AMD’s $30m settlement ends Llano lawsuit
Chip maker agrees to pay class action lawsuit filed by shareholders in 2014
Chip designer Advanced Micro Devices (AMD) has agreed to shell out close to $30m to settle a class action lawsuit filed by shareholders in 2014.
The lawsuit stems from allegations the chip maker violated the Securities Exchange Act of 1934 by overstating the demand for its Llano APU.
Members of the class action claim they were duped by AMD's statements that demand for the chip was strong, even though the company knew it was suffering from supply issues and weak demand. The class action, certified by U.S. District Judge Yvonne Gonzalez Rogers early last year, includes anyone who purchased AMD common stock between April 4, 2011 and October 18, 2012, the period before the company took a $100m write-down on inventory of its Llano chip.
AMD's Llano APU was originally slated to ship in 2009, but after multiple delays due to production yields, the processor didn't come to market until 2011. During that time, plaintiffs alleged that the company intentionally misled investors, claiming there was "strong and pent up demand" for Llano. Poor sales eventually led to a massive oversupply of Llano APUs, prompting the chip designer to take a $100m write-down on chip inventory in October 2012. This sent AMD's stock down by as much as 75%, leaving investors holding the bag.
The case alleges that at the start of the class period in April 2011, the defendants told the market that the yield problems that had affected the Llano chip in 2010 were behind the company, and that Llano was shipping to customers in sufficient volume for a successful June 2011 launch. However, the plaintiffs claim that starting in at least early 2011, the company was having substantial yield issues with Llano and could not provide Llano to a significant part of its customer base-the distribution channel.
The plaintiffs allege that at the end of September 2011, it was revealed that the company was having yield issues with Llano. However, the plaintiffs contend that the problems with the yield in 2011 caused weakened demand for the chip in 2012, and throughout 2012, the plaintiffs allege the defendants continued to tout the supposedly strong and pent up demand for Llano, particularly in its channel.
The plaintiffs claim that the truth about the channel sales begins to come out in July 2012, and in October 2012, the company took a write down of $100m in Llano inventory. AMD's stock price dropped from a class period high of $9.10 to $2.62 at the end of the class period. The defendants have denied all allegations.
Under the proposed settlement, AMD has agreed to pay $29.5m without admitting any liability or wrongdoing in the case. The settlement is pending court approval, but considering both sides have agreed to the terms of the settlement, it seems likely the courts will sign off on the deal. Both parties are still negotiating the remaining terms of the agreement and will submit a motion for approval to the courts by October 9, 2017.