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NVIDIA's problems only started with the $200 million one-time charge

In July 2008, NVIDIA reported one of its first losses in a long time. The main cause for NVIDIA's loss was a one-time charge the firm was forced to take after some of its notebook GPUs were found to be failing at higher than normal rates in some notebook systems.

The one-time charge amounted to about $200 million and was to cover costs associated with repair or replacement of affected notebook computers. NVIDIA hoped that the negative quarter and one-time charge would be as bad as things got for it, but things are really just starting to become interesting.

Two proposed class action lawsuits are pending against the graphics giant over the $200 million charge and the defective GPUs. On September 9, law firm Shalov Stone Bonner & Rocco LLP filed a securities fraud class action on behalf of all investors who purchased or acquired stock in NVIDIA between November 8, 2007 and July 2, 2008.

The core allegation in the suit is that NVIDIA knew as far back as November 2007 that the GPUs were defective and mislead investors by not divulging the issue with the GPUs and the damage the problem could cause the NVIDIA's profitability. The suit was filed in U.S. District Court, Northern District of California on behalf of all NVIDIA stock holders and naming Lisa Miller as the chief plaintiff.

second class action lawsuit was filed against NVIDIA in the Northern District of California on behalf of NVIDIA shareholders who bought or acquired shares of NVIDIA stock during the period of November 8, 2007 to July 2, 2008. The Suit was filed by the Brualdi Law Firm. The Brualdi suit has yet to define a class and is looking for a lead plaintiff for its case. According to the firm, the lead plaintiff will be the applicant for the suit who had the most significant loss in NVIDIA stock.



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second lawsuit goes in the future...
By zshift on 9/15/2008 12:15:52 PM , Rating: 2
you need to fix the part about the second lawsuit, says from november "2008" to july 2008.

should be november 2007




RE: second lawsuit goes in the future...
By silversound on 9/15/2008 12:44:21 PM , Rating: 2
Bad business moral...
High price, little improvements...
Intel step in the game now, nvidia's future is not bright...


RE: second lawsuit goes in the future...
By quiksilvr on 9/15/2008 12:51:24 PM , Rating: 2
"The core allegation in the suit is that NVIDIA knew as far back as November 2007 that the GPUs were defective and mislead investors by not divulging the issue with the GPUs and the damage the problem could cause the NVIDIA's profitability."

Where have I heard this before?...oh yeah!
http://gizmodo.com/5046314/the-shocking-inside-sto...


RE: second lawsuit goes in the future...
By BladeVenom on 9/15/2008 1:02:11 PM , Rating: 2
Why does Nvidia get sued for a few bad chips, but MS doesn't when the 360's failure rate is even worse?


RE: second lawsuit goes in the future...
By quiksilvr on 9/15/2008 1:11:24 PM , Rating: 2
Because they spent over a billion dollars fixing the failures. I think they learned their lesson.


RE: second lawsuit goes in the future...
By Drexial on 9/15/2008 1:20:08 PM , Rating: 2
they also never really admitted there was a problem, when there is no problem then there is nothing to sue over....


RE: second lawsuit goes in the future...
By cokbun on 9/15/2008 10:14:56 PM , Rating: 2
umm then why are they putting red lights there on the console...


RE: second lawsuit goes in the future...
By Samus on 9/16/2008 6:03:02 AM , Rating: 2
For the longest time, especially in mobile platforms, nVidia was pushing it. They kept getting hotter and more power hungry. They invented the dual slot card, the blower cooling fan (remember the leaf blower jokes...lol) and they pioneered such requirements as ATX-spec power connectors (of course, the Voodoo 5500 had the first power connector!) and SLI motherboards with additional power connectors.

ATI has for the past few years been moving in a more green direction (no pun intended, as the AMD logo is green :) making chips that run cooler and these days, faster and less expensive. nVidia focused on the wrong thing. Just like in the automotive industry, die-hard performance always gets you in trouble somewhere along the line.


By ecktt on 9/16/2008 12:09:44 PM , Rating: 2
Is there some other ATi company? All the ATi products I know of have a higher current draw and produce more heat than an equivalently performing NVidia product at full load. Yes, NV screwed the pooch here but that does not validate the comment about ATi.

