NEW YORK (Reuters) - U.S. chipmaker Advanced Micro Devices must face claims that it committed securities fraud by hiding problems with the 2011 launch of a new computer processor that eventually led to a $100 million writedown, a federal judge in Oakland, California, ruled.
In an order on Tuesday, U.S. District Judge Yvonne Gonzales Rogers said plaintiffs have supported their claims that Advanced Micro officials misled them by stating in the spring of 2011 that problems with the new processor were in the past.
Plaintiffs’ lawyer Jonathan Gardner said he was pleased with the decision. Lawyers for Advanced Micro could not immediately be reached for comment.
The lawsuit filed last year accused Advanced Micro of artificially inflating the company’s share price by making false statements about the so-called Llano, which it had touted as “the most impressive processor in history.”
Originally set for product launch in the fourth quarter of 2010, sales of the Llano were delayed because of problems at the company’s chip manufacturing plant, the lawsuit said.
The lawsuit said Advance Micro’s then-Chief Financial Officer Thomas Seifert told analysts on an April 2011 conference call that problems with chip production for the Llano were in the past, and that the company would have ample product for a launch in the second quarter.
Advanced Micro officials continued to state that there were no problems with supply, concealing the fact that it was only shipping Llanos to top-tier computer manufacturers because of supply constraints, the lawsuit said.
By the time Advanced Micro was ready to ramp up shipments in late 2011, demand had dwindled, leading to an inventory glut, the lawsuit said. Advanced Micro eventually disclosed in October 2012 that it was writing down $100 million of Llano inventory as not salable, the lawsuit said.
Advanced Micro’s shares fell nearly 74 percent from a peak of $8.35 in March 2012 to a low of $2.18 in October 2012 when the market learned the extent of the problems with the Llano launch, the lawsuit said.
The lawsuit seeks damages on behalf of the Arkansas Teacher Retirement System, Belgium-based KBC Group’s KBC Asset Management and other investors who bought the company’s shares between April 2011 and October 2012.
The case is: Babak Hatamian et al Advanced Micro Devices Inc et al, U.S. District Court, Northern District of California, No 14-226.
Reporting By Dena Aubin; Editing by Jonathan Oatis