Thursday, January 16th 2014

AMD Sued for Overestimating APU Success to Investors

Some investors in AMD, who purchased company stock between October 27, 2011 and October 18, 2012, filed a class action lawsuit against AMD, through law firm Robbins Geller Rudman & Dowd. The class action alleges that AMD and its officers and directors committed violations of the US Securities Exchange Act of 1934. AMD allegedly misled its investors over how popular its first generation "Llano" desktop APU would get, claiming that there were much greater prospects for the APU than it actually ended up selling.

The law firm detailing its suit writes:
The complaint alleges that during the Class Period, defendants made false and misleading statements about the Company's business and prospects. Specifically, the complaint alleges defendants made false statements and/or concealed adverse facts regarding AMD's 32 nanometer Llano (the "Llano") Accelerated Processing Unit ("APU"), which is a type of microprocessor that combines AMD's central processing unit and its graphics processing unit onto a single piece of silicon, including repeatedly highlighting the "strong" and "significant" interest in, demand for, and unit shipments of, the Llano APUs, and falsely and misleadingly representing that AMD's desktop business was in a "strong position" and that it would "continue to rebound" in 2012. As a result of defendants' false statements, AMD stock traded at artificially inflated prices throughout the Class Period.
When AMD announced its Q2-2012 results in July of that year, it became clear that there really wasn't the kind of demand for the APU that AMD was playing up, AMD in its IR release stated that the markets where it most expected the APU to sell - China and Europe, had lukewarm reception of "Llano." This caused a fire-sale of AMD stock, when it saw a fall by almost 25 percent on extremely heavy trading volume. In the following quarter, on October 28, 2012, AMD announced a decline in its gross margins for Q3 2012 declined 31 percent QoQ, due in part to the $100 million inventory write-down, following which AMD stock declined another 17 percent in a flash.

The Plantiff seeks to recover damages, who are represented by Robbins Geller, a firm that specializes in class action suits against companies that mislead their investors in a very big way. It would be interesting to see how this case plays out, given that readers of content on sites like ours most likely knew how fast AMD's K10 CPU and VLIW5 GPU architectures were (given that they had each driven AMD's product stack for several years), and what to expect from Llano, way back in 2011.Source: Robins Geller Rudman and Dowd LLP, Image Credit: BeHardware
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52 Comments on AMD Sued for Overestimating APU Success to Investors

#1
Prima.Vera
I guess only in US they can expect to win this over ridiculous process :))))
Posted on Reply
#2
Kaynar
Unless AMD's execs signed contracts with those people guaranteeing them something, I don't see how AMD was legally bound to perform these numbers.

I can sell magical bananas to people for $100, if investors believe I am selling magical bananas without proof it's their fault for buying them. Stupid clueless investors as always...
Posted on Reply
#3
Rowsol
The whole idea of investing in something is risk vs reward. Apparently there can only be reward now.
Posted on Reply
#4
lemonadesoda
Do you think it is Intel or nVidia interests who are driving this? This is not about independent investors making nothing or losing a cent, it is about the PR. And there are a few companies that would love to do this... ;)
Posted on Reply
#5
Fx
by: TRWOV
What to the who now? So shareholders are just going to sue when companies don't meet projected sales? Now if AMD indeed made up numbers out of thin air then yeah, that's fraud but failing short of an honest estimate isn't.

Me smells lots of butthurt "investors" (there's always a risk involved with investments).
+1

As an investor, there is always inherent risk regardless of who says or does what; this is ridiculous.
Posted on Reply
#6
Dent1
by: FreedomEclipse
In this case, estimates/promises their all the same and AMD didnt deliver - thats the bottom line
Estimates and promises are completely different in all languages.

Estimates are a mere projection, often based on past data. But with a understanding that the projection can be incorrect or become inaccurate depending on marketplace changes.

Promises are 100% concrete guarantees and reassurances. If you're in business you know there is always risk, so certified guarantees are never given. If you're buying stock its up to the investor to do their OWN research. Just like any investment, if you're buying a house or car you are required to do your OWN research.


