In the ensuing two short weeks since news broke 3 January about the flaw in chips that exposed computers and devices to securities vulnerabilities Spectre and Meltdown, a few tech companies have seen share prices buffeted and others have seemingly crested the tsunami of bad news.
The CES conference in Las Vegas is the biggest in the tech industry and its where tech companies are use to unveil the big news and launches. The conference suffered a power outage and there was heavy rain which made it all more portentous.
According to FactSet, at industry level 12 of the 18 companies that issued positive EPS guidance were in the semiconductor and software industries. The Information Technology sector is expected to report the third highest earnings growth of all eleven sectors in Q4 2017 at 15.9% led by growth in semiconductor industry.
Whether or not the chaos enveloping the industry could present opportunities or expectations for further difficulties remains to be seen but let’s first take a look at what happened, some of the key publicly held players’ responses and market reaction.
Not a paranormal pair
In the simplest of terms, this security crisis is likely to affect everyone with a modern computer and or device leaving them open to having their information stolen. Meltdown and Spectre will exploit vulnerabilities differently and here is a comprehensive but easy explanation of both by researchers.
Meltdown will affect desktop, laptop, Cloud computers and every Intel processor since 1995 (except for two of their processors Intel Itanium and Intel Atom 2013). ARM has admitted that some of its processors are affected but said at first there was “near zero risk” for some variants to affect its processors. It has since changed its tune and admits that Spectre is applicable to AMD processors. There are workarounds/fixes that are currently being rolled out.
Spectre is a root problem that is more difficult to solve and is therefore expected to hang around for much longer. Every system is expected to be affected: desktop, laptops and smartphones around 3 billion of them according to MIT Technology Review and can be found on Intel, AMD and ARM processors.
Google Project Zero announcement
Chip companies, system developers and cloud computing providers were all made aware of the security flaws privately and apparently, public disclosure was due to come a week after it was exposed after fixes were developed and deployed where possible.
However, it was anything like managed communication by the companies involved as the release of news by Google Project Zero of the flaw was suddenly brought forward. Accusations that some of tech companies were sowing confusion and obfuscation came thick and fast and share prices have responded.
Analysts say investors should expect continued volatility by the main responders: semiconductor, operating system companies and providers of cloud services. So which of the key companies had their own mini-meltdown in response, which surfed through chaos by remaining calm and transparent and what was subsequent market reaction?
Blessed are the chip makers
Intel: At close on Friday 12/1/18 down -0.39% at $43.24. It made gains over past 12 months of +17.53%
Intel bore the brunt of the bad news initially because of its market dominance with its chips powering PC and servers. While Spectre will affect chips from many vendors, Meltdown only affects those made by Intel for the past 20 years and AMD’s highest performance chips.
The company initially sought to downplay the news as its share price plunged. However, CEO Brian Krzanich has since pledged in an open letter a 15 January deadline to update 90% of Intel’s CPUs made in the last five years and the remainder to be fixed by the end of the month.
Krzanich also promised: “We commit to provide frequent progress reports of patch progress, performance data and other information.”
Intel has seen a spectacular turnaround in the past five years as it shifted beyond PC chips in to faster growing technologies, which include AI-centric intelligence and a move into autonomous driving partnerships with the likes of BMW and Delphi Automotive and its share price had been rewarded up 27% last year.