AMD Faces Securities Fraud Lawsuit

[btarunr]

Over-promising and under-delivering with its very first accelerated processing units (APU), codenamed "Llano," is coming back to haunt AMD, with a US District Court ruling that the company must face claims from investors over potential securities fraud. Launched in Q3-2012, AMD's A-series "Llano" APUs went largely unsold due to various factors including lack of product appeal, competition from Intel, forcing AMD to pull in its second-generation "Trinity" APU too soon. The related development first took shape in January 2014.

The swelling unsold "Llano" inventory forced an inventory writedown of $100 million, reducing the company's worth by nearly that much overnight, and tanking the value of the AMD stock. While AMD talked about the concept of an APU for years, Intel was the first to come out with a processor that integrates a graphics processor, with its Core i3 and Core i5 "Clarkdale" processors. The suit claims that AMD misrepresented production of "Llano" chips to its investors despite supply issues from its foundry partner GlobalFoundries, artificially inflating the value of the company in 2011-12. By the time production finally caught up, it ended up overproducing resulting in unsold inventory, and in consequence, the $100 million writeoff.



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[Sakurai]

I take the first seat, anybody wants some fresh popcorn?

 

[arterius2]

I thought April Fools was over?

Oh wait..

 

[twilyth]

The Anandtech article sums up what this might mean

These types of lawsuits are not particularly uncommon, especially as institutional investors seek restitution for money they lost from the drop in stock price. That said, today’s ruling is only over whether the lawsuit can go to trial and not over the validity of the claims themselves, never mind what specifically the investors are asking for. So it is likely that the actual lawsuit will take quite a bit longer to resolve.

 

[the54thvoid]

In all fairness, Llano and generally APU's were and are a good idea. Its difficult though to fight a company as big as Intel with R&D and time to market.
Missing predictions in tech is a certainty for most companies and many are prone to it.

I also think investors are often little more than parasites who simply gamble and when they lose, they complain like brats. You invest in anything, you take risks. The suit would have to prove an awful lot and I don't think AMD have much to worry about.

 

[RejZoR]

Erm, isn't that called "everyday business risk" ?

 

[TheGuruStud]

In all fairness, Llano and generally APU's were and are a good idea. Its difficult though to fight a company as big as Intel with R&D and time to market.
Missing predictions in tech is a certainty for most companies and many are prone to it.

I also think investors are often little more than parasites who simply gamble and when they lose, they complain like brats. You invest in anything, you take risks. The suit would have to prove an awful lot and I don't think AMD have much to worry about.

Bingo. They're mad they didn't get a big, easy money maker. Llano was a great performer for what it's job is (be cheap and do graphics, exactly what intel still can't do).

 

[REAYTH]

In all fairness, Llano and generally APU's were and are a good idea. Its difficult though to fight a company as big as Intel with R&D and time to market.
Missing predictions in tech is a certainty for most companies and many are prone to it.

I also think investors are often little more than parasites who simply gamble and when they lose, they complain like brats. You invest in anything, you take risks. The suit would have to prove an awful lot and I don't think AMD have much to worry about.

Not when you mislead an investor. AMD basically made false claims to entice investment. That sir is against the law. I'm willing to bet AMD loses this in court. They have set precedence for falsehood in the past also. Bulldozer anyone?

 

[FordGT90Concept]

But is it because Intel ran circles around AMD or did AMD not deliver what was promised? It really boils down to what AMD said when.

 

[Hood]

Supporting the underdog is the American Way (unless they lie to you besides being generally crappy products, then we kick the crap out of them!) Tried AMD for the prices, went right back to Intel, to get "back to the future" and away from slow buggy systems.
EDIT; I've heard many times on many forums from people who claim to prefer AMD because they see them as the number 2, trying harder, making the noble effort to provide the "budget-minded" (poor people) with hardware they can afford, and precisely because they're NOT Intel (the giant uncaring behemoth that's perceived as "laughing all the way to the bank"). All I can say to them is "you get what you pay for", enjoy Pentium 4 level performance in 2015, Intel had it in 2005...
BTW, AMD's always been about hype and bullspit: look how they count their "cores", that's BS on a fundamental level. Now they do it with GPU "cores" as well.