The fact of the matter is that NV was trying to fill market niche that ATi or most other manufactures didn't fill and that was the mobile gamer or CAD professional.


Got to love class action suits
By MrTeal on 9/15/2008 12:47:56 PM , Rating: 5
quote:
The Suit was filed by the Brualdi Law Firm. The Brualdi suit has yet to define a class and is looking for a lead plaintiff for its case.


So, no one's actually come forward to them to launch the suit, and they're not exactly sure what they're suing over, but they're sure there's money involved somewhere. Classy.




RE: Got to love class action suits
By whickywhickyjim on 9/15/2008 1:38:20 PM , Rating: 2
"why don't you call me sometime, when you have no class."


RE: Got to love class action suits
By XBMC Fan on 9/15/2008 3:34:51 PM , Rating: 2
"When she said 'I do', I should have said 'With who'!"


RE: Got to love class action suits
By DEVGRU on 9/16/2008 11:33:39 AM , Rating: 2
"Screw you Melon!"


By Polynikes on 9/15/2008 1:46:17 PM , Rating: 2
Yeah, that was pretty awesome. They're just sad they didn't think of it first like the other firm did, and want to muscle in on the action.


By omnicronx on 9/15/2008 3:08:21 PM , Rating: 2
quote:
So, no one's actually come forward to them to launch the suit, and they're not exactly sure what they're suing over, but they're sure there's money involved somewhere. Classy.
... All that this means is they have not finalized the class, which is the group of people that are suing. I assume that once the class is certified, that they can no longer add people to the suit. As such, they can't find a lead plaintiff until they know who the biggest loser was, and to do that, the class has to be completed. The statement in no way means that they have not found anyone to sue.. or that they are having trouble finding a lead plaintiff..


2nd vultures late to the carcass
By tmouse on 9/15/2008 12:31:40 PM , Rating: 3
Looks like the second group is out a filing fee, any judge worth his/her salt will combine these suites.




RE: 2nd vultures late to the carcass
By Spivonious on 9/15/2008 2:17:41 PM , Rating: 3
I didn't know they had hotel rooms.


RE: 2nd vultures late to the carcass
By tmouse on 9/16/2008 8:19:20 AM , Rating: 2
Yes its where they go when they are not scre@#ng each other over in the court room


Shareholders not Consumers
By Chemical Chris on 9/15/2008 1:32:10 PM , Rating: 2
While I definitely understand the action taken by the shareholders, I am not really concerned with them reducing their losses, as they already have the money to invest.
I am concerned about the consumers who bought defective products thinking they were 'fine'. They will now have dead cards/laptops, with what recourse? All the damages will go to shareholders, leaving the little guy out in the cold with a dead laptop. These are the people who cant afford this loss, no matter how small in the grand scheme of things. Many of my friends (all students) now have defunct chips; they cant afford a new laptop, and will undoubtedly be the ones who get screwed.
So in short, Im sickened by the fact the little guy who actually bought a product will be given the big screw, and the wealthy people who owned stocks will get some money back.
Argh, go capitalism/American justice

Chem C




By crystal clear on 9/15/2008 2:44:26 PM , Rating: 2
Hey, there are plenty of law firms in the USA just waiting for you & your student friends to file a class action lawsuit.

I doubt if they will even ask you to pay their fees-they know how to get their share.

Example- read my comment above.


RE: Shareholders not Consumers
By The Jedi on 9/16/2008 10:05:21 PM , Rating: 2
If you got a Dell, they extended the warranty for 'the GPU issue'. Not like your whole system would be covered, but if it's related to the the GPU failing, that may be covered.


By crystal clear on 9/15/2008 1:25:34 PM , Rating: 1
quote:
The core allegation in the suit is that NVIDIA knew as far back as November 2007 that the GPUs were defective and mislead investors by not divulging the issue with the GPUs and the damage the problem could cause the NVIDIA's profitability.


Yes this will force Nvidia to handover to the judge all emails plus other relevant details/records/correspondences etc ofcourse relevant to the case.

