SGI faces share fraud lawsuit

Silicon Graphics (SGI) is the latest in a string of computer companies to be hit with a class action lawsuit, accusing it of making misleading statements to inflate the company's share price for insider dealing.

And it won't be the last, warned industry analysts.

The suit, filed in the Northern District Court of California, covers the period be- tween 24 July and 6 October - just before the company fired its chief executive Ed McCracken and announced drastic restructuring. This caused the company's share price to nosedive from more than $30 to less than $14.

The unnamed defendants are alleged to have raked in $7.4 million by selling shares before the announcement was made. Silicon Graphics said it will vigorously defend the case.

Analysts suggested that the frequency of such legal action against listed IT companies is likely to increase because their share prices are vulnerable to fast technological change.

Investors who lose money inevitably seek redress. A similar suit was filed against network vendor Cabletron last month.