 

[ThomasDM]

The problem isn't the failure of the chip but the withholding of information and misleading claims about Llano supply & demand. AMD told investors production issues were over when they knew this wasn't the case and there seems to be a lot of evidence to support this claim.

A copy of the court's denying the motion to dismiss filing can be read at http://regmedia.co.uk/2015/04/01/amd_no_dismissal.pdf , it contains some interesting snippets.

 

[the54thvoid]

Supporting the underdog is the American Way

Umm, my reply is OT but hell no it isn't. That shit ended well before Wounded Knee... World Super Powers never support under dogs. In the world of tech, this is also true. It's why Apple chooses to fight so many thing in California, where it has great sympathy, despite being the over dog.

Anyway, sorry for wandering off topic.

 

[Casecutter]

All the plaintiff (Babak Hatamian, ET AL) can really exploit in court are transcripts from earnings call’s, engineering symposiums, from that time in say mid 2011 onto release. Perhaps social media from executive’s and or things that can be directly quoted etc. But the hype, rumors, and embellishment of articles, won't. While they’ll need to show a concerted effort from management to guide the mindsets as such. We will see.

 

[d1nky]

Didn't know they wrote so much monies worth off, that in itself is huge! Plus the cost of a lawsuit and maybe compo... hope that doesn't happen!

I just hope this doesnt turn into some Intel vs AMD BS, i've had several AMD chips and Intel, apart from synthetic i never saw a massive difference. Even the reviews of 4k give the FX 8 core some glamour!

 

[RejZoR]

Also not sure why everyone was shitting over these early APU's. I have a second generation (Zacate) and it's pretty good. CPU is a bit weak, but that was the target anyway. GPU is what allows you to even run games that don't work on any other such CPU.

 

[Jorge]

Not when you mislead an investor. AMD basically made false claims to entice investment. That sir is against the law. I'm willing to bet AMD loses this in court. They have set precedence for falsehood in the past also. Bulldozer anyone?

Actually AMD did not make false claims to entice anyone. AMD like Intel and other PC hardware providers issued roadmap projections of new products that were in the pipeline. The roadmaps are often optimistic even in Intel's case. AMD's 10Q reports and discussions always state that the future is not guaranteed but that at the time management believes the information to be accurate - which it was. The fact that AMD's stock price dropped and a group of investors lost money is largely due to their failure to understand the industry and AMD's history of technical challenges with production of new products - which are almost always late to market.

Neither AMD nor any other company has an obligation to tell investors the proprietary production issues they may experience. The fact that AMD adjusted their product release dates as they experienced production set-backs shows they were not defrauding investors at all. Unless the plaintiffs can pull a real snow job on a jury, I doubt they will prevail in this attempt to be compensated for gambling on AMD to deliver new tech and new products on time. This lawsuit is an attempt to use the judicial system to reimburse bad investing by plaintiffs, IMO and I hope it fails.

 

[64K]

Investors don't seem too alarmed by this news today. AMD is down less that 1% today in trading.

 

[Frick]

Also not sure why everyone was shitting over these early APU's. I have a second generation (Zacate) and it's pretty good. CPU is a bit weak, but that was the target anyway. GPU is what allows you to even run games that don't work on any other such CPU.

The E-350 and its ilk were terrible. Not to mention the C60 and whatever they were called. Absolutely terrible. They weren't exactly cheap, and slow.

 

[NC37]

Investors are idiots. First gens of anything, never are as super as the 2nd or 3rd.

Llano wasn't bad. Heck I built a Llano rig for a relative that is still in use today and runs well. Only major downside is that AMD changed the socket for the next gens so it has no real upgrade path.

 

[HumanSmoke]

Supporting the underdog is the American Way (unless they lie to you besides being generally crappy products, then we kick the crap out of them!)

Chips and Technologies, VIA, Digital Research Inc. and a whole host of ODM's like EPoX would disagree. Likewise consumers stayed away from AMC (American Motors Corp.) in droves simply because they weren't one of the big three.

