NVIDIA Slapped With Lawsuit Over Flawed GPUs

NVIDIA Slapped With Lawsuit Over Flawed GPUs

NVIDIA has been hit with a securities fraud class action lawsuit over the defective GPUs which it admitted to in July. The complaint was filed by New York-based law firm Shalov Stone Bonner & Rocco. It alleges that NVIDIA knew about the flawed GPUs as early as November 8th, 2007 though no public announcement was made until July 2, 2008.

After the announcement, NVIDIA stock dropped 30%.

Since then manufacturers have issued BIOS updates to "fix" the issue, but all these have done is increase use of the fan to prevent the GPUs from overheating.

The class action lawsuit is detailed on Shalov Stone Bonner & Rocco's website. Paragraph 23 of the complaint (.PDF) says:
According to multiple public sources, the earliest of the BIOS updates was issued by Hewlett-Packard no later than November 2007. Although NVIDIA and the other defendants were almost certainly aware of the underlying problem earlier than this, the fact that they had knowledge of the flaws by November 2007 is beyond serious debate. Nevertheless, for at least eight months, Defendants concealed from NVIDIA investors these defects and their obvious impact on the Company's financial condition and future business prospects. More recently, in August 2008, industry watchdogs revealed that the flaws in NVIDIA's video adapters may affect an even broader range ofthe Company's product line. Reacting to this possibility, some notebook manufacturers have reportedly turned to NVIDIA rival ATI to provide graphics options on their new portable systems.
The statement NVIDIA made on July 2nd, when admitting the issue, was that it was taking a $150 - $200 million charge to cover (emphasis mine):
... anticipated customer warranty, repair, return, replacement and other consequential costs and expenses arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products used in notebook systems. All newly manufactured products and all products currently shipping in volume have a different and more robust material set.
The lawsuit was filed in United States District Court for the Northern District of California, and names as defendants NVIDIA and CEO Jen-Hsun Huang and CFO Marvin Burkett.
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Looks like Nvidia will need to announces another stock buy back that they will never follow up on to raise there stocks back up.

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