Shareholder sues Nvidia over GPU failure cover-up

Just over two months after Nvidia went public with notebook GPU failures and subsequently lowered its revenue forecast, an angry shareholder has filed a class-action lawsuit in a California court. The suit alleges that Nvidia knew about the failures last summer but kept things under lid for eight months.

The plaintiff’s law firm conveniently hosts a PDF copy of the complaint, giving us a glimpse into the allegations. Here’s the meaty part:

At least as early as November 2007, Nvidia and the other Defendants have known about these unprecedented failure rates, as well as their “root causes.” Indeed, Michael Hara, the Company’s Vice President for Investor Relations and Communications, conceded during a September 4, 2008, “Citigroup Technology Conference” that Nvidia began troubleshooting these problems with major computer manufacturers beginning in August of 2007. . . . Despite this, for eight months or more Nvidia and the other Defendants concealed the defects and their ramifications for the Company’s financial health and future in a series of false and misleading statements made to the investing public.

Nasty. One can hardly blame shareholders for being ticked off, though. Nvidia’s stock nose-dived from around $18 to $12.50 on the news, and it still hasn’t recovered: the shares are worth $10.98 right now. This isn’t the first time we’ve heard about the possibility of a cover-up, either. In late July, an HP spokesman mentioned that HP had “initiated a customer program” to tackle the GPU failures back in November 2007.

Add to that the lawsuit’s claim that Nvidia is also lying about the scope of the problem, and you have an explosive cocktail. If the failures don’t make Nvidia go over its expected $200-million write-off limit, the lawsuit might

We’ve asked Nvidia to comment and are awaiting a reply. We’ll post an update as soon as we get it.

Update: Nvidia Partner PR Manager Ken Brown has replied to our request with a terse, “I’m sorry but we can’t comment on pending litigation.”

Comments closed
    • Mavrick88
    • 12 years ago

    Good.

    I’m glad someone stood up to do something about that. And it has nothing to do with the fact that I’ve never really liked Nvidia as a company (I’ve always thought they were shady) because if AMD/ATI did the same thing, I’d feel the same way about this issue.

    These companies need to learn to quit rushing stuff, do more reseach on these products over a good time period, and quit stiffing the customer. We’re the ones paying for their mistakes and they need to start being held directly responsible and not allowed to cover that up.

    • pogsnet
    • 12 years ago
      • Shining Arcanine
      • 12 years ago

      AMD never detailed exactly what was affected. They just said that there was a problem and were very vague about it. The enthusiast community’s attempts to get information from AMD regarding the issue were the equivalent of pulling teeth.

      I don’t think AMD is much better off.

    • kitsura
    • 12 years ago

    Wow, I didn’t expect shareholders to be the first to sue them. If anything consumers should be more pissed for being sold lemons close to 1 yr.

      • Kulith
      • 12 years ago

      shareholders have more to lose

    • thermistor
    • 12 years ago

    #17…Welcome to IT where last year’s cutting edge is next years bargain bin. NV was a co I did not expect to not execute and have process problems. I wonder who will have to do the root-cause analysis, poor bastard. ATI is making good product now, but 1-2 good generations is not a trend.

    • GeForce6200
    • 12 years ago

    Every Company has it’s cover ups I guess. I like Nvidia, still got a 8800GTS on my hands that I need to get rid of, anyway I would have gotten them except. It took forever for them to release an AMD/Nvidia chipset. Said the 780a and 750a series would be around Q1. It was Q3 or late Q2 when they came out. And the 780a was outragous in price. Would have gotten SLI 9800 but ATI came out with 4850 and Nvidia thought “shat”.

    • albundy
    • 12 years ago

    good for amti. nice scandals like this boost amti employee moral. lol

    • MadManOriginal
    • 12 years ago

    Maybe he should sue NV for announcing billion-dollar stock buybacks which they don’t complete anyway before announcing more stock buybacks to boost the stock price too.

    • sweatshopking
    • 12 years ago

    hahhahhahahaha nvidia!! i have a 8800gt, and i have been satisfied with it, but recently man this company!! lol, they really are getting hammered!!! If ati can keep some pressure on and amd can get out of the hole they are in, hopefully they can keep some pressure on nvidia to stop the price gouging that was going on with the 260/280 and other gpu’s.i paid 274 for my 8800 gt, and they are 109 on tiger direct now!!! bastards.

    • =assassin=
    • 12 years ago

    The way I see it, suing NVidia will only make matters worse for shareholders as any payouts will make the share price plunge even more?

    • Joerdgs
    • 12 years ago

    My laptop was victim of one of these GPU failures. Luckily Dell’s warranty still covered it. Mechanic came by the house and replaced the entire mobo.

    • PRIME1
    • 12 years ago

    I didn’t know Charlie had a share of NVIDIA stock.

      • ssidbroadcast
      • 12 years ago

      CHARLIE’S DON’T… er, DIVERSIFY THEIR STOCKS!

    • robspierre6
    • 12 years ago

    Nice news.

    • MadManOriginal
    • 12 years ago

    They had to report it for accounting purposes in order to note the costs as a charge-off. They could have just lumped it in with other warranty charges (if they have such an item in their accounting) but it would have affected the bottom line the same and might have been misleading according to accounting and SEC guidelines.

    oops,, reply to #3

    • jsncable
    • 12 years ago

    The problem IS that they admitted the problems with thier GPU’s… They should have kept it covered up. The stock prices wouldn’t have been affected nearly as bad. And this guy would have been in ignorant bliss.

      • Meadows
      • 12 years ago

      Nice. GPUSs’.

        • eitje
        • 12 years ago

        how lame are you?

          • MadManOriginal
          • 12 years ago

          Better capitalize that H before Meadows reads it!

      • ssidbroadcast
      • 12 years ago

      Yeah, with that policy they’d be as successful as Enron.

      oh wait…

        • jsncable
        • 12 years ago

        Enron…? find a better example.. that was completly different… although MadManOriginal is right, they probably would have to show it on the accounting records.

      • jsncable
      • 12 years ago

      Thank goodness for you!, otherwise typos might go unnoticed.

        • Meadows
        • 12 years ago

        You’re welcome.

      • anjulpa
      • 12 years ago

      *this girl

      • clone
      • 12 years ago

      r[

    • MadManOriginal
    • 12 years ago

    I’d like to sue companies when their stock goes down too. I suppose it’s ok for the courts and SEC to decide when NV ‘should have’ announced this but if there’s an ongoing investigation in to the problem is the company required to say that? And if they had announced it eariler the stock would have crashed then and the guy would have lost his money then instead.

    The thing is if this guy was so concerned about his investment he should have done more digging on a regular basis about his holdings beyond Yahoo finance news which, once it’s on there, it’s too late for the individual investor. The problem was known before the announcement by NV that dropped the stock price, and speculated about even before that. In addition, it was clear once NV had to slash prices to compete with ATi offerings that their forward profits would be lowered so if he’d kept up with knowing the company’s market he would have sold before the announcement that hurt the stock.

    • kuraegomon
    • 12 years ago

    Oh yeah … the fit has hit the shan

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