Two completely different things.
Posted on Reply
#7
theoneandonlymrk
by: Dent1
Estimates and promises are completely different in all languages.

Estimates are a mere projection, often based on past data. But with a understanding that the projection can be incorrect or become inaccurate depending on marketplace changes.

Promises are 100% concrete guarantees and reassurances. If you're in business you know there is always risk, so certified guarantees are never given. If you're buying stock its up to the investor to do their OWN research. Just like any investment, if you're buying a house or car you are required to do your OWN research.


Two completely different things.
quite right and i would have thought AMD's catch all statement(/get out clause) at the end of said investor report(the same as any comapany's, ie the forward looking statements in this report are based on trends and prior statements and may not come to pass etc etc blah blah) would serve to deflect any lawsuit.

All companys cover their asses directly and thoroughly in the investor statements clause at the end of any financial report.
Posted on Reply
#8
AsRock
TPU addict
by: Recus
I feel bad for them. When you invest your money you want physical benefit. Not a empty PR slides.
But not the real world or else everyone would be investing. Investing has always been a gamble.
Posted on Reply
#9
micropage7
investors should pay attention of AMD performance, and realize its kinda hard to achieve that
Posted on Reply
#10
AsRock
TPU addict
by: micropage7
investors should pay attention of AMD performance, and realize its kinda hard to achieve that
I think there just unhappy as they did not make the money they though by a time line.. Once there is more games for them lets face it the XBox 1 and PS4 will sell more.
Posted on Reply
#11
Dent1
99% of people whom invest in stocks will either break even or lose money. Even if the stocks rise drastically you still need to be experience enough to pull out whilst on top, before it plummets. This is a real skill that only 1% of people will master.

Its this new entitlement mentality people have. They feel entitled not to do their own research, then complain when things don't work out. Rather than admit their mistakes, learn from it and adapt they blame others for not being successful.
Posted on Reply
#12
xtremesv
Stock exchange is a type of legal gambling. One hour you win, the other you lose. I don't see how these poor investors have a case.
Posted on Reply
#13
de.das.dude
Pro Indian Modder
amd cant help if intel keeps indulging in unfair practices and occupying idiot consumers. as freedom eclipse said, the apus are hopeless when it comes to desktops and hybrid cfx is still bullshit. BUT, these make excellent mobile processors, but much better performance /price/battery life ratio than similarly priced intel i3 based ones. but you still see the intel i3 ones being sold 100x over.
Posted on Reply
#14
TRWOV
by: de.das.dude
amd cant help if intel keeps indulging in unfair practices and occupying idiot consumers. as freedom eclipse said, the apus are hopeless when it comes to desktops and hybrid cfx is still bullshit. BUT, these make excellent mobile processors, but much better performance /price/battery life ratio than similarly priced intel i3 based ones. but you still see the intel i3 ones being sold 100x over.
I don't think that's a mayor issue right now, even if AMD wanted to sell more they don't have the manufacture capacity to do so. I suspect that that is a far greater issue for the few design wins that AMD gets than anything Intel might be doing.
Posted on Reply
#15
newtekie1
Semi-Retired Folder
Don't be so quick to assumed that the misrepresentations were just estimates that AMD didn't meet. That very likely isn't the case here. From the sounds of the actual wording of the lawsuit, AMD misrepresented the actual demand for the product. Generally before you release a product you go to the people you'll be directly selling it to and see how interested they are in buying it, they might even get pre-orders, they then report this to their investors so the investors will spend more money to actually put the product into production. From the wording of the lawsuit it sounds like what happened is that AMD fibbed to the investors about how many of their partners actually wanted Llano or how much their partners were willing to buy, or at least that is what the investors are saying. It will be up to the courts to sort out all the documentation on what was presented to the investors vs. what data was actually collected from AMD's partners.
Posted on Reply
#16
xavier1123
I may sound like an AMD fanboy but all the stock market investors have to bear it in mind that stock market is always a gamble. Whether you fly on profits or get burnt on losses; not a single person is liable for your loss or profit. You always have to take a risk of getting full losses or full profits.
Posted on Reply
#17
Dent1
by: newtekie1
Don't be so quick to assumed that the misrepresentations were just estimates that AMD didn't meet. That very likely isn't the case here. From the sounds of the actual wording of the lawsuit, AMD misrepresented the actual demand for the product. Generally before you release a product you go to the people you'll be directly selling it to and see how interested they are in buying it, they might even get pre-orders, they then report this to their investors so the investors will spend more money to actually put the product into production. From the wording of the lawsuit it sounds like what happened is that AMD fibbed to the investors about how many of their partners actually wanted Llano or how much their partners were willing to buy, or at least that is what the investors are saying. It will be up to the courts to sort out all the documentation on what was presented to the investors vs. what data was actually collected from AMD's partners.
Even if AMD exaggerated it seems like the investors didn't do thorough research on their end. The investors should have asked for documentation confirming the amount of definite Llano order or preorder, and then contacted the companies for references verifying AMD's claims.

