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AMD to Face Investor Lawsuit Over Llano APUs

A judge has given the green light to securities fraud claims that AMD misled investors and the market about supply problems with the chip in 2011.

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Advanced Micro Devices will have to face an investor lawsuit that accuses the chip maker of touting a processor launched in 2011 even though officials knew of problems that forced the vendor eventually to take a $100 million inventory write-down.

According to a Reuters report, a U.S. District Court judge ruled this week that the investors had supported their allegations enough to go forward with a securities fraud claim against the world's second-largest chip maker.

The investors are accusing AMD of misleading them regarding the prospects of the Llano processor family that was introduced in 2011. The new Fusion A-Series accelerated-processing units (APUs) were touted by AMD executives as a significant advance in processor technology, particularly the integration of high-performance graphics on the same piece of silicon as the CPU.

At the same time, the company talked about the fast ramp of the Llano chips, with then-Chief Financial Officer and interim CEO Thomas Seifert saying during a July 2011 call to discuss quarterly earnings that the "success of the [Llano and Brazos] APUs demonstrates that we have the right strategy."

The investors claim that AMD executives said in the spring of 2011 that problems with the Llano chips had been solved, and that such comments artificially inflated the vendor's stock price. According to the suit, the Llano chips initially were set to launch in late 2010, but production problems with chip foundry Globalfoundries pushed the date into 2011. During an April conference call, Seifert told analysts that the issues had been resolved and that there would be plenty of inventory for the second-quarter 2011 launch.

However, AMD officials continued to say there were no supply problems despite the fact that the only Llanos that were shipping were for tier-one PC makers. When supplies really started to ramp up later in the year, demand had dried up, which created an inventory of Llano APUs that was not moving, according to the investors. In October 2012, AMD announced it was taking a $100 million write-down on the inventory of Llano chips, which caused the stock price to fall sharply.