MILBERG WEISS BERSHAD
  HYNES & LERACH LLP
PATRICK J. COUGHLIN (111070)
RANDI D. BANDMAN (145212)
SPENCER A. BURKHOLZ (147029)
AMBER L. ECK (177882)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058

BERNSTEIN LIEBHARD & LIFSHITZ
SANDY A. LIEBHARD
MEL E. LIFSHITZ
ABRAHAM I. KATSMAN
274 Madison Avenue
New York, NY 10016
Telephone: 212/779-1414

Attorneys for Plaintiffs and the Class

TO: ALL PARTIES AND THEIR ATTORNEYS OF RECORD

PLEASE TAKE NOTICE that, on October 24, 1997, at 9:00 a.m. or as soon thereafter as this motion may be heard before the Honorable Ronald M. Whyte, in the San Jose Division of the United States District Court, Northern District of California, located at 280 South First St., San Jose, California 95113, plaintiffs Sara Werczberger, James B. Barnes and Linda Barnes, on behalf of all others similarly situated in the Werczberger, et al. v. StorMedia, et al., No. C-97-20538-RMW(PVT) action (hereinafter collectively referred to as the "Moving Plaintiffs") will move this Court, pursuant to §21D(a)(3)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), as amended by the Private Securities Litigation Reform Act of 1995 ("PSLRA"), Pub. L. 104-67, §101, for the appointment of Sara Werczberger, James Barnes and Linda Barnes as lead plaintiffs and for the approval of the proposed lead plaintiffs' choice of Milberg Weiss Bershad Hynes & Lerach LLP ("Milberg Weiss") and Bernstein Liebhard & Lifshitz ("Bernstein Liebhard") as co-lead counsel for the class.

This motion is made on the grounds that the proposed lead plaintiffs are the most adequate plaintiffs under the PSLRA, because they have the largest financial interest in the relief sought by the class, they meet the requirements of Rule 23 of the Federal Rules of Civil Procedure in that their claims are typical of the claims of the class, and they will fairly and adequately represent the interests of the class. Further, the proposed lead plaintiffs have selected and retained Milberg Weiss and Bernstein Liebhard, firms with substantial experience in the area of securities litigation, to serve as co-lead counsel for the class.

This motion is based upon this Notice of Motion and Memorandum in Support Thereof, the Declaration of Amber L. Eck with attached exhibits, the records on file herein and any other such evidence as may be presented at the hearing on this motion.

I. INTRODUCTION

II. FACTUAL SUMMARY

III. PROCEDURAL BACKGROUND

IV. THE PROPOSED LEAD PLAINTIFFS ARE THE MOST ADEQUATE PLAINTIFFS UNDER THE EXCHANGE ACT

A. The Proposed Lead Plaintiffs Have The Largest Financial Interest In The Relief Sought By The Class

B. The Proposed Lead Plaintiffs Are Qualified Under Rule 23

1. The Claims Of The Proposed Lead Plaintiffs Are Typical Of The Claims Of The Class

2. The Proposed Lead Plaintiffs Will Fairly And Adequately Represent The Interests Of The Class

V. THIS COURT SHOULD APPROVE THE PROPOSED LEAD PLAINTIFFS' CHOICE OF CO-LEAD COUNSEL

VI. CONCLUSION

I. INTRODUCTION

The Moving Plaintiffs allege violations of the Exchange Act and Rule 10b-5 promulgated thereunder, on behalf of purchasers of StorMedia, Inc. ("StorMedia" or the "Company") common stock between November 27, 1995 and August 9, 1996, inclusive (the "Class Period"), against defendants StorMedia, William J. Almon, Michael E. Oxen, Stephen M. Abely, Sherman Silverman, Atef Eltoukhy and Henry Lo. Moving Plaintiffs purchased StorMedia common stock during the Class Period and have been damaged as a result of the violations of the federal securities laws alleged in the Complaint for Violations of the Securities Exchange Act of 1934 ("Complaint").⁽¹⁾ Moving Plaintiffs submit this memorandum of law in support of their motion for: (i) appointment of Sara Werczberger, James Barnes and Linda Barnes (collectively the "proposed lead plaintiffs"), to serve as lead plaintiffs in this action; and (ii) approval of the proposed lead plaintiffs' choice of co-lead counsel.

On December 22, 1995, Congress amended the Exchange Act via the enactment of the PSLRA. Section 21D of the Exchange Act sets forth the procedure for the selection of lead plaintiff to oversee class actions brought under the federal securities laws. Specifically, §21D(a)(3)(A)(i) provides that, within 20 days after the date on which a class action is filed under the PSLRA,

the plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class --

(I) of the pendency of the action, the claims asserted therein, and the purported class period; and

(II) that, not later than 60 days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.

15 U.S.C. §78u-4(a)(3)(A)(i).

Further, §21D(a)(3)(B) of the Exchange Act directs the Court to presume that the "most adequate plaintiff" to serve as lead plaintiff is the person, or group of persons, that:

(aa) has either filed the complaint or made a motion in response to a notice . . . ;

(bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and

(cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.

15 U.S.C. §78u-4(a)(3)(B)(iii)(I).

Here, in accordance with the above provisions, the proposed lead plaintiffs purchased 29,839 shares of StorMedia stock during the Class Period and have incurred damages in excess of $372,324.00. See Declaration of Amber L. Eck in Support of Motion to be Appointed Lead Plaintiffs and for Approval of Lead Plaintiffs' Choice of Co-Lead Counsel ("Eck Decl."), Ex. 1. Moving Plaintiffs also seek the Court's approval of the proposed lead plaintiffs' choice of counsel, Milberg Weiss and Bernstein Liebhard as co-lead counsel.