Thsi will expose the real truth about those defective GPUs,this will inspire more class action suits by buyers/users for damages against Nvidia-

that Nvidia knowingly sold them defective GPUs.




By crystal clear on 9/15/2008 1:44:06 PM , Rating: 2
But in th meantime Nvidia has another class action suit filed against them,read below-

AMD, Nvidia Conspire to Price Fixing; Sued

In late August of this year, a major class action lawsuit was filed in the state of California against ATI/AMD and Nvidia, alleging that the two primary graphics cards companies conspired to price fixing of GPU processors and graphics cards.

The suit was filed in the U.S. District Court for the Northern District of California and the courts have ruled that the filing may proceed. The plaintiffs are Jordan Walker and Michael Bensingor, who have filed the suite on behalf of themselves and anyone else who has been an ATI or Nvidia customer.

According to the class action filing:

"The Named Plaintiffs allege that, in violation of the federal antitrust laws, Nvidia and ATI conspired to fix, raise, maintain and stabilize prices of graphics processing chips and cards. The Named Plaintiffs also contend that Defendants unlawfully colluded to coordinate new product introductions."


http://www.tomshardware.com/news/nvidia-amd-ati-gr...

Portions of the article above-

Now those half truths seem to be true. Tom’s Hardware was able to obtain the legal documents for the filing as well as exhibits, showing detailed email exchanges between top ATI executives and managers and those from Nvidia. In one such email, Paul Ayscough of ATI exchanged long emails with Kevin Shuh of Nvidia, talking about working more closely together:

"We launch the GPU initiative at some industry show together. Perhaps something like Meltdown or IDF. We could even share a GPU initiative booth together to get tons of PR from the press."

Another email exchange between Ayscough and Shuh even had Ayscough saying that Intel would never make a discrete GPU part, and asserted to taking advantage of this situation to bolster each other’s position in the market. As we all know today however, Intel has stepped into the graphics playground in a very big way with it’s Larrabee architecture.

In another email between Dan Vivoli of Nvidia and Dave Orton of ATI, Dan wrote:

"I really think we should work harder together on the marketing front. As you and I have talked about, even though we are competitors, we have the common goal of making our category a well positioned, respected playing field. $5 and $8 stocks are the result of no respect."

In the same email, Dan wrote:

"Both of us have spent the last three years trying to bring the perceived value of our products up to the level of Intel. The "GPU" category is clean and has served us well that way. We both have increased the price of our high end product several fold over the last 4 years while Intel’s high end prices have more than halved. Creating another category serves to work contradictory to that. How does one cleanly position it versus a GPU and a CPU?? It will tear down what we have both built."

You can rad these emails below-

http://www.tomshardware.com/gallery/Picture-3,0101...

As the judge commented-

"That's not good for defense," Alsup said after reading the email. "A jury would like to see this."

http://www.channelregister.co.uk/2008/09/03/email_...


By TheJian on 9/16/2008 8:15:25 AM , Rating: 2
http://www.theinquirer.net/gb/inquirer/news/2008/0...

Umm...Case dismissed...LOL. At least be accurate. This case is closed. Don't people do their homework before posting this stuff?

When a federal grand jury drops the case (basically) and Nvidia gets a free ride from Charlie (who REALLY hates NV) this is case closed...LOL. ATI has never really made much money (best quarter 46mil or so?), so I fail to see how you can price fix when never making money in the first place. Apparently your "FIXING" was completely useless and you should be fired for NOT knowing how to "PUT IN THE FIX"...LOL. Myself I couldn't care less about $600 cards from either co. However I'm thankful a few rich fools pay for me to get a $200 A$$ kicker (IMHO) and allow NV/AMD to invest Millions/Billions into my next $200 card :) Lets face it, for $200 today (heck $130 if you have a 24in or less) you get a pretty awesome gaming experience from either side. Not possible 5 years ago. What are they fixing? Meanwhile MS DEGRADES our machines with Vista and charges more money for the OS to boot. They could have just sold us XP with DX10/Aero/search and called it a day. Instead everyone has to write new software/drivers wasting money/time to perfect something new, and not very useful.

