S3 slapped with class action
Just days after S3 said it would have to restate its financial results for several quarters, the chipmaker is hit with a class-action lawsuit.
The complaint alleges that, during the class period of January 27, 1997, to November 3, 1997, certain company officers and directors issued false and misleading statements, earnings reports, and SEC filings despite knowing that S3 has been recognizing revenue on sales prior to the time its products were sold to customers.
Consequently, this aggressive revenue recognition caused S3 to overstate its revenues by up to $70 million. The suit charges that this practice caused the price of S3's common stock to move up to artificially inflated levels.
The complaint also alleges that, during the class period, some defendants sold substantial amounts of S3 common stock in order to take advantage of the artificially inflated price.
Earlier this week, shares of S3 tumbled more than 22 percent in trading, following the chip maker's announcement that it would have to restate some results.
S3 said it would restate its revenues downward by $40 million to $70 million for prior quarters. In addition, its net profits are expected to be revised downward for those quarters by 14 cents to 29 cents a share.
Business editor Dawn Yoshitake contributed to this report.