Intel Investors Question Timing of CEO’s Share Sales

(CN) – Intel shareholders claim in a federal class action that CEO Brian Krzanich knew of the cybersecurity flaws with Intel’s microprocessor chips before the public was informed and sold $39 million in stock at an inflated price.

In January, a British technology website broke the news that Intel’s microprocessor chips suffer from two major security flaws that enable hackers to swipe data from personal computers, mobile devices and servers, including those that connect to cloud computing networks.

Filing suit on March 6 in San Jose, California, shareholders led by the Louisiana Sheriffs’ Pension & Relief Fund says Intel knew of the defects before they became public, and Krzanich sold the maximum amount of stock allowed under the company’s bylaws – roughly $39 million worth of his personal holdings.

Named as defendants are Intel, Krzanich, CFO Robert Swan and Executive Vice President Navin Shenoy. The complaint accuses the company of concealing its knowledge of its chips’ cybersecurity issues from investors.

Intel’s share price fell approximately 4 percent from $46.85 per share to $44.43 per share when the security flaws and Krzanich’s sales became public knowledge.

The first flaw, now known as Meltdown, affects virtually all Intel microprocessors, which make up more than 90 percent of computer servers.

The defect enables hackers to bypass the barrier between applications and hardware to access a computer’s core memory and steal private information like passwords through cloud computing services.

Microsoft Windows quickly unveiled a security patch for the Meltdown flaw, but the fix slows down computers by as much as 30 percent, according to the complaint.

A day later, Google researchers publicly announced that Intel chips suffer from a second flaw, now called Spectre.

Both Spectre and Meltdown exploit a vulnerability in a computing operation called speculative execution. Speculative execution occurs when the computer “guesses” the next piece of data a user will access based on former actions and makes that data available in the kernel, a layer of computer memory that sits between the operating system and hardware.

Intel released updates for its microprocessors in January, and again in February to address the security issues, and major cloud computer services run by Amazon, Google, and Microsoft say they updated their systems to prevent hackers from exploiting the flaws.

“Federal lawmakers have since wrote a letter to the SEC and the Department of Justice urging them to investigate Intel’s CEO’s ‘alarming’ and ‘troubling’ insider sales,” the complaint says. “The United States House of Representatives is also investigating Intel’s ‘troublesome’ concealment of the security flaws and ‘glaring warning signs that we must take cybersecurity more seriously.’”

Intel’s share price has since recovered from the news, closing at $52.19 on March 9, its highest valuation since the dot com bubble in 2000.

The class is represented by David R. Stickney with Bernstein, Litowitz, Berger & Grossmann in San Diego.



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