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Suit Alleges Texas Instruments Artificially Depressed Stock Price

December 6, 1989

DALLAS (AP) _ Texas Instruments Inc. has little to say about a lawsuit that claims the company artificially depressed its stock price last month by not quickly disclosing a Japanese patent potentially worth billions of dollars.

The class-action suit filed in Dallas federal court Monday claimed the company misrepresented its financial prospects by not disclosing that it had been granted the patent in Japan for the basic computer chip.

Industry analysts estimate that the patent, which was issued Oct. 30, could generate $100 million to $300 million in annual royalties from Japanese companies until it expires in November 2001.

The lawsuit alleges that Texas Instruments knew about the Japanese patent ruling as early as August and that the company should have mentioned it in a third-quarter earnings report released Oct. 20.

Texas Instruments did not inform investors about the patent until after a Japanese business newspaper reported the story Nov. 21.

Because investors were not told of the prospects for the Japanese patent, the earnings report contained ″misrepresentations″ about Texas Instruments’ prospects of increased revenues from royalties, according to the lawsuit.

Texas Instruments spokesman Stan Victor said Monday that the company ″is confident that it has fully complied with U.S. disclosure requirements.″ Victor declined further comment.

On Nov. 20, the day before the Japanese patent became public knowledge, Texas Instruments announced plans to take a $55 million write-down in fourth- quarter earnings and to lay off up to 1,500 domestic employees.

Texas Instruments stock closed at $29 a share on Nov. 20 but rose to $36 by the close of trading Nov. 22, following the patent announcement.

The suit was brought by an investor, Margot Broza of New York, who had purchased five options to sell Texas Instruments stock in November.

She claims to represent all investors who sold Texas Instruments stock or bought options on Texas Instruments stock between Oct. 20 and Nov. 22. More than 14 million Texas Instruments shares were traded by thousands of investors during the period.

The suit seeks compensatory damages resulting from the trading of undervalued stock.

Jerry Junkins, Texas Instruments president and chief executive officer; Bill George, a TI executive vice president; and John Toomay, a TI director, also were named as defendants.

George purchased 1,000 Texas Instruments shares at $30 each on Nov. 9 and Toomay purchased 500 shares at $31.50 apiece on Oct. 30.

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