If I'm a car dealer I'm going to tell customers I have twenty other people wanting this car so they buy quicker. Or if I'm selling a house I'm going to tell viewers I have another offer to make them put in a higher counter-offer. It isn't ethical but it happens in all types of businesses.

by: xavier1123
I may sound like an AMD fanboy but all the stock market investors have to bear it in mind that stock market is always a gamble. Whether you fly on profits or get burnt on losses; not a single person is liable for your loss or profit. You always have to take a risk of getting full losses or full profits.
I wouldn't say gambling unless you're an inexperienced investor, but if you're doing research, following trends, reacting to the market and implementing strategy its calculated risk like any other business, whereas a gamble is just luck. But I do agree nobody else is liable for any loss or profit.
Posted on Reply
#18
oNyX
by: lemonadesoda
Do you think it is Intel or nVidia interests who are driving this? This is not about independent investors making nothing or losing a cent, it is about the PR. And there are a few companies that would love to do this... ;)
Of course, in fact I went back to all the old financial news and technological rumors of AMD and none of them became true. I'm 100% sure that someone from Intel or Nvidia intentionally spreads lies to see if they can break AMD's reputation e.g the bankruptcy rumor. AMD has a good financial ethics track record the last few years. I mean, you will never see any bad rumors about Intel or Nvidia. It's always AMD.

But if this investment agreement and sue occurred in South Africa, AMD would be required to pay back their initial investments. We had many Financial Advisors promising good growth which never happened and at the end paid out less than their clients invested initially. We have a law that protect investors from this.

AMD has a great winning streak of court cases, most of them coming from Intel.
Posted on Reply
#19
Xzibit
by: newtekie1
Don't be so quick to assumed that the misrepresentations were just estimates that AMD didn't meet. That very likely isn't the case here. From the sounds of the actual wording of the lawsuit, AMD misrepresented the actual demand for the product. Generally before you release a product you go to the people you'll be directly selling it to and see how interested they are in buying it, they might even get pre-orders, they then report this to their investors so the investors will spend more money to actually put the product into production. From the wording of the lawsuit it sounds like what happened is that AMD fibbed to the investors about how many of their partners actually wanted Llano or how much their partners were willing to buy, or at least that is what the investors are saying. It will be up to the courts to sort out all the documentation on what was presented to the investors vs. what data was actually collected from AMD's partners.
That's not how it works and that's not how its worded in the filling.

The complaint is based off conference call statements which alleged SEC violations. If you ever listen to any conference call from any company. They start off with a disclaimer which is read and is also in the paperwork, you also get reminded of it before the Q & A session. A lawyer(s) is always sitting in the room with the company during the Conference Calls. Further more the company is not legaly required to inform its investors of details in its day to day operations nor its deals. Case in point company don't disclose units sold of any product unless they see it as a benefit, usually we get Point Of Sale estimates once the product is sold to the consumer.

If you thought that's how it works, Microsoft would be sued left in right for Windows 8 & Nvidia would be sued for Tegra 4+SHIELD.

