Apple sensor supplier InvenSense is facing a class-action lawsuit filed by investors accusing the company of defrauding investors by not revealing the true terms of its deals with Apple and Samsung, reports Silicon Beat. InvenSense recently joined Apple's supply chain, producing gyroscopes and accelerometers for the iPhone 6 and 6 Plus.

In the lawsuit, investors accuse InvenSense CEO Alan Krock of providing misleading guidance when he discussed a large new customer during the company's earnings conference call in July 2014.

"Instead of revealing the true condition of the company and its prospects, defendants hid those facts from investors and chose to issue strong guidance and paint a picture of a bright future with a new mega-customer," the complaint states.

Investors believed the new customer to be Apple and increased their stock holdings based on this assumption. During this buying frenzy, InvenSense insiders reportedly sold off their shares, making more than $5.3 million at a time when the price of InvenSense's stock was climbing.

invensense-gyro
Investors were surprised when InvenSense's gross margins dropped 11 percentage points in the following quarter despite this supposed lucrative Apple contract, and the company's share price quickly fell 20 percent. Plaintiffs in the case assert this decline in the company's financial state was the result of overly generous supplier deals with Apple and Samsung, as well as manufacturing problems that delayed component shipments. The company's failure to disclose these "sweetheart deals" is the basis for the class-action lawsuit.

InvenSense isn't the first supplier to face financial troubles after inking a deal with Apple. Materials manufacturer GT Advanced last year filed for bankruptcy following a failed manufacturer agreement with Apple to supply sapphire for future Apple devices.

Related Forum: iPhone

Top Rated Comments

Analog Kid Avatar
136 months ago
Ah, investor logic is such simple logic...

If I beat the market, I'm a genius that saw something no one else did!

If the market beats me, I must have been lied to: sue!!
Score: 5 Votes (Like | Disagree)
IJ Reilly Avatar
136 months ago
Due to Apple’s insistence on secrecy, InvenSense was not allowed to announce that its sensors would be included in the iPhone 6 and 6 Plus before the gadgets’ release. But plaintiffs claim that savvy investors read between the lines when former InvenSense Chief Financial Officer Alan Krock alluded to a new customer who would account for 10 percent of the company’s revenue during a July earnings call.
http://www.siliconbeat.com/2015/01/12/invensense-sued-by-investors-over-sweetheart-deal-with-apple/

So investors who tried to "read between the lines" are suing because they failed to guess right? Good luck with that one.

The comparison to GTAT seems inevitable, but off base. InvenSense is selling product to Apple. GTAT never did.
Score: 5 Votes (Like | Disagree)
IJ Reilly Avatar
136 months ago
I'm not market savvy so be gentle. Did they actually fail to guess right? They guessed the customer was Apple. It was Apple. CEO issued strong guidance based on that customer. Investors bought, insiders sold, margins dropped, stock dropped. I'm probably over simplifying. I still don't think this is worthy of a lawsuit. Stock market is a calculated risk.

Related but unrelated. Wouldn't a smart investor naturally assume if a company is in business with Apple: 1. The margins will be thin. 2. The company is betting on volume to counter the thin margins.

Again, not savvy enough to know what's what.

I think you are getting it right. The plaintiffs have to show that the company provided investors with deliberately misleading or inaccurate information. The insider trading claim is also difficult to prove without evidence that insiders traded outside of the trading plans they are required to file with the SEC. The problem with most insider trading claims is that this evidence is generally absent. Insiders are always trading so it's easy to make strictly circumstantial claims like these but they don't count for a hill of beans.
Score: 3 Votes (Like | Disagree)
nzalog Avatar
136 months ago
We're only 13 days into 2015 but I feel like this is the most bland story I have read this year, quite possibly ever, even the GTAT story was more riveting.

Worst comment of 2015?
Score: 3 Votes (Like | Disagree)
ArtOfWarfare Avatar
136 months ago
Is the margin dropping 11% really all that important, though? I feel like the profit is more important. Are they making more or less than last year?

