Opinion ID: 731320
Heading Depth: 5
Heading Rank: 1

Heading: The 1991 Second Quarter Forecasts

Text: 54 In an April 25, 1991 conference call with market analysts, defendant Ludvigson, MIPS' chief financial officer (CFO), stated that MIPS expected technology revenues to decline slightly from the Q1 levels but expected higher technology revenue performance ... for the total year. Although Ludvigson cautioned that he would be hesitant to put a total number on it, he suggested that MIPS' earnings for the second quarter would be similar to the $624,000 earnings reported for the first quarter. Specifically, Ludvigson stated that his expectations for Q2 would be bottom line about Q1. 55 Plaintiffs' claim that these statements were false and misleading is based on a MIPS' internal spread sheet which predicted a loss of 17 cents per share. The spread sheet was dated April 17, 1991, eight days before the conference call. The spread sheet showed that MIPS' internal forecasts projected a loss of $4,000,000 for the second quarter. 56 The district court, however, did not think that the internal spreadsheet raised a triable issue of material fact. As the district court explained: 57 Plaintiffs ignore all of the other documents and testimony that put the spread sheet in context. The spreadsheet was the starting point for the discussion at the April 22-23 quarterly business review, not the quarterly forecast. The entire purpose of the quarterly business review was to develop a forecast for the quarter, known as the QBR commitment. The QBR commitment is consistent with the general guidance given during the April 25 conference call, was distributed shortly thereafter, and was presented to the board on May 15, as a second quarter forecast. There is no evidence that the spreadsheet was other than a preliminary worksheet and, as such, was not something that should have been disclosed to the public. Nor does it suggest, given the way it was prepared, that defendants were hiding adverse facts. 58 The district court is partially correct. As we recently explained in In re Stac Electronics Sec. Litig.: 59 Issuers need not reveal all projections. Any firm generates a range of estimates internally or through consultants. It may reveal the projection it thinks best while withholding the others, so long as the one revealed has a reasonable basis--a question on which other estimates may reflect without automatically depriving the published one of foundation. 60 89 F.3d 1399, 1411 (9th Cir.1996) (quoting In re VeriFone Sec. Litig., 784 F.Supp. 1471, 1487 (N.D.Cal.1992)), aff'd, 11 F.3d 865 (9th Cir.1993). 61 In this case, Ludvigson predicted a profit when in fact MIPS had information that the company would suffer a loss. We found no evidence in the record that the defendants disclosed to analysts the financial information upon which the internal forecast was based. Further, according to the deposition testimony of MIPS' employees, the internal forecast represented the best, most accurate representation as of the time it was prepared of what the company's financial results [would] be like for the prospective quarter. Based on this evidence, a reasonable trier of fact could conclude that defendants' forecasts or projections of a profit in the second quarter were unreasonable in light of the internal forecasts which indicated a loss for the second quarter. We find that plaintiffs have raised a genuine issue of material fact as to whether defendants' projections for the second quarter made during the April 25, 1991 conference call were false or misleading. 62