[TPU] AMD Sued by Investors for Unfounded Llano Hype / SEC Fraud

OCGuy

Lifer
Jul 12, 2000
27,224
36
91
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

http://www.techpowerup.com/196941/amd-sued-for-overestimating-apu-success-to-investors.html

http://online.wsj.com/article/PR-CO-20140115-912232.html


The lawsuit is in regards to AMD officers giving misinformation about Llano demand, which may be a SEC violation
 
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ShintaiDK

Lifer
Apr 22, 2012
20,378
145
106
They had problems with this for a long time now, close to 10 years. And Rory havent been able to change that culture yet.
 

KingFatty

Diamond Member
Dec 29, 2010
3,034
1
81
Can someone clarify the lawsuit?

It seems to me that AMD made a prediction about the future. Then, when the future happened, it was not the same as the prediction.

I'm trying to understand how it's even possible to misrepresent about the future. Doesn't everyone know that it's subject to many factors that cannot be known with absolute certainty? I think the statements even have that little disclaimer at the bottom about being forward looking blah blah blah.

I'm sure there is legal merit to the case, but reading the stuff I saw seemed to always use the future-type language, such as "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."
 

ShintaiDK

Lifer
Apr 22, 2012
20,378
145
106
Can someone clarify the lawsuit?

It seems to me that AMD made a prediction about the future. Then, when the future happened, it was not the same as the prediction.

I'm trying to understand how it's even possible to misrepresent about the future. Doesn't everyone know that it's subject to many factors that cannot be known with absolute certainty? I think the statements even have that little disclaimer at the bottom about being forward looking blah blah blah.

I'm sure there is legal merit to the case, but reading the stuff I saw seemed to always use the future-type language, such as "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."

It looks to be a rerun of the surface sales. Saying everything is great, until you have to show the financials. Even tho you know as a company it flopped.

So its not about the future. Its about lying about the past.
 
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blackened23

Diamond Member
Jul 26, 2011
8,548
2
0
Can someone clarify the lawsuit?

It seems to me that AMD made a prediction about the future. Then, when the future happened, it was not the same as the prediction.

I'm trying to understand how it's even possible to misrepresent about the future. Doesn't everyone know that it's subject to many factors that cannot be known with absolute certainty? I think the statements even have that little disclaimer at the bottom about being forward looking blah blah blah.

I'm sure there is legal merit to the case, but reading the stuff I saw seemed to always use the future-type language, such as "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."

Whoa. You're in over your head here. Maybe you should read up on SEC rules. The allegation is that AMD violated SEC rules. It's a pretty clear cut legal case. Did AMD violate SEC rules or didn't they. Clearly SEC rules has sanctions for future product sales predictions. Remember, Llano had millions of unsold inventory. That was written off. Remember that? Now, here AMD was saying Llano sales were great only to turn around the next year with millions upon millions of written off unsold Llano products.

100 million USD Llano inventory write off: This is after they told investors that it was selling great, apparently:

http://news.idg.no/cw/art.cfm?id=37BD1259-A756-BA80-E3429558DBB9BA73

It's a pretty clear cut case that they did or didn't. All it takes is one email on AMD's side to prove that they're guilty, and i'm sure courts will require subpoenas for all that sort of thing. I'm not saying it happened. But the due process will happen, subpoenas will happen, and we will know after several years. Unfortunately the legal process is slow.
 
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SiliconWars

Platinum Member
Dec 29, 2012
2,346
0
0
Your "millions and millions" is actually about a million or two. Just assume 100 bucks a chip, woot 1 million chips ie not even 2% of AMD's entire yearly sales. That's the sort of thing that can go unsold when the industry takes a turn for the worst...wait isn't that what happened?

The whole thing is a non-starter. AMD will simply point to Intel taking penalties due to fab under-utilization around the same time.

Also while you're ranting about AMD stealth marketing here (again) you might want to consider the fact that there are at least no moderators here who work at AMD. I remember you said you were going to ask about these things in the moderator forum - you should tell us how that went, ie is it ok for you to continue with this line of discussion in every thread, regardless of it being completely off topic?
 

AnandThenMan

Diamond Member
Nov 11, 2004
3,980
595
126
Isn't this the same law firm that goes out and sues everyone just because that's what they do? Lawsuit trolls basically.

