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Privacy Groups Still Push for Intel Boycott

Investment fund manager says she'll investigate chips that ID users.

By Daniel Rubin, PCWorld   

"We are calling on socially responsible fund managers to dump Intel," said Jason Catlett, president of Junkbusters, whose group has spearheaded the boycott of Intel's new chip. "Socially responsible managers should look at privacy issues the same way as environmental issues."

At least one targeted manager says her company will take a hard look at the privacy implications of the Pentium III chip, which can transmit a user's computer serial numbers over the Internet. Intel implemented the feature for better security in e-commerce. The company offers a software on/off switch for the ID function, but early tests unveiled apparent flaws in that method. Privacy groups aren't satisfied.

"We are going to take the issue seriously," says Amy Domini, president and managing principal of Domini Social Equity Fund, one of the nation's largest funds that promotes itself for socially conscious investing. Domini Social Equity Fund holds more than $700 million in assets. Intel makes up nearly 4 percent of her portfolio, and is her second largest holding behind Microsoft.

"It is a good wake-up call for us as social investors," Domini says.

Privacy Groups Attack Intel

Junkbusters, with the Electronic Privacy Information Center and the Center for Democracy and Technology, is leading a coalition of privacy groups attacking Intel over the new PIII feature.

The coalition sent an open letter on Sunday to six mutual funds promoted as "socially responsible," Catlett says. The letter advocated dropping Intel from their holdings and urged the fund managers to encourage stockholder activism.

Representatives of two of the six companies mentioned in the letter, including Domini, said they had not yet received it.

Intel is aware of the letter but "had not heard anything from the funds," says George Alfs, Intel representative.

Intel, which controls more than 80 percent of the chip market through its Pentium and Celeron chips, posted more than $26 billion in sales last year. But the past few weeks has seen Intel hit by a series of controversies and a mixed reception to its new Pentium III chip.

And on Monday, PC Data research showed that Advanced Micro Devices, Intel's main rival, actually sold more processors in January. Strong sales of systems priced less than $1000, considered one of Intel's weaknesses, helped AMD capture the lead.

And, finally, the firm goes to court next month in an antitrust trial brought by the Federal Trade Commission.

Concerned Investors

Privacy is quickly becoming an issue among large investors, fund manager Domini notes, in agreement with Catlett. To investors, it can be as important a concern as the environment or human rights.

"The reason I knew about the chip is my 14-year-old told me we should buy a computer before these new chips came out," Domini says. "Right now, there is a tendency to put into place mechanisms that are hard to unwind. Some of these things could be used for darker purposes."

Domini said that divestment of Intel stock is the most extreme method of showing displeasure with a company. Dialogue with companies often brings results as well, she said.

A spokesperson for the Social Investment Forum, an organization that represents funds billed as socially responsible, says investors turn to the funds for varying reasons.

"The first draw is profits," says Elizabeth Elliot-McGeveren, a representative for the forum. "There is a growing desire to combine values with economic choices and avoid issues that are troublesome." Typically, tobacco, gambling, firearms, and alcohol companies are screened out by the funds, Elliot-McGeveren says.