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AMD: $30 Million Settlement Ends Llano Lawsuit

According to a joint notice of settlement filed in California federal court, Advanced Micro Devices (AMD) has agreed to shell out close to $30 million to settle a class action lawsuit filed by shareholders in 2014.

The lawsuit stems from allegations the chipmaker 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 $100 million 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 chipmaker to take a $100 million 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 law firm representing the plaintiffs released the following statement:

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 $100 million 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 $29.5 million 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 Oct. 9, 2017.

  • hotsacoman
    I remember the 30's...Nothing but Llano's and the Great Depression.
    Reply
  • Lawyers going to lawyer. Who sees the money? The lawyers do.
    Reply
  • redgarl
    AMD PR is sometime questionable at best, however when they deliver, they deliver... and when they don't... they really don't.
    Reply
  • dudmont
    As someone who invests, I never invest cause of what the company says in pr statements(unless it confirms what the fundementals are saying), only when there's tangible evidence of a good investment(growing earnings, cheap stock price, strengthening market position etc. etc.). I try to avoid investing in companies where I can't explain what they do, or how they do it. There's a reason someone once said, "buyer beware". That can go for a companies products or a companies stock.
    Reply
  • 10tacle
    ^^Smart potential investors do a broad range of analysis not just on the company itself and management, but on the markets said company is involved with. And that includes what their competitors are doing.

    In any event, you can hear crickets chirping in here from the silence of the Intel and Nvidia haters always claiming they have shady business practices.
    Reply
  • RomeoReject
    Yeah, I'm not condoning what AMD did here, but seriously: If you don't actually research what you're investing in, it's reeaaally hard to empathize with you.
    Reply
  • MASOUTH
    If you hear crickets then it is probably because of the affected group sizes.

    Exaggerating to your investors vs shady practices towards other companies and consumers

    I'm pretty sure that the latter vastly outnumbers the former and is going to generate more noise.

    That said, I am not pro or anti Intel, nVidia, or AMD and feel they should all be praised/ burned when they deserve it.
    Reply
  • MASOUTH
    as far as people referring to the investors...

    I'm pretty sure that the problem stemmed not from people that invested in AMD due to an over-hyped prospectus (that's your job to research as has been pointed out) as much as AMD actively lying in their annual reports to their already invested stockholders (WTF!?).
    Reply
  • 10tacle
    Well the good news is that Intel and Nvidia usually get popped with unfair or questionable trade practice settlements and have to shell out. The most recent big ones for Intel were being slapped with a $1.5 billion fine in 2014 by the EU, and before that in 2009 with a $1.3 billion payment to AMD after an FTC investigation in the US.

    Nvidia's most recent was the $5 million settlement of the GTX 970 fiasco (which I got $60 for my two 970s no longer in my possession). <-- And keep in mind there was no evidence of any intent to mislead the consumer. No documentation, no witnesses, no emails, no undercover video. Nothing. Nvidia just owned up to it as a technicality error, paid out, and moved on as a lesson learned.

    Then there are Apple's business practices and the billion dollar lost lawsuits on patent infringement, yet people still flock to their products as well.
    Reply
  • wiyosaya
    It would not at all surprise me if this happened during Rory Read's tenure - https://en.wikipedia.org/wiki/Rory_Read
    Reply