Oh and if you invested in AMD stock in the last year, you could have doubled your money. :hmm:
 

ams23

Senior member
Feb 18, 2013
907
0
0
Oh and if you invested in AMD stock in the last year, you could have doubled your money. :hmm:

And if you invested in AMD in 2010, 2011, or even early 2012, you would have halved your money [value of shares] by now.
 

SiliconWars

Platinum Member
Dec 29, 2012
2,346
0
0
And if you invested in AMD in 2010, 2011, or even early 2012, you would have halved your money [value of shares] by now.

And if you'd invested in AMD in 2009 you'd have made 5x your money within a year. The thing about buying shares is that it's not actually a guarantee of making money. It's a risk, it quite clearly states this when you buy them - not only that but it clearly states that forward looking statements might not end becoming reality, acts of god and all that.
 

KingFatty

Diamond Member
Dec 29, 2010
3,034
1
81
Now, here AMD was saying Llano sales were great only to turn around the next year with millions upon millions of written off unsold Llano products.

I'm interested in learning more about how these kinds of lawsuits work, and what a company is prevented from doing. But the behavior described above strikes me as a different scenario than I'm imagining.

To me, lying about your sales and then getting caught a year later would mean that AMD was, at the time they lied, lying about something that was currently happening at the time (saying good sales when at that time it was bad sales), and it's just that the proof (unsold products) becomes evident later. But at the time the statement was made, it was technically incorrect at the time of the statement. So it doesn't seem to me like a future prediction, but rather it's false statements at that time right as they are being made.

I took a look at the SEC rules here http://www.sec.gov/rules/final/33-8176.htm , and saw something about whether this or that applied, and they mention future predictions, but I'm quite ignorant about this stuff.

But it seems to me different to say "Demand in the future for this new product will be very high!" because you are saying something about how people will behave in the future, and it's reasonable to understand that people's behavior is not predictable.

If you say you are having great sales, but nothing is selling, then that's a lie that is easy to prove or disprove by numbers.

I'm just confused how the SEC can block a company from being enthusiastic about the prospects of a new product, and somewhat hyping it up or advertising it, or is there an easy way to explain the way they crossed the line?
 

sandorski

No Lifer
Oct 10, 1999
70,231
5,806
126
If AMD Claimed X amount of Sales and that was not true, then they are guilty. If they Predicted X amount of Sales and it didn't happen, then they are not guilty.

The first is an outright misrepresentation. The latter is an overestimation, as such, that would be part of the Risk of Investing and shouldn't be a case where Investors can seek compensation.
 

ams23

Senior member
Feb 18, 2013
907
0
0
And if you'd invested in AMD in 2009 you'd have made 5x your money within a year.

Right, there was a 4-5 month window of opportunity from Nov '08 to Mar '09 where the price even stayed low enough for that to happen (and that also assumes one would sell at the absolute peak, which is highly unlikely). Other than that window, and a 5-6 month window from Nov '12 to Apr '13, anyone who has invested long in AMD stock over the last 10 years would have earned almost nothing on their investment (and more than likely would have lost a huge amount of their original investment value). Compound that with lack of capital return to shareholders, and it is very obvious that this has been a poor long-term investment for most people.
 
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KingFatty

Diamond Member
Dec 29, 2010
3,034
1
81
Well the website's interpretation of the lawsuit seems to be very favorable toward AMD, describing things as how popular the product "would" get (i.e., future prediction).

My issue is what is that interpretation based on? They quote a part of the lawsuit's claims by the stockholders, but is it more that I'm missing on how the tech blog can re-interpret things and just add their own commentary that it's future looking stuff and not lies of present/past stuff?
 

mrmt

Diamond Member
Aug 18, 2012
3,974
0
76
[redacted]

I'm rather curious about the lawsuit. From Rory Read tap-dacing in the Q&A, the dark hole of the WSA, Bulldozer performance estimations, the scandal of the the guy is complaining about a subpar product that wouldn't even complain a third of AMD's sales?
 
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Leyawiin

Diamond Member
Nov 11, 2008
3,204
52
91
Same firm that's suing EA for a buggy launch of BF4. Its just what they do.
 

ams23

Senior member
Feb 18, 2013
907
0
0
Yeah, and there is nothing illegal about filing a lawsuit against AMD for allegedly deceptive practices either, so deal with it.
 
