An estimated loss from a loss contingency (as defined in
paragraph 1) shall be accrued by a
charge to income if both of the following conditions are met:
a. Information available prior to issuance of the financial
statements indicates that
it is probable that an asset had been impaired or a liability had
been incurred at
the date of the financial statements.a It is implicit in this
condition that it must
be probable that one or more future events will occur
confirming the fact of the
loss.

b. The amount of loss can be reasonably estimated.
If no accrual is made for a loss contingency because one or both
of the conditions in
paragraph 8 are not met, or if an exposure to loss exists in
excess of the amount accrued
pursuant to the provisions of paragraph 8, disclosure of the
contingency shall be made when
there is at least a reasonable possibility that a loss or an
additional loss may have been
incurred. The disclosure shall indicate the nature of the
contingency and shall give an estimate
of the possible loss or range of loss or state that such estimate
cannot be made.
Source: Statement of Financial Accounting Standards No. 5,
Accounting for Contingencies, issued March 1975. FASB
Statement
No. 5, Accounting for Contingencies, is copyrighted by the
Financial Accounting Standards Board, 401 Merritt 7, P.O.
Box 5116, Norwalk Connecticut 06856-5116, U.S.A. These
paragraphs are reprinted with permission. Complete
copies of this document are available from the FASB.
aDate of the financial statements means the end of the most
recent accounting period for which financial statements are
being
presented.

CopyrightAccounting for IntelHarvard Business School Case
#101-072Case Software #XLS006Copyright © 2010 President
and Fellows of Harvard College. No part of this product may be
reproduced, stored in a retrieval system or transmitted in any
form or by any means—electronic, mechanical, photocopying,
recording or otherwise—without the permission of Harvard
Business School.
Exhibit 1Exhibit 1 Selected Intel Financial Information (all
year's end as of December 31)(In $ millions-except per share
amounts)199319921991Consolidated Statements of IncomeNet
revenues$8,782$5,844$4,779Cost of sales3,2522,5572,316Gross
profit5,5303,2872463Research and
development970780618Marketing, general and
administrative1,1681,017765Operating costs and
expenses5,3904,3543,699Operating
Income3,3921,4901,080Interest expense(50)(54)(82)Interest
income and other, net188133197Income before
taxes3,5301,5691,195Provision for taxes1,235502376Net
income$2,295$1,067$819Earnings per common and common
equivalent share$5.20$2.49$1.96Weighted average common and
common equivalent441429418shares outstanding(In $ millions-
except per share amounts)199319921991Balance SheetAssets –
CurrentCash and cash equivalents1,6591,8431,519Other current
assets4,1432,8482,085Total current
assets5,8024,6913,604Property, plant and equipment,
net3,9962,8162,163Long-term investments and other
assets1,546582525Total Assets$11,344$8,089$6,292Liabilities
and Stockholders’ EquityCurrent
liabilities2,4331,8421,228Long-term debt426249363Deferred
tax liabilities and put warrants297180144Commitments and
contingenciesStockholders’ equity:Preferred stock, $.001 par
value, 50 shares authorized;---none issuedCommon Stock, $.001
par value, 1,400 shares authorized;2,1941,776-418 issued and
outstanding in 1993 (419 in 1992) andCapital in excess of par
valueCapital Surplus1,640Retained

earnings5,3063,6692,777Other equity688373140Total
stockholders’ equity8,1885,8184,558Total liabilities and
stockholders’ equity$11,344$8,089$6,292Source: Intel
Corporation Annual Report, 1994, p. 15;
<http://ga.primark.com/ga/dbaseReports>, derived from
Disclosure’s SEC Database, accessed January 24, 2001.
Exhibit 3Exhibit 3 Pentium Chip Sales199319941995
(Estimated)UnitsaASPbSalescUnitsaASPbSalescUnitsaASPbSal
esc1Q0.000$00.40625$2504.00341$1,3652Q0.00000.805284225
.003261,6303Q0.05660331.504837256.002831,7004Q0.2066513
33.003751,1257.012681,879Year0.256641665.714422,52221.99
2996,574Source: J.J. Laslo, “Intel Corporation Company
Report,” PaineWebber Inc., January 26, 1995, pp. 7-9.aUnits in
millionsbAverage selling pricecTotal sales in millions of dollars

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