A lawsuit filed Tuesday alleges Nvidia lost more than $3 billion in market value because it concealed defects in its graphics chips.
The complaint filed by New York-based Shalov Stone Bonner & Rocco alleges that Nvidia committed "securities fraud" due to "a series of misrepresentations and omissions that actively concealed and failed to disclose the unusually high failure rates of Nvidia's mobile video adapters."
The suit ties the alleged misrepresentations to Nvidia's loss of market capitalization since July when the company "belatedly" revealed the information about problems and "promptly" lost $3 billion in market capitalization. The class action covers the period between November 8, 2007, and July 2, 2008--when Nvidia allegedly failed to disclose problems.
On July 2, Nvidia announced that it would take a one-time charge of $150 million to $200 million to "cover anticipated warranty, repair, return, replacement and other costs and expenses, arising from a weak die/packaging material set in certain versions of its previous generation GPU and MCP products used in notebook systems." (GPU stands for graphics processing unit, and MCP for multichip package.)
Hewlett-Packard stated in July that it "initiated a customer program to address this issue in November 2007, and have notified registered customers who have notebook PC models that are included in this HP program."
Dell at that time also issued a statement and offered a workaround that involved updating the computer's BIOS (basic input/output system). Other PC makers have also offered BIOS workarounds that try to mitigate potential problems.
Dell characterized the problem as "weak die/packaging material set, which may fail with GPU temperature fluctuations. If your GPU fails, you may see intermittent symptoms," Dell said at that time.
Both companies listed more than a dozen laptop models potentially affected by the glitch.
The most oft-cited graphics chip models potentially affected by the problem are Nvidia's GeForce 8 series.
Symptoms include black screens, duplicate images, wireless networking complications, and the random appearance of lines, characters, and other on-screen interference, according to the complaint.
The lawsuit tries to draw a comparison with the infamous Intel chip flaw of 1994 that forced Intel to take a $475 million write down. That flaw, however, turned out to be extremely rare. The lawsuit contends that this kind of "disaster scenario" has "materialized" for Nvidia.
Filed in United States District Court for the Northern District of California, the lawsuit names as defendants Nvidia and the company's CEO and CFO during the Class Period.
Update on July 27 at 10:00 a.m. with additional information
Dell has issued a system update for a well-publicized problem with Nvidia chips.
The company said Friday it has posted BIOS updates for an Nvidia graphics chip glitch affecting laptop computers. Citing Nvidia information, Dell said the "affected GPUs (graphics processing units) are experiencing higher than expected failure rates causing video problems."
"The issue is a weak die/packaging material set, which may fail with GPU temperature fluctuations. If your GPU fails, you may see intermittent symptoms," the Dell blog said.
Dell said the symptoms include "multiple images, random characters on the screen, lines on the screen, no video." But added this caveat: "if you are already experiencing video-related issues like the...points above, updating the BIOS will not correct them. Dell will provide support for customers who have experienced GPU failure according to the terms of the system warranty."
Dell laptop systems potentially affected by Nvidia glitch with update file name
(Credit: Dell)Dell is recommending that users flash their system BIOS. "Each of these BIOS updates...modifies the fan profile to help regulate GPU temperature fluctuations," Dell said.
New systems are shipping with the BIOS update, according to Dell.
On July 2, Nvidia said it would take a one-time charge of between $150 million and $200 million to cover "anticipated warranty, repair, return, replacement, and other costs and expenses, arising from a weak die/packaging material set in certain versions of its previous generation GPU and MCP (multi-chip package) products used in notebook systems."
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