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ViRGE

Elite Member, Moderator Emeritus
Oct 9, 1999
31,516
167
106
I just deleted a page of posts, so before anyone else posts anything, let's have a short discussion.

1) Learn to read - especially you, OCGuy. I'm not even kidding on this. 2/3rds of the posts in here were discussing something that wasn't even related to the matter at hand. If you read TFA, and better yet the original press release from the law firm filing the suit, it's very, VERY clear that this suit is over statements and projections made by AMD officers regarding Llano sales.

2) Stealth marketing programs are not, I repeat NOT open to discussion here. You have proven time and time again that you cannot discuss the issue like rational adults, so you don't get to discuss it at all. There are a number of you who become raving lunatics when the matter comes up, and others of you who have levels of paranoia that would make Sen. Joseph McCarthy proud. So if you have any questions or concerns about such programs or members, the only place that's appropriate to discuss those matters is in Moderator Discussions.

-ViRGE
 
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JDG1980

Golden Member
Jul 18, 2013
1,663
570
136
This same law firm is trying to sue Microsoft because of the failure of the Surface RT. I don't see how they can win either battle; it's not at all unusual or unexpected for companies to be overly optimistic in their forecasts, or to miss marketing projections. That kind of stuff happens all the time, and is just part of the risk that investors take when they buy stock.

Nintendo just posted a $240 million loss this quarter, after forecasting a $527 million gain. This was due to projections of Wii U sales which were missed by a substantial margin. Does Nintendo now get sued by these ambulance chasers, too?
 

ShintaiDK

Lifer
Apr 22, 2012
20,378
145
106
This same law firm is trying to sue Microsoft because of the failure of the Surface RT. I don't see how they can win either battle; it's not at all unusual or unexpected for companies to be overly optimistic in their forecasts, or to miss marketing projections. That kind of stuff happens all the time, and is just part of the risk that investors take when they buy stock.

Nintendo just posted a $240 million loss this quarter, after forecasting a $527 million gain. This was due to projections of Wii U sales which were missed by a substantial margin. Does Nintendo now get sued by these ambulance chasers, too?

Microsoft flat out lied. Ballmer said the surface was a huge success and selling beyond expectations. Only to annouce later a 900M$ writedown due to the flopped product with stocks dropping afterwards. Surface at that time only had a revenue of 853M$. Even less than the 900M$ write down and the 898M$ increase in advertising costs.

Same firm that's suing EA for a buggy launch of BF4. Its just what they do.

And they rightfully do so. EA hyped BF4 beyond the clouds and all the exec dumped stocks at high price. BF4 ended as a flop, both sales and bug wise.

The AMD case about Llano is the exact same. Overhyping a product to investors, well aware its not delivering nor will deliver whats promised to boost stocks and investment. Its simply fraud.
 
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Galatian

Senior member
Dec 7, 2012
372
0
71
So - in a sense - they are actually good lawsuit trolls, by reminding firms to not hype their product and then underdeliver?
 

ShintaiDK

Lifer
Apr 22, 2012
20,378
145
106
So - in a sense - they are actually good lawsuit trolls, by reminding firms to not hype their product and then underdeliver?

Well, it seems people easily get their emotions hurt when IT companies get a lawsuit for some odd reason. But in the wast majority of cases the lawsuit are justified. Qualcomm in under antitrust investigations in China right now. Intel, Microsoft, Google, nVidia and such is anything but innocent too. Samsung, Hynix, Micron and so on had their cases and I am sure new will come too. Specially with the still spiralling memory prices. And you could keep listing companies. I dont think you can find a single major company that havent violated the rules, multiple times.
 
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mrmt

Diamond Member
Aug 18, 2012
3,974
0
76
So - in a sense - they are actually good lawsuit trolls, by reminding firms to not hype their product and then underdeliver?

It's not about hyping and under-deliver, it's about giving projections and not informing investors about the developments in its execution.

For those who want to read the entire text, here's the complaint:

http://www.rgrdlaw.com/media/cases/260_Complaint.pdf

IMO, they have a very strong case. They took a lot of quotes from Rory "Predator" Read at that moment, when he was trying to portray AMD with a strength they didn't have, and showed how they were mostly contradicted a few quarters after the claims.