It's not too late MS. Flick the switch and drop the price $50-100, and sell ONE version for business and ONE version for home. XP2008 and XP2008 Business ed. Problem solved, one pig slaughtered for the better of mankind...heh.


Summary
By othercents on 9/15/2008 12:51:36 PM , Rating: 2
So investors wanted inside information before the charge out, so that they could dump their stocks before the stock went down? I'm not sure if a judge can rule that it is legal to allow insider trading.

Other




RE: Summary
By Runiteshark on 9/15/2008 5:54:36 PM , Rating: 2
Its considered insider trading if the company you invest in sells faulty products?

Don't tell Martha.


Dell M1330
By chhimp on 9/15/2008 10:15:26 PM , Rating: 2
The lawsuit should be against Dell. I bought a Dell XPS m1330 in Dec 07 and on Sept 08 the graphic card overheats and causes the computer to crash. The Nvidia 8400m is failing because of the poorly engineered heatsink. Dell will be sending a box to replace the motherboard. Meanwhile....




Losers ?
By Boushh on 9/16/2008 12:51:36 PM , Rating: 2
It seems to me that these people seek a way to compensate for their loses. And they found a reason to do this with nVidia (you probaly would not have ever heard from them if the stock prices would have gone up).

However, these people forget that around the same time there was much more going on in the financial market, like the problem with mortages, high oil prices, stalling economies, more competition from AMD/ATi.

I also think therefore that the impact of the announcement of nVidia to take a reserve has had more impact on their stock prices that it would normaly have had.

And sure, they may have known earlier that something was wrong, but currently all seems to be based on Charlies writing at the Inquirer, and not on actual facts.

And btw, I'm a nVidia stock holder (be it a small one) and I watched the stock price the few days that it dropped. There was enough room for people to get out before it actualy got down to the realy low numbers. In my point of view: you lose some, you win some. Have some balls and take it like a man/woman. Don't acuse others of your own mistakes.




Investor Stupidity
By Inkjammer on 9/15/08, Rating: -1
RE: Investor Stupidity
By Janooo on 9/15/2008 12:39:31 PM , Rating: 5
Investors like their money more than NV.
It's nothing personal, it's business.


RE: Investor Stupidity
By Inkjammer on 9/15/08, Rating: 0
RE: Investor Stupidity
By Runiteshark on 9/15/2008 1:26:02 PM , Rating: 2
I take it you know nothing about stocks?

If I would of seen it dip, and continue on as it was going I would of already cut my losses. This is an opportunity for them to make back their cash, and I doubt they have their money with Nvidia anymore (I wouldn't)


RE: Investor Stupidity
By monitorjbl on 9/15/2008 1:31:39 PM , Rating: 3
God! Would HAVE! Would HAVE!


RE: Investor Stupidity
By MamiyaOtaru on 9/15/2008 2:22:40 PM , Rating: 2
Or would've if you really want to write it out how it sounds. But yeah, 'of' is not correct and horrible.


RE: Investor Stupidity
By Runiteshark on 9/15/2008 3:28:40 PM , Rating: 2
I offer my sincerest apologies. It was completely wrong of me to assume that my post would go ignored due to my one grammar mistake.

How foolish of me.


RE: Investor Stupidity
By gerf on 9/15/2008 4:08:51 PM , Rating: 2
If the President of the US wrote only with crayons, would he be taken seriously?


RE: Investor Stupidity
By Gzus666 on 9/15/2008 5:31:02 PM , Rating: 2
I don't know, lets ask Mr. Bush, I have a feeling he has many a Crayola in his repertoire, some people seem to take him pretty seriously.


RE: Investor Stupidity
By Runiteshark on 9/16/2008 9:38:35 AM , Rating: 2
I wish I could rate you up still..


RE: Investor Stupidity
By trajan on 9/15/2008 1:29:43 PM , Rating: 2
That's not really the case, another commentator has already explained this but wasn't explicit on the point. The law suit is being filed by people who bought stock during a particular period, during which the deception is alleged. Those guys lost a lot of money, allegedly because of NVidia lying. They're going to sue to get their $ back; if they achieve a total victory, they'll end up roughly in the same financial position they were before they invested; they will even be able to ask for interest. E.g. if they investest $1,000 in NVidia during the period, and sold a year later for $500, they could ask for $600 in damages (netting them a gain of $100 or 10%) if they convinced a judge that all of the losses were due to lies and that 10% is a fair rate of return for the market during that period.

