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AMD Faces Lawsuit Over Llano APU Sales

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This lawsuit alleges that AMD violated the Securities Exchange Act.


AMD is currently facing a class action suit by Robbins Geller Rudman & Dowd LLP who on Wednesday filed the complaint ( pdf) in the United States District Court for the Northern District of California. The suit is on behalf of purchasers of AMD common stock between October 27, 2011 and October 18, 2012, aka the 'class period,' and accuses AMD of violating the Securities Exchange Act of 1934 over its 'Llano' APU.


Essentially, the lawsuit claims that AMD misled its investors by using statements that led them to believe that the 32 nm 'Llano' first-generation APU had better chances on the market than it really did. Here's more directly from the lawsuit:


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. Defendants, however, concealed that demand for Llano APUs in desktop devices was much weaker than suggested by their statements, especially in its Chinese and European markets.

In July 2012, AMD revealed a weak demand for Llano APUs in desktop devices, particularly in the Chinese and European markets. That resulted in AMD reporting a lower than expected revenue for the June 30, 2012 quarter. This, in turn, caused the price of AMD stock to decline nearly 25 percent on extremely heavy trading volume.


The lawsuit alleges that AMD execs 'deceptively dismissed' the notion that the company's future gross margins would be 'adversely affected by the large amount of unsold Llano inventory, when such inventory was unsalable, even at heavily discounted prices.'


Weeks later, AMD announced that its gross margins for the fiscal 2012 third quarter declined more than 31 percent from its previous quarter, in large part, due to AMD's recording of an approximate $100 million inventory write-down, mainly attributable to the overstated value of the Llano. On this news, the price of AMD stock declined nearly another 17 percent on extremely heavy trading volume.


Two plaintiffs are listed in the class action suit, as they purchased stock during the Class Period and were 'damaged' by the stock drop. They're seeking damages on behalf of all purchasers of AMD common stock during that period of time.


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