AMD Rebuts One Lawsuit, Gets Hit By Second

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March 15, 1999 (12:53 PM EST)

By Will Wade ,

Advanced Micro Devices denied allegations Friday within a class-action lawsuit filed last week that said the company artificially inflated its stock price over the past few quarters with overly optimistic projections for revenue from its K6 microprocessors. Even as the company rebutted the claims, a second, nearly identical suit has also been announced.

"The lawsuit filed on behalf of a shareholder is totally without merit," said Thomas McCoy, senior vice president and general counsel at AMD, adding the company intends to fight the charges.

Two separate suits were filed on behalf of shareholders last week, both in U.S. District Court for the Northern District of California, and both naming the company and its CEO, William J. (Jerry) Sanders. The first was announced early Wednesday morning, and was filed on behalf of shareholders who purchased AMD stock between Nov. 12, 1998, and Jan. 13 of this year. The second was announced Friday, covers the same period, and makes essentially the same complaint.

The suits say during that period, AMD publicly projected demand for its K6 microprocessors would swell, leading to increased revenue. While demand has indeed increased, AMD has been beset with manufacturing problems, which have limited its ability to deliver enough of the fastest K6-2 chips. As a result, unit volumes have not met expectations, and the chips that have been delivered have not included enough of the higher-profit features to generate the expected revenue.

Both suits say the company knew about the manufacturing problems -- or should have known -- but recklessly continued to project strong earnings potential. During the period covered by the suits, AMD's stock swelled to a high of 32, as analysts predicted the company would see strong revenue and market-share gains.

Instead, stock prices fell 20 percent within one day of announcing its fourth quarter earnings on Jan. 13, when the company revealed design and manufacturing problems had kept it from meeting earnings expectations.

Both suits seek unspecified damages. An AMD spokesman said the company had not yet reviewed the second case and said it would be imprudent to comment at this time.

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