Unless something is discovered right now it just seams like 2 guys who are mad they bought AMD stock around 8 hoping it would go up and it crashed.
Posted on Reply
#20
Fourstaff
I suppose AMD has a duty to report good projected sales, and report at the first opportunity if projections are not going to be met. However, I don't think shareholders cannot sue them if their estimates are wrong, unless they are pumping and dumping (which may well be the case here).
Posted on Reply
#21
newtekie1
Semi-Retired Folder
by: Dent1
Even if AMD exaggerated it seems like the investors didn't do thorough research on their end. The investors should have asked for documentation confirming the amount of definite Llano order or preorder, and then contacted the companies for references verifying AMD's claims.

If I'm a car dealer I'm going to tell customers I have twenty other people wanting this car so they buy quicker. Or if I'm selling a house I'm going to tell viewers I have another offer to make them put in a higher counter-offer. It isn't ethical but it happens in all types of businesses.
That is the thing though, the reports AMD gave their investors are supposed to be that proof. That is the argument here, the investors are saying the proof they asked for was false and AMD knew it.

And it isn't illegal for a car dealer or a realtor to say those things, it is illegal for a large corporation to lie about how many people are interested in a product.
Posted on Reply
#22
Xzibit
by: newtekie1
That is the thing though, the reports AMD gave their investors are supposed to be that proof. That is the argument here, the investors are saying the proof they asked for was false and AMD knew it.
Wrong.

The two investors filing the complaint didn't ask for proof at any given time. No where in the complaint did it reference the two investors ask for information themselves. The complaint is based off Conference Calls with Q&A statements and press releases.

Might want to give it another read.

Babak Hatamian and Lussu Dennj Salvatore
vs
Advanced Micro Devices, Inc.
Posted on Reply
#23
newtekie1
Semi-Retired Folder
by: Xzibit
Wrong.

The two investors filing the complaint didn't ask for proof at any given time. No where in the complaint did it reference the two investors ask for information themselves. The complaint is based off Conference Calls with Q&A statements and press releases.

Might want to give it another read.

Babak Hatamian and Lussu Dennj Salvatore
vs
Advanced Micro Devices, Inc.

I've read it, again they don't have to ask for the proof, AMD's claims were supposed to be the proof. That is the basis behind this case, AMD was lying to their investors and knew it.
Posted on Reply
#24
HumanSmoke
by: newtekie1
Don't be so quick to assumed that the misrepresentations were just estimates that AMD didn't meet. That very likely isn't the case here. From the sounds of the actual wording of the lawsuit, AMD misrepresented the actual demand for the product.
If that's the case then AMD misrepresented Llano popularity to themselves, since they ended up having to write off the best part of $100m in Llano inventory. Might be less a case of deliberate misleading and more a case of having the strategic insight of fungus.
by: lemonadesoda
Do you think it is Intel or nVidia interests who are driving this? This is not about independent investors making nothing or losing a cent, it is about the PR. And there are a few companies that would love to do this... ;)
+1 tinfoil hat
by: oNyX
I mean, you will never see any bad rumors about Intel or Nvidia. It's always AMD.
You mean you haven't ever seen rumours that Intel are done for thanks to ARM and AMD's hUMA and the nascent juggernaut that supposedly is HSA? And you haven't heard the rumours that Nvidia will be dead in [insert latest Demerjian estimate] years/months thanks to HSA/hUMA/Mantle/Consoles/APUs/Jen Hsun's hubris/global warming et al ?
Posted on Reply
#25
Xzibit
by: newtekie1
I've read it, again they don't have to ask for the proof, AMD's claims were supposed to be the proof. That is the basis behind this case, AMD was lying to their investors and knew it.
Or these two investors never read the "Cautionary Statement" that follows each press release or the "Risk Factors" that goes into every SEC Filing. They have to prove the alligation there making aren't covered by those.

I'm sure we will hear about it if the Judge agrees to proceed with the case and if we don't hear about it the Judge dismissed it.
Posted on Reply
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