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AMD faces class action investor lawsuit over Llano sales

Class action suit filed over allegations that AMD misled investors over sales of its first APU.

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AMD executives misled investors to the success of AMD’s Llano APU and “deceptively dismissed” the potential impact of unsold inventory on the company’s gross margins, a new class action lawsuit filed against AMD alleges.

The suit, filed in California, is on behalf of purchasers of AMD common stock between October 27, 2011 and October 18, 2012, and alleges CEO Rory Read, former CFO Thomas J. Seifert, and vice president Lisa Su, violated multiple sections of the Securities Exchange Act for making “false and misleading” statements about the success of Llano.

During the Class Period, defendants repeatedly highlighted the “strong” and “significant” interest in, demand for, and unit shipments of, its Llano APUs. Defendants falsely and misleadingly represented that AMD’s desktop business was in a “strong position” and that it would “continue to rebound” in 2012. As late as April 19, 2012, defendants stated that the demand for the Llano APU was “higher than anticipated,” particularly in the “emerging markets” and that there were no “significant issues” in the important desktop market. In July 2012, AMD announced that weak demand for Llano APUs in desktop devices,particularly in its Chinese and European markets, resulted in AMD’s reporting of lower than expected revenue for the June 30, 2012 quarter. As defendants knew or recklessly ignored, such lack of demand was compounded by a known, but undisclosed, “misalignment” between the amount of Llano APUs and desktop motherboards in AMD’s sales channel that originated in 2011.

The lawsuit also alleges that AMD did not properly disclose “then presently known trends, events or uncertainties” that might prove to be a risk to the success of Llano.

During AMD second quarter earnings call, the company announced that weak demand for Llano had caused the company to report lower than expected revenue for the quarter. The next trading day, AMD’s stock dropped 25 percent on this news. Months later in October 2012 AMD announced that it was taking a $100 million writedown on unsold Llano inventory, which could not be moved to channel because of a weak demand for the product in China and Europe. Subsequently, AMD’s stock dropped 17 percent the following trading day.

This case might not be as cut and dry as the plaintiffs and their class action suit chasing law firm hope for. During the last few years the PC market has been in an overall downward trend, with demand also softening for components of AMD’s rival Intel. While a jury (the plaintiffs demand a jury trial) may be convinced that the language used by AMD executives was deceptive, AMD’s counsel has a strong case to argue that their company was simply victim to an industry-wide trend.

The complaint in its entirety is available to be read here.

Source:  Robbins Geller Rudman & Dowd LLP

Via: Tom’s Hardware

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