Nvidia Corp. said on Friday it reached a tentative deal with U.S. regulators who were planning to recommend enforcement actions against the chip designer. The company, whose accounting practices have been under investigation by the Securities and Exchange Commission since early 2002, said in a regulatory filing that it had received a "Wells notice" indicating that the agency's staff was going to advise the full commission to take enforcement action related to the probe.
Shares of Nvidia fell nearly 4 percent. Nvidia said in an annual report filed with the SEC that it then reached a tentative deal with the agency this month. The Santa Clara, California, company said it would not have to pay any fines or penalties, but must agree to a cease-and-desist order against any future violations of certain federal securities laws.
Nvidia said the review of the agreement could take weeks or even months to complete, and there is no guarantee the SEC would approve the deal. In April 2002, Nvidia said that as a result of the investigation and its own internal review, it would restate results going back to its 2000 fiscal year to correct accounting errors.
In the annual report, Nvidia also disclosed that the bankruptcy trustee for a company called 3dfx served it in March with a complaint demanding additional payments under an April 2001 asset purchase agreement between the two companies. Nvidia said it believes the 3dfx bankruptcy filing would allow a determination of the full extent of that company's debts and liabilities, and in turn Nvidia's obligations under the April 2001 deal.
After rising 317 percent in 2001 to be the best-performing stock on the S&P 500, Nvidia shares lost nearly 83 percent of their value in 2002 because of the regulatory probe, a dispute with Microsoft Corp. MSFT.O over chip pricing, and inventory issues. But the shares are up nearly 18 percent in 2003 after Nvidia settled the dispute with Microsoft, its largest customer at 23 percent of revenue, and rolled out a series of new chips for the desktop and mobile markets.
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