Opinion ID: 571326
Heading Depth: 4
Heading Rank: 3

Heading: The August 5 Press Release

Text: 52 The plaintiffs also challenge Convergent's August 8, 1983 press release. In this release, Convergent stated: 53 [N]et sales for the third quarter of 1983 will be approximately equal to its net sales for the second quarter because of customer anticipation of deliveries of its new generation of products, which are expected to be available for volume shipments in the first half of calendar 1984. Fourth quarter revenues cannot be predicted with certainty, but could be below third quarter revenues. Because of price reduction on existing products and startup costs associated with three new product lines, the Company anticipates that until volume shipment of its new products begins there will be a decrease in gross profit margin, and may be a substantial decrease in net income. 54 The plaintiffs contend this statement misstated the demand for Convergent's AWS/IWS workstation because Convergent knew at the time that third and fourth quarter revenues for 1983 would actually decline, not just remain flat. 55 The plaintiffs made no such showing. Convergent's revenues for the second half of 1983 were pretty much what the August press release predicted. Third quarter revenues, rather than being merely flat, declined in relation to second quarter revenues, but only by approximately 10%. For the fourth quarter, Convergent actually posted revenues greater than those recorded in the second and third quarters. Thus, while Convergent was somewhat optimistic regarding the third quarter, it actually underestimated fourth quarter revenues. 56 Plaintiffs also contend that if Convergent had excluded from its year-end financial statements one-time software license sales, it would not have shown a profit for the fourth quarter. That may be so. But plaintiffs do not explain why Convergent would want to exclude such sales. Plaintiffs suggest Convergent made the sales in the fourth quarter to post better numbers on its year-end financials and thus further the scheme to inflate its stock price. Plaintiffs provide no evidence to support this suggestion.