Investors are idiots. First gens of anything, never are as super as the 2nd or 3rd.

I don't think the suit pertains to the performance ramp. It concerns Seiferts statements regarding supply and market saturation levels for the most part.

All the plaintiff (Babak Hatamian, ET AL) can really exploit in court are transcripts from earnings call’s, engineering symposiums, from that time in say mid 2011 onto release. Perhaps social media from executive’s and or things that can be directly quoted etc.

From the suit filing, it seems that that is exactly what is being taken to task. Companies in general are very guarded about predictions and product ramps with good reason, but Seifert had only just taken on the job after Dirk Meyer's ousting, and AMD were getting destroyed both in sales and as a brand by Intel's recently launched Sandy Bridge. Personally, I'm not sure if the interim CEO's words just bombast, deliberately misleading, or naïveté. OEM's would likely know the real truth about supply and performance, while Intel could care less about what an AMD CEO talks about, since the outcome is invariably...

Investors are idiots.

With AMD's prior record of production, process, performance, and time to market issues, investing in the BoD's predictions seems like an exercise in Reverse Darwinism. What's the proverb? "A fool and their money are soon parted"

 

[techy1]

this is not about crappy product - because there are tons of crappy products marketed as the next big thing that will change the world and wash away all our problems... in PC industry or whatever industry... but when you lie to your investors who counts on your reports and calculate based on them Investments - cuz there are many Stock exchange laws what reports and whena company must create them

 

[xvi]

The E-350 and its ilk were terrible. Not to mention the C60 and whatever they were called. Absolutely terrible. They weren't exactly cheap, and slow.

I had a machine with a E1-1200 which is a very similar processor. It wasn't a powerhouse, but it seemed like enough for what it was for. Ran Google Earth surprisingly well. Easily overwhelmed though. Seemed inexpensive enough too.

 

[qubit]

AMD is already so much weaker than Intel and NVIDIA and now this to crush them even further? Not good. We really need competition in the market.

Unfortunately, I see no future for them unless the likes of Samsung buys them out and gets around that x86 licence clause that prevents the bought out company from using it. Perhaps anti-trust laws could apply to this clause, too?

 

[arbiter]

I had a machine with a E1-1200 which is a very similar processor. It wasn't a powerhouse, but it seemed like enough for what it was for. Ran Google Earth surprisingly well. Easily overwhelmed though. Seemed inexpensive enough too.

I know someone with one those e1 cpu powered laptops, its like 2 years old i think, that cpu is Slow as CRAP. My 8+ year old core duo laptop its not core 2. Its lowest end core duo chip was made matches the thing in performance. Even using his laptop core duo in mine is faster.

 

[HumanSmoke]

Unfortunately, I see no future for them unless the likes of Samsung buys them out and gets around that x86 licence clause that prevents the bought out company from using it. Perhaps anti-trust laws could apply to this clause, too?

Couple of points regarding that.
The x86 licence/cross-licence agreement allows for a buyer to retain the licence for a year to allow for negotiations on licence renewal. So instead of a hostile suit/countersuit trade embargo situation, any transference is smoother - along the lines of when National Semiconductor sold its x86 licence to VIA.

I doubt Samsung has any interest in x86, and even if they did, ramping R&D to a level that Intel are already at would probably exceed the purchase price of AMD by a considerable margin.

The prime reason I could see for Samsung purchasing AMD wouldn't be for x86/x86-64, but for graphics IP, since that is an area Samsung has interest in. Strangely enough, AMD's position would become stronger if Nvidia succeeds in its suit against Samsung and Qualcomm. If Nvidia enforces it's graphics IP as licensable, then AMD's would also be in the same position, thus raising their value. AMD already has long term cross-licences with Nvidia for graphics IP, and purchasing AMD would likely mean a transfer of those cross-licences to Samsung and a means to avoid paying fees to Nvidia. With that in mind, AMD's value improves proportionally with any potential settlement levied against Samsung in its suit with Nvidia.