The opinion of the court was delivered by: Orrick, District Judge.
MEMORANDUM DECISION AND ORDER
In this securities fraud "forecasting" case brought against
Sybase, Inc. ("Sybase"), a California corporation and a leading
developer of relational database
management system software, having its principal place of
business in Emeryville, California, and certain Sybase's top
officers and directors,*fn1 sixteen plaintiffs represented by
Milberg Weiss Bershad Hynes & Lerach, a nationally recognized
plaintiffs' securities firm, brought this action under § 10(b) of
the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and the
rules promulgated thereunder found in Rule 10b-7 of the
Securities and Exchange Commission Rule. 17 C.F.R. § 240.10b. In
their class action complaint, plaintiffs allege that Sybase and
certain of its officers and executives made false and misleading
statements about its products and issued false earnings forecasts
about the financial condition of Sybase from November 14, 1994 to
April 3, 1995.
After five years of intensive investigation, during which more
than 400,000 documents were produced, 100 subpoenas issued and,
as a result, depositions without number taken, plaintiffs
produced their evidence of fraud, consisting of the following
flimsy and frivolous bits of evidence, most of it inadmissible,
which may be briefly summarized as follows:
1. Hearsay statements taken from analysts' reports that contain
allegedly false and misleading statements made by Sybase
executives and directors. Based on the statements attributed to
Sybase executives and directors in these analysts' reports,
plaintiffs maintain that Sybase defrauded investors by failing to
a. There were serious problems with Sybase's flagship product,
SQL Server 10 (both bugs and a lack of connectivity to other
b. Sybase was losing customers due to poor customer service and
its failure to introduce new products to meet its customers'
c. Sybase had inadequate staffing levels for its sales force;
d. Sybase's overly optimistic financial forecasts were
undermined by internal budget calculations and information from
the sales force that its First Quarter 1995 revenue projections
would be impossible to meet.
2. Statements, contained in Sybase's own press releases and
transcripts of conference calls that its officials had with
investors, of Sybase managers declaring that one of Sybase's
software products, the Navigation Server, would be shipped in
December and was production quality and that the its System 10
products were poised for continued growth.
3. Statements by employees affirming their belief that Sybase
would be able to achieve its revenue projections for First
Sybase has now moved for summary judgment. The motion is
granted in its entirety, and judgment is entered in favor of
Sybase, Inc., for the reasons set forth hereinafter.
This case had its genesis in Sybase's stock drop on April 3,
1995. On that day, after the close of the market, Sybase made a
public announcement that, instead of the strong First Quarter
1995 results it had forecast growth of approximately an
additional $0.28 in earnings per share and full year 1995
earnings growth of approximately $1.85 per share, Sybase would
earn only $0.03 to $0.06 per share in the First Quarter 1995.
After this announcement, Sybase's stock fell $16 per share from a
closing price of $39 ¼ per share on April 3, 1995 to
approximately $23 per share on April 4, 1995, representing a
decline of approximately forty percent. This suit
was filed on April 4, 1995, the day after Sybase's announcement.
Plaintiffs seek to hold Sybase liable for allegedly false
statements that Sybase made to the public regarding its revenue
forecasts and earnings predictions, as well as general statements
that Sybase made about its economic strength and its products.
Far from inflating revenue forecasts, the Court finds that,
contrary to plaintiffs' assertions, Sybase responsibly lowered
its internal forecasts figures when making representations to
outside parties when it became clear that Sybase would not be
able to achieve its revenue goals. Further, the guidance that
Sybase gave to investors was, throughout most of the First
Quarter 1995, lower than its internal forecasts. The Court,
therefore, finds that there is no ...