(That's just me making up example numbers, realistically it would be very different, there would be a fight over how much of the losses were really due to the lying vs. how much was going to happen anyway, and probably during that period the overall market declined in value).

These people likely don't still own NVidia stock so it doesn't bother them if it goes down more in value. Naturally when anyone gains money, someone else is losing it, and the losers here are going to be the stockholders who invested outside of the period of alleged dishonestly.

Or to put it simply, the plaintiffs are _not_ putting money in their right pocket by taking it out of their left. They're taking it from their co-stockholders.


RE: Investor Stupidity
By Chernobyl68 on 9/15/2008 3:14:29 PM , Rating: 2
nah...they'll make the money off the lawsuit and short the stock as well!


RE: Investor Stupidity
By HinderedHindsight on 9/15/2008 12:50:56 PM , Rating: 5
The problem doesn't just affect existing investors, in affects people who have previously invested (and since pulled their investments out).

This whole thing was announced in July. Say you just bought stock prior to the discovery of the graphics issue, under the impression that nVidia would keep its investors informed. Then guess what, an issue that started over year ago drives your stock prices down, and you no longer have faith in nVidia.

This lawsuit is not necessarily meant for those who wish to continue investing in nVidia, but for those who recently invested in what they thought was an honest company and wish to take their investent elsewhere now that this has come up and hurt nVidias stock price.

Those who purchased stock in the last year feel duped, and may not have purchased the stock if this had been known. And since the dishonesty seems to span the course of a whole year, the coverup hurts invester confidence (and subsequently the stock price) even more a year later.

THAT is why they're suing and that's why there's a limitation on the time period.


RE: Investor Stupidity
By Oregonian2 on 9/15/2008 3:14:20 PM , Rating: 1
The funny thing is that it's not nVidia that gained the money that's claimed to have been lost. That money "lost" was gained by those who sold stock to those buyers.

The only thing nVidia is claimed to have done wrong is not to have announced the problem when they first knew about (and before they perhaps knew exactly why the problem existed or how to fix it) as to drive the stock price down earlier -- before the time they bought their shares.

Unless nVidia used their stock to buy another company (or had employees sell stock during that time) there wasn't any actual gain by nVidia (but they'll have to pay for it perhaps).

So.. as a result nVidia will have it's stock drop further, beyond that which it already has dropped due to the technical problem. So maybe those doing the suing could be sued by those who bought shares just before the suit was announced for having depressed their shares.


RE: Investor Stupidity
By Chadder007 on 9/15/2008 1:19:17 PM , Rating: 3
I hate the stock market. Its such BS, everything is too speculative.


RE: Investor Stupidity
By Polynikes on 9/15/2008 1:45:11 PM , Rating: 5
Legalized gambling, baby. :)


RE: Investor Stupidity
By eyebeeemmpawn on 9/15/2008 3:35:11 PM , Rating: 2
think of them as corporate baseball cards :)


RE: Investor Stupidity
By sprockkets on 9/15/2008 4:24:37 PM , Rating: 2
I know. It's like, we are suing because you didn't give us a chance to sell the stock before it went down, but ironically, it will go down because you sold it.

Wait, what if no one wants to buy your nv stock? Doesn't matter if you were warned!

No, we have no idea how the stock market works. All I know is, they try so hard to minimize their losses, only to find that by doing so, they cause the loss in the first place!

Thanks for making the price of gas jump 20 cents in two days!


RE: Investor Stupidity
By eldakka on 9/16/2008 8:22:16 PM , Rating: 2
quote:
It's like, we are suing because you didn't give us a chance to sell the stock before it went down, but ironically, it will go down because you sold it.


It's more likely to be "We would never have purchased that stock at that time (i.e. between November 2007 and July 2008) if you hadn't of hidden the fact you were having serious problems that have the potential to require NVIDIA to take a hit of 100's of millions of dollars".


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