II. FACTUAL SUMMARY

StorMedia manufactures thin film magnetic disks ("media") for hard disk drives used in portable computers. ¶1. Plaintiffs' Complaint alleges that the defendants participated in a scheme to inflate the price of StorMedia stock during the Class Period. ¶¶1-5. Plaintiffs allege that defendants artificially inflated the price of StorMedia's stock to as high as $30 per share⁽²⁾ based on representations that StorMedia was enjoying strong demand for its products and that StorMedia entered into a new, multi-year supply contract with Maxtor Corporation ("Maxtor"), a manufacturer of computer hard disk drives, which would result in substantial sequential revenue and earnings gains throughout 1996 and 1997.

In November, 1995 StorMedia announced its contract with Maxtor to the investing public, asserting that Maxtor would provide StorMedia with the opportunity to double revenue and profit for the year. ¶2. When StorMedia hyped this multi-million dollar agreement, its stock began a meteoric rise. However, to induce Maxtor to sign the supply agreement, StorMedia had to misrepresent to Maxtor that it had the ability, at that time, to meet Maxtor's specifications supporting Maxtor's move from flying head to proximity recording technology in its hard disk drives. This was simply not true. ¶2.

StorMedia benefited from the inflated stock price by avoiding a large loss on certain "put options" and attempted to complete a huge secondary stock offering. ¶3. In addition, taking advantage of non-disclosed information, its Maxtor contract and declining financial results, five of StorMedia's top insiders sold over 207,000 shares of their StorMedia stock on the open market at artificially inflated prices as high as $28.83 per share -- over half of which shares had been acquired by the insiders via stock option exercises at just $.19 per share and then immediately sold off by them so that they could pocket over $4.8 million in illegal, risk-free insider trading proceeds. ¶¶4-5. Two of the insiders unloaded 100% of their StorMedia holdings while three others sold off 63%-79% of their StorMedia holdings. ¶4. Defendant Almon disposed of 30,000 shares worth nearly a million dollars on May 16, 1996 when the stock was trading at over $29 per share. ¶4.

Then, shortly afterward, on June 13, 1996, StorMedia suddenly "suspended" its stock offering, supposedly due to market conditions. ¶54. On June 21, 1996, StorMedia stock fell $6-7/8 per share from $20-1/2 to $13-5/8 per share, on huge volume of 1.75 million shares, as StorMedia admitted in a press release that Maxtor was reducing its production volumes, apparently due to "significant business problems" at Maxtor. ¶55. On June 24, 1996, StorMedia revealed that its second quarter revenues and earnings would be much lower than earlier forecast and its stock plunged again, falling to as low as $9-3/4 per share on June 24, 1996 from its close of $13-5/8 on June 21, 1996, on huge volume of 3 million shares. ¶56. StorMedia finally revealed on August 9, 1996 that Maxtor was "terminating the volume purchase agreement." ¶59. According to Maxtor, the contract was cancelled due to StorMedia's inability (throughout the Class Period) to successfully manufacture and deliver disks to Maxtor that complied with Maxtor's specifications and quality requirements. ¶3.

III. PROCEDURAL BACKGROUND

The present action was filed on June 19, 1997, and assigned to this Court.⁽³⁾ Pursuant to §21D(a)(3)(A)(i) of the Exchange Act, plaintiff published early notice to class members in the Business Wire on June 20, 1997, whereby they advised purchasers of the pendency of the Werczberger class action for a Class Period of November 27, 1995 to August 9, 1996. See Eck Decl., Ex. 2. To date, Moving Plaintiffs are not aware of the filing of any other related cases.

The Exchange Act, as amended by the PSLRA, requires early notice to advise class members of their right to move the Court to be appointed lead plaintiff within 60 days of publication. Thus, Moving Plaintiffs have filed this motion prior to August 19, 1997, which is 60 days from the publication of the Werczberger notice.

IV. THE PROPOSED LEAD PLAINTIFFS ARE THE MOST ADEQUATE PLAINTIFFS UNDER THE EXCHANGE ACT

A. The Proposed Lead Plaintiffs Have The Largest Financial Interest In The Relief Sought By The Class

The "most adequate plaintiff" provision of the PSLRA provides that a court

shall appoint as lead plaintiff the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of class members (hereafter in this paragraph referred to as the "most adequate plaintiff") in accordance with this subparagraph.

§21D(a)(3)(B)(i), 15 U.S.C. §78u-4(a)(3)(B)(i) (emphasis added). Moreover, the Exchange Act, as amended by the PSLRA, requires a court to adopt a rebuttable presumption

that the most adequate plaintiff in any private action arising under this chapter is the person or group of persons that --

* * *

(bb) in the determination of the court, has the largest financial interest in the relief sought by the class . . . .

§21D(a)(3)(B)(iii), 15 U.S.C. §78u-4(a)(3)(B)(iii) (emphasis added).⁽⁴⁾

Proposed lead plaintiffs are qualified to represent the class. They have signed and filed certifications stating that they have reviewed the Complaint, have authorized its filing, and are willing to serve as representatives on behalf of the class. See Eck Decl., Ex. 3. In addition, the proposed lead plaintiffs have selected and retained counsel highly experienced in prosecuting securities class actions such as this to represent them. See the firm resumes of Milberg Weiss and Bