AMD, one of the biggest computer hardware manufacturers in the world, is now facing a major lawsuit from their own investors. AMD is best known for creating PC processors, many of which are favorites among gamers for their speed and reliability. AMD’s most recent A-series APU processors claim they can give compatible systems up to eight cores of “unrestrained, overclockable power.” Unfortunately, it’s these vague claims and broken promises that has gotten them in trouble with their own investment team.
A Brief History Of Corporate Screw-Ups
Back in 2011, AMD launched the predecessor to the current A-series, the Llano. In the launch, they made a a number of claims that their new chips would increase window size, improve IP-based hardware prefetching (what makes your computer and programs boot faster), a faster and more reliable IPC (instructions per cycle) and so forth. Their marketing team proclaimed it was “the most impressive processor in history,” which isn’t too dissimilar from what any marketing team worth their salt will say, but apparently their investors truly took this claim to heart.
Fast forward to today. According to Bit-Tech, it would appear that the investors are now suing AMD over “false claims” about the true power and expected roll-out of the Llano product. Despite all of this taking place almost exactly four years ago, the investors have now decided to get together and try and squeeze some green out of AMD.
The Llano launch was a failure due to a more expensive production cost than AMD claimed, as well as a longer production schedule than the investors were told. By the time the Llano chip was available to the public, it was 2012 and AMD was forced to write off approximately $100 million. In layman terms: the people who invested into the chip not only made a bad deal, but were possibly misled as to what they were actually spending their money on.
Anytime you’re a hardware or software company, investors have to know there’s a risk that the product won’t roll out when expected and that Murphy’s Law will kick them in the teeth every chance it gets. There is nothing abnormal about under-delivering in the tech world. The problem here is that AMD may have purposefully misled their investors so that they could get the money to make their Llano processing chips, then just prayed that the deal would work out and their investors wouldn’t catch on. It’s one of those kinds of plans where if it works, you’re a business genius, but if it fails, you could be exposed as a fraud. Right now, it seems AMD is leaning towards the latter.
Sue! Sue! Sue!
A California judge has ruled that the investors have a legitimate case, and now it will be brought to court. There’s always a chance this might be settled out of court—deals like this often are—but regardless, AMD can’t be loving this press. AMD’s stock took a nosedive in 2012, and just when it seemed they had put the whole disaster behind them, Llano has risen from the dead.
As someone whose made minor investments in software and hardware companies, I can understand the investors’ anger. However, I think it would be disingenuous for me to suggest that the investors aren’t just being immature and unreasonable. Companies make promises all the time, promises they fully intend to keep but can’t necessarily deliver on when the rubber hits the road. As an investor you take that risk when you give them money and you accept how a capitalist free market works. Life doesn’t always work out the way you want it to.
Still, if it can be proven that AMD purposefully misled their investors, it could mean big trouble for them. It won’t just screw them over with this current lawsuit, it could open to door to more lawsuits from other investors who believe they were misled as well. Once your legal capital wears thin, the sharks will smell the blood in the water. AMD basically can’t afford to lose this suit, and if they do, it could very well be the beginning of the end for the company.