AMD settles K5 lawsuit

The chipmaker settles a securities lawsuit regarding the performance of its older K5 chips, which will widen its first-quarter loss.

Advanced Micro Devices settled a securities lawsuit regarding its older K5 processors, a development that is expected result in a widening of the company's first-quarter loss.

The lawsuit, which dates back to 1995, concerned the company's development and release of the K5 chip. If approved, the cost of the settlement to the Sunnyvale, California, company would be $11,500,000.

A complaint brought by shareholders asserted that AMD made false or misleading projections about the status of K5 development efforts in 1995. A spokesperson said AMD admitted no wrongdoing but settled the lawsuit to "move on with the business of producing chips." He expected that the company's board and the U.S. District Court in San Jose would approve the settlement.

The settlement closes a tumultuous chapter in AMD's history. After touting the K5 as a challenger to Intel's Pentium processor, AMD persuaded Compaq to adopt the chip for some mainstream computer models. The deal fell apart quickly amid performance problems, however, temporarily sending AMD's fortunes into a tailspin.

Production of the K5 was halted in August of 1997.

The company said it is adjusting its first-quarter 1998 results to reflect the settlement. The adjustment, net of tax, increases the quarterly loss by $0.05 per share to $62,727,000.