Most of the claims can somehow be related to the WSA. While AMD might have missed their sales forecasts, but we don't know why did these chips end up as inventory. Did AMD actually order them, or did they have to swallow them because of more expensive WSA take-or-pay charges? I think a lot of things about the framework of the WSA will surface in this lawsuit.

On a side note I can see the contrast between the Rory "predator" Read of that point and the behavior of the management today, which refuses to give anything to investors. At least now he keeps his trap shut most of the time.
 

KingFatty

Diamond Member
Dec 29, 2010
3,034
1
81
For those who want to read the entire text, here's the complaint:

http://www.rgrdlaw.com/media/cases/260_Complaint.pdf

That is exactly what I wanted to see, thanks! After reading it, I can see how the lawsuit makes a lot of sense, e.g., see paragraph 23 that says: [oops, looks like they disabled copy/paste]

Pretty much it describes all kinds of examples that do not fall under future predictions or what would happen. So, I am still really confused how the tech blog analysis got it so wrong, like they were being way too kind to AMD in interpreting the actual complaint.

Or, maybe because the complaint disabled copy/pasting, the tech blog simply had its hands tied heheh too hard to actually re-type all those pesky words...

But one example is how the complaint starts off with the light stuff, like at para. 37 where AMD said demand was higher than anticipated. I could see AMD coming back with saying they just had super-low anticipation or something, but that flies in the face of actual statements/marketing materials or whatever. Still, it's the kind of statements where you could argue they were specifically crafted to give one impression, but really can be interpreted in other ways. Like, consider para. 38, where they said the issues with Global Foundry impacted ability to "fulfill customer demand". Hah that's just really sneaky, because you read that and think "Oh wow AMD has all this demand" when really they were just misleading you because the issue was that even if demand is nearly zero, if you are having issues with the supply, that will impact your ability to fulfill that near zero demand. Sneaky.

Or in para. 39 saying how issues causing revenue shortfall were largely in their control. Well, again sneaky language where they could control it directly into the ground if they wanted to make it worse, so that's technically true they could control the worsening of it, but when you read the statement you automatically think oh sure, they could control it in a way that makes it better right? WRong.

So it seems all that is slick clever double-speak from marketing lawyers. But then you get to the juicy parts down in para 43 and onward (into paragraphs 50-, etc), where Read and Seifert open their mouths and words come out that do not seem to have the ability to be interpreted in multiple ways. I just don't have familiarity with the SEC rules to know where they crossed the line, but seems like legit grounds to bring the suit.

Also para 98 does a nice job of explaining how these false statement issues differ from the forward-looking statements that would otherwise provide safe-harbor, which I think the tech blog cited by OP would have picked up on and avoided paraphrasing in such a pro-AMD friendly way.
 
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mrmt

Diamond Member
Aug 18, 2012
3,974
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76
So, I am still really confused how the tech blog analysis got it so wrong, like they were being way too kind to AMD in interpreting the actual complaint.

Tech blog analysts can't understand correctly the tech part, let alone financials and lawsuits. From the beginning it was already clear that the Bulldozer family would be an economic disaster, because it was too big and too power hungry to compete on price in the OEM supply chain, and yet not a single website explored this side of the equation, and that side is exactly what wrecked AMD CPU division. And when they talk about economics and cost structure, it is people like Anton Shilov, who write things not worth a single donut.

Also para 98 does a nice job of explaining how these false statement issues differ from the forward-looking statements that would otherwise provide safe-harbor, which I think the tech blog cited by OP would have picked up on and avoided paraphrasing in such a pro-AMD friendly way.

I used to post here that AMD management was a bunch of amateurs and had no credibility, and that was the reason. At the time they couldn't give a correct forecast and couldn't talk straight about their future plans. Every Q&A was a box full of bad surprises. My guess at the time was that the new management was indeed a bunch of amateurs, but a bunch of amateurs that didn't have the adequate support. Now they are a bunch of amateurs that at least do their home work and get the right numbers to present at the Q&A. I hope for their own sake that AMD management can prove they were just incompetent at the time, and not engaged in stock manipulation as the law firm is arguing.

Either way, a lot of WSA stuff should surface.
 
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