According to the Company’s Form 10-Q for the quarterly period ended October 1, 2000, between March 10, 1999 and April 22, 1999, AMD and certain individual officers of AMD were named as defendants in a number of lawsuits that were consolidated under Ellis Investment Co., Ltd., et al v. Advanced Micro Devices, Inc., et al. Following appointment of lead counsel, the case was re-named Hall et al. v. Advanced Micro Devices, Inc., et al. On September 5, 2000, the parties stipulated to and the United States District Court for the Northern District of California entered an order whereby all plaintiffs' claims and causes of action against all defendants were voluntarily dismissed without prejudice.
The original Complaint asserts that defendants violated Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. The lawsuit alleges that defendants' material misrepresentations and omissions caused the Company's stock to trade at artificially inflated levels during the Class Period. In summary, the Complaint states that during the Class Period defendants made materially false and misleading statements about the demand for AMD's ability to produce high speed K6 microprocessors that could compete with industry giant Intel's Pentium II chips. Defendants failed to disclose that they had serious design flaws and production problems that severely restricted the number of 350+ MHz K6 chips that they could produce. The inability to produce a sufficient volume of high speed chips caused AMD to have to sell its chips at lower prices, severely depressing its earnings. Even when defendants publicly disclosed during the Class Period production problems with the high speed K6 microprocessors, they claimed that the "production glitch" was behind them and that they could increase production in the first quarter of 1999. These statements were false and misleading and lacked a reasonable basis because defendants knew that the design and production problems were continuing and that AMD could not produce the high speed chips in the announced amounts. Defendants' announcement on March 8, 1999 that it would fall short of its shipment goals and suffer a significant loss for the first quarter, was laying off 300 employees and would take charges in the first quarter and second quarters of 1999 shocked the market, causing the price for AMD's stock to plummet from a high of $32 during the Class Period to $16 following the announcement.