Silicon Graphics (SGI) has been hit with three further legal actions from its investors, for alleged distortion of share information.
The high end graphics and workstation company had already received one lawsuit earlier last week. Each of the cases alleges that some of SGI's former and current directors made "false and misleading statements" about the company's finances in order to artificially inflate the share price and enhance profits for stock disposals.
SGI, which successfully fought off a similar case earlier this year, denies all allegations.
The investors and their lawyers complain that SGI made a $7.4 million profit by selling shares before it announced a $37 million loss in October. The chief executive Ed McCracken resigned after that announcement, but the losses caused the share price to tumble by 23 per cent between July and October - and it continues to fall.
The investors point out that the company also admitted that it had included orders from future quarters in those quarterly results.
Mark Raphael, a senior analyst at Meta Group, said: "The workstation and graphics markets are pretty flat at the moment so Silicon Graphics is facing some tough business challenges. It tried to diversify into the server market but this hasn't proven very profitable yet. So lawsuits are distracting and bad news for the users as well as the company."
That may be so, but the US hi-tech industry is still awash with shareholder lawsuits, with 3Com receiving one in the same week. This is despite the result of the SGI test case this year, in which the judge effectively tightened the rules for bringing such lawsuits, ruling that proven negligence was not enough and that compensation would only be paid with proof of actual fraudulent activity.
An industry insider questioned the likelihood of such cases succeeding because of the nature of the legal system and the technology market. He said the earlier SGI case proved "there is no legal precedent for this type of case. By the time gets through the legal system the share prices could have regained their strength or the companies in question are likely to have been taken over."
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