----------

http://www.siliconbeat.com/2015/01/12/invensense-sued-by-investors-over-sweetheart-deal-with-apple/

This article also fails to mention what their profit was.

Also, their margin fell from 47% to 36%. This really doesn't sound like the sky falling to me. So long as they're selling at least 31% more product, they've increased their profit.
Score: 2 Votes (Like | Disagree)
saving107 Avatar
136 months ago
We're only 13 days into 2015 but I feel like this is the most bland story I have read this year, quite possibly ever, even the GTAT story was more riveting.
Score: 2 Votes (Like | Disagree)

Popular Stories

WWDC25 Live Coverage Feature 1

WWDC 2025 Apple Event Live Keynote Coverage: iOS 26, macOS Tahoe, and More

Monday June 9, 2025 9:00 am PDT by
Apple's Worldwide Developers Conference (WWDC) starts today with the traditional keynote kicking things off at 10:00 a.m. Pacific Time. MacRumors is on hand for the event and we'll be sharing details and our thoughts throughout the day. We're expecting to see a number of software-related announcements led by a design revamp across Apple's platforms that will also see the numbering of all of...
maxresdefault

Everything Apple Announced at WWDC 2025 in 9 Minutes

Monday June 9, 2025 5:21 pm PDT by
At today's WWDC 2025 keynote event, Apple unveiled a new design that will inform the next decade of iOS, iPadOS, and macOS development, so needless to say, it was a busy day. Apple also unveiled a ton of new features for the iPhone, an overhauled Spotlight interface for the Mac, and a ton of updates that make the iPad more like a Mac than ever before. Subscribe to the MacRumors YouTube channel ...
liquid glass

Apple Announces All-New 'Liquid Glass' Software Redesign Across iOS 26 and More

Monday June 9, 2025 10:13 am PDT by
Apple today announced a complete redesign of all of its major software platforms called "Liquid Glass." Announced simultaneously for iOS, iPadOS, macOS, watchOS, tvOS, visionOS, and CarPlay, Liquid Glass forms a new universal design language for the first time. At its WWDC 2025 keynote address, Apple's software chief Craig Federighi said "Apple Silicon has become dramatically more powerful...
iPadOS 26 Apple Newsroom

Apple Says iPadOS 26 is Compatible With These iPad Models

Monday June 9, 2025 11:22 am PDT by
Apple today announced that iPadOS 26 will be compatible with the iPad models listed below. iPadOS 26 features a new Liquid Glass design, a menu bar, improved app windowing, and more. iPadOS 26 supports the following iPad models:iPad Pro (M4) iPad Pro 12.9-inch (3rd generation and later) iPad Pro 11-inch (1st generation and later) iPad Air (M2 and later) iPad Air (3rd generation and...
iPhone Car Key WWDC 2025

Apple Says These 13 Vehicle Brands Will Soon Offer iPhone Car Keys

Monday June 9, 2025 2:38 pm PDT by
In 2020, Apple added a digital car key feature to its Wallet app, allowing users to lock, unlock, and start a compatible vehicle with an iPhone or Apple Watch. The feature is currently offered by select automakers, including Audi, BMW, Hyundai, Kia, Genesis, Mercedes-Benz, Volvo, and a handful of others, and it is set to expand further. During its WWDC 2025 keynote today, Apple said that 13...
Apple WWDC25 iOS 26 hero 250609

Apple Announces iOS 26 With 'Liquid Glass' Design, Live Translation, Overhauled Phone App, and More

Monday June 9, 2025 11:00 am PDT by
Apple at WWDC announced iOS 26, introducing a comprehensive visual redesign built around its new "Liquid Glass" concept, alongside expanded Apple Intelligence capabilities, updates to core communication apps, and more. Liquid Glass is a translucent material that reflects and refracts surroundings to create dynamic, responsive interface elements, according to Apple. The new design language...