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Intel to pay rebates on Pentium processors

The company settles suit for $50 rebates, $1.5 million in legal fees.

An overambitious performance benchmark on two processors will allow some Intel (INTC) customers to qualify for a $50 rebate on an upgrade, while their attorney will walk away with $1.5 million.

Intel has come to a preliminary settlement in a class action lawsuit filed on behalf of computer customers who bought computers containing 120-MHz or 133-MHz Pentium processors between October 23, 1995 and January 5, 1996, said Intel spokesman Chuck Mulloy.

Results from a benchmark performance test, referred to as "SPECint92," posted between those dates overstated the performance of the two processors by approximately 10 percent. The test essentially overestimated how quickly the processor could perform productivity applications. Mulloy further emphasized that the chips themselves are not defective; rather, the benchmark was.

When Intel discovered the overstatement, it posted a notice on January 6. Approximately a month later, Terry Gross, a San Francisco attorney, filed a class action suit on behalf of Intel customers alleging that they detrimentally relied on the erroneous benchmarks.

Under terms of the settlement, customers have to demonstrate that they purchased a computer containing a 120-MHz or 133-MHz Pentium between October 23, 1995 and January 5, 1996, when Intel posted its correction. If proof can be made, Intel will send the customer a coupon worth $50 toward an OverDrive Pentium upgrade card. With OverDrive processors, users unplug the old processor and replace it with a faster OverDrive chip. For instance, a 100-MHz Pentium in some systems could be upgraded to a 166-MHz chip.

The OverDrive Pentium upgrade card for 120- and 133-MHz systems comes with a manufacturer's list price of $219, according to the Intel Web site. So to take advantage of the settlement, customers will have to spend roughly $170 for the OverDrive processor. An MMX-enhanced version costs $399.

Assuming no appeals or objections take place, the settlement will likely be wrapped up by October, allowing customers to qualify for rebates during the first quarter of 1998.

James Staten, an analyst at Dataquest, said that approximately 592,000 computers with the two processors in question were sold in the U.S. during the relevant time period, while 1.2 million were sold worldwide.

Notice of the settlement will be posted on the Intel site and at Gross' site at

Gross' office, on the other hand, will receive $1.5 million for legal fees and costs, according to sources.

Intel would not comment on the fees received by Gross' firm. Mulloy, however, said that legal activity on the case was fairly light. "I don't think we ever went to discovery.?