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April 29, 1999


The opinion of the court was delivered by: Orrick, District Judge.


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 disclose that:

a. There were serious problems with Sybase's flagship product, SQL Server 10 (both bugs and a lack of connectivity to other computer products);

b. Sybase was losing customers due to poor customer service and its failure to introduce new products to meet its customers' demands;

c. Sybase had inadequate staffing levels for its sales force; and

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 Quarter 1995.*fn2

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 ...

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