The Santa Clara, California-based company said it set aside $475 million pre-tax for a replacement program for the flawed chip, which works out at 70 cents per share.
Intel still managed to earn $372 million in the quarter, down from $594 million a year earlier. Earnings per share fell to 86 cents from $1.35.
Intel said its revenues overall grew 35 percent in the fourth quarter to $3.23 billion.
What started as an obscure problem with the complex chip last summer turned into a nightmare by year's end for Intel.
"The Pentium processor divide problem has been a learning experience for Intel," Andrew Grove, Intel's chief executive officer, said in a statement.
Last month, in a move to quell one of the biggest public relations disasters ever in the computer industry, Intel said it would replace the Pentium chips for any consumer who wanted to make the swap. The company said at the time it would charge the costs against its fourth-quarter earnings.
The flaw in the state-of-the-art computer chip was the focus of discussions on computer bulletin boards and academic circles for months last year.
But Intel said the chance of an average computer user encountering any problem was remote. It said the problems occur "in floating point operations once every nine billion random number pairs."
The company said this would only happen in sophisticated computer operations and "almost no one will ever encounter the flaw." Intel initially said it would replace the chips only for those whose work was likely to suffer from the flaw.
But the problem turned into a crisis in December when International Business Machines Corp., the world's largest computer maker, said it would halt all sales of Pentium-equipped PCs because of quality problems.
Soon after, Intel, the world's largest chip maker, publicly apologized for the previous strict replacement strategy and said it would replace the chips for any consumer who asked.
While apologizing, Intel said the flaw was "technically an extremely minor problem."
Despite the concern about Pentiums during the quarter, Intel said shipments of the chip doubled from the third quarter. It said it expects to see Pentium unit sales grow strongly in the current quarter.
Intel said the Pentium chips it is now shipping are all an updated version without the flaw. "We have done a very rapid manufacturing cutover to the updated version of the Pentium processor, and currently all Pentium processor shipments are of the updated version," Grove said.
The $475 million charge covers expected replacement costs, replacement material and writedown of the company's inventory of the earlier versions of Pentium processors, Intel said. The charge for replacing the chip was larger than expected. Industry analysts had estimated the company would take a charge between $200 million and $400 million.
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