Opinion ID: 740651
Heading Depth: 2
Heading Rank: 3

Heading: Statements about Sun

Text: 29 Appellants challenge several statements that Appellees made regarding Cypress's sales to Sun Microsystems. (Statements E, F, P, R). In general, these statements all concern one of two issues: Cypress's revenues from sales of its SPARC chip to Sun and possible design wins at Sun for Cypress's new Pinnacle chip. The record demonstrates that all of these statements were true when Appellees made them. Therefore, the district court properly granted summary judgment with respect to all of these statements. 30 On September 30, 1991, Sun announced a new product, the Galaxy server, which used Cypress's SPARC chip. After this announcement, Rodgers told analysts that Galaxy was a hit and that SPARC sales would contribute significantly to gross revenues in the fourth and the first quarters. The record indisputably shows that Cypress's internal projections forecasted increased revenue at Ross, the Cypress subsidiary which produced SPARC, and that Ross's sales increased by almost $5 million in the fourth quarter and beat Cypress's internal forecast by $4 million. (SR 286/6: 165748; 287/4; 165923). As such, Rodgers's statements were true and are unactionable. 31 Appellants maintain that the statements were misleading because Rodgers failed to disclose that Sun was about to produce a new product which would render Galaxy obsolete. (Pl.Br. at 13). However, as the district court properly noted, we presume that investors know the risk of obsolescence of computer equipment because the field is marked by rapid technological advances. Convergent Sec. Litig., 948 F.2d at 513. Thus, Cypress had no duty to disclose the risk that Galaxy might become obsolete. Moreover, Appellants' only evidence that Cypress knew that Galaxy sales would decline because of this new product is a March 1992 memorandum from Ross to Rodgers stating that because of declining Galaxy sales, Ross believed that Sun would not commit to the number of SPARC modules necessary for Ross to meet its second quarter 1992 BOQ. (ER 318:122). This document fails to create an issue of material fact because it relates to Galaxy sales in the second quarter of 1992, while the challenged statements all relate to Galaxy sales in fourth quarter 1991 and first quarter 1992 and because the memorandum originated in March 1992--several months after Rodgers made the challenged statements. 32 In their Second Amended Interrogatory Responses, Appellants also challenge two statements boasting that the Pinnacle, a chip which Cypress was developing during the class period, would attain significant design wins at Sun. (Statements F, R). 2 Appellants implicitly contend that these statements misled the market by implying that Sun would select Pinnacle instead of Viking, a Pinnacle competitor, for its next generation SPARCserver. (Pl.Br. at 13). However, contrary to Appellants' contentions, Rodgers did not state that Sun would select Pinnacle over Viking. Rather, Rodgers stated that even if Sun decided to use the Viking chip in its new SPARCserver, Sun would design Pinnacle into other new products. (ER 280:223; ER 280:266.) As Rodgers stated, Sun eventually did design Pinnacle into its high-end computers. (SR 280: Rodgers Decl. p 72.) That Sun did design Pinnacle into its products indicates that Rodgers's statements were not false when made and were not materially misleading. Syntex Sec. Litig., 95 F.3d at 930-31 (the fact that the FDA approved the defendant's product only three weeks after its patent expired indicated that the defendant's statement that the FDA would approve its product well in advance of its patent expiration was neither false nor materially misleading); see also Convergent Sec. Litig., 948 F.2d at 514 (sales predictions were not actionable, in part, because the company missed those projections by only 10%). 33 Moreover, Appellants argue that Rodgers's statements were misleading because at the time that Rodgers purportedly made them he knew that Cypress's relationship with Sun was deteriorating, that Cypress had not been able to produce a working Pinnacle model and that, therefore, Sun would not design Cypress's Pinnacle into its new product. (Id.) However, Appellants mischaracterize snippets from Cypress's internal memoranda and omit pertinent parts of the challenged statements in an effort to create a triable issue with respect to these statements. A review of Appellants' proffered documents in their entirety reveals that none of the internal memoranda and correspondence upon which Appellants rely supports an inference that Sun told Rodgers that it would not use Pinnacle. For example, in December 1991, Rodgers drafted an internal memorandum stating that Sun officers had recently explained to him why Sun may not use Pinnacle. (ER 318:99). Rodgers drafted this memorandum almost two months after his October 1991 statement, so it does not establish that Rodgers knew that Pinnacle might not achieve design wins at Sun at the time he made the first challenged statement. (Statement F.) Likewise, the December 1991 memorandum does not support an inference that Rodgers's January statement (Statement R) was false or misleading when he made it. The memorandum merely states that Sun officers told him that Sun may not use Pinnacle, not that Sun would not use Pinnacle. (ER 318:99). However, later memoranda and correspondence reveal that Rodgers was involved in ongoing negotiations with these Sun officers to attain a commitment from Sun to use Pinnacle, (ER 318:101-02), and two January 20, 1992 memoranda from Rodgers confirm that Rodgers met with Sun officials. (ER 318:103, 105). Although one of the memoranda indicates that Rodgers was upset about Cypress's performance with Sun because a Sun officer raised it during the meeting, it does not indicate that this performance prevented Cypress from selling Pinnacle to Sun. (ER 318:103-04). Indeed, the second January 20 memorandum is titled Selling Pinnacle to Sun and states that I have gotten Wozniak [a Sun officer] to the point that he agreed he will look at Pinnacle as a viable option. (ER 318:105). The memorandum also states that based on a conversation with another Sun person, John Doerr, two other Sun officers seem also to be supporters of Pinnacle and concerned about Viking. (Id.) The memorandum concludes by requesting a major push to sell Pinnacle to Sun. (Id.) These memoranda and correspondence, when viewed together, do not support an inference that Rodgers's statements at the January 20 teleconference were false or misleading. Rather, they demonstrate that Rodgers's statements were an accurate summary of his negotiations with Sun and expressed his genuine belief that Sun would design Pinnacle into a future product. Appellants point to no other documents or testimony contradicting these documents. Therefore, the district court properly granted summary judgment on these statements.