Intel Secures Dismissal of Shareholder Fraud Lawsuit
In a significant legal victory, Intel Corporation has successfully obtained the dismissal of a shareholder lawsuit that accused the semiconductor giant of fraudulently concealing challenges within its foundry operations. This concealment allegedly led to widespread job cuts and a suspension of dividends, resulting in a staggering loss of over $32 billion in market value within a single day.
In a decision unveiled on Tuesday, U.S. District Judge Trina Thompson in San Francisco dismissed allegations that Intel delayed revealing a $7 billion operating loss for fiscal 2023 associated with its chip manufacturing services for external clients. This loss was only disclosed last April when Intel modified its financial reporting framework.
The judge noted that plaintiffs erroneously linked the $7 billion loss exclusively to the Intel Foundry Services business unit. Furthermore, they were not misled into thinking the unit’s reported performance encompassed the entire Internal Foundry Model.
Judge Thompson also addressed statements made by former CEO Patrick Gelsinger in March, which suggested Intel was gaining “significant traction” and experiencing “growing demand for our foundry offering.” These statements were found not to be misleading as they pertained to specific clients rather than the overall declining revenue.
The attorneys representing the shareholders have yet to comment on the dismissal. Meanwhile, Intel has chosen not to provide any statements. However, Judge Thompson did allow the plaintiffs the option to file an amended complaint.
The litigation alleged that Intel artificially inflated its stock price between January 25 and August 1, 2024. This period culminated in Intel reporting a $1.61 billion quarterly loss, announcing layoffs affecting over 15,000 employees, and suspending its dividend to achieve a $10 billion savings target by 2025. Following these announcements, Intel’s share price plunged by 26% the next day, leading to the $32 billion loss in market value.
Based in Santa Clara, California, Intel has been grappling with intense competition from other chip manufacturers and striving to capitalize on the burgeoning artificial intelligence sector. Key competitors include Nvidia, Advanced Micro Devices, Samsung Electronics, and Taiwan’s TSMC. In December, Intel decided to replace Mr. Gelsinger as CEO.
The lawsuit is formally referred to as In re Intel Corp Securities Litigation and is being heard in the U.S. District Court, Northern District of California.
