Hi EKS .... About the Class Action Suit
>>If these allegations are true and can be proven then Novell is in for more difficult times.<<
The specific allegations spelled out in the suit are true, in fact their lying goes back to Q1-96 as explained in the white paper. Also, one of the allegations in the PR is weaker than what actually happened. Here are the allegations:
>>>>The complaint further alleges that defendants manipulated and inflated Novell's reported EPS for the 4thQ of F96, ended Oct. 26, 1996, and the 1stQ of F97, ended Jan. 31, 1997, making Novell
appear profitable when, in fact, it had suffered losses.
In Nov. 1996, Novell told investors of the "broad market acceptance of" and "strong market demand" for Novell's new products which it represented "greatly impacted fourth quarter growth."
As a result of these allegedly false statements, assurances, forecasts and inflated financial results, Novell's stock increased to $13 per share in Feb. 1997 from $8-3/4 per share on Oct. 31, 1997, a 33% increase in just three months.
On March 18, 1997, Novell announced that Eric Schmidt had been named Chairman of Novell's Board and its Chief Executive Officer. Then, on April 22, 1997, just weeks after Schmidt joined Novell, Novell revealed that its 2ndQ F97 results, the quarter to end April 30, 1997, would be much worse than earlier forecast, with revenues of only about $300 million, a sharp decline from 1st Q F97 revenues of $375 million, due to poor sales to Novell's OEMs and distributors of boxed software products.
Upon this revelation, which one analyst called "brutal" and "not pretty," on April 23, 1997, Novell's stock fell to $7, on huge volume of 16.6 million shares, taking it back below where it was at the beginning of the Class Period.<<<<
This statement in the PR is not accurate:
>>....Novell revealed that its 2ndQ F97 results, the quarter to end April 30, 1997, would be much worse than earlier forecast, with revenues of only about $300 million,...<<
In fact, Novell's pre-announcement stated that revenues will be $300M-$335M. Worse yet, the actual revenues for Q2-97 were $273, missing the pre-announced number by a mile. Further, they lied again about Q3-97:
1. They said that the layoff of 1000 employees will result in a charge of $25M-$35M, they ended up by spending $55M, and never bothered by explaining this hefty charge, an average of $55K for every employee, this is ridiculous.
2. They stated that revenues will be flat with Q2, actual results showed a decline of ~$50M in revenues.
In any case, they have been lying and misleading Wall Street and investors consistently since Q4-95. In Schmidt's interview with CNBC today he mentioned the previous problems with the channel inventory, my best guess is that their defense will be all the misleading projections were the result of poor tracking of sell-thru the channel, nothing intentional.
About Schmidt's Interview with CNBC
This was the worst interview by a CEO I have ever seen, in fact Jim Rogers said after the interview why did he come if he didn't want to answer any questions. Example:
Q: Do you think the stock is undervalued?
A: I can't answer this question.
Pathetic, if he didn't want to say anything, he could have said 'the stock is a fraction of its all-time high, it has room for improvement', I don't think lawyers can nail him on this statement but it is a lot better than his response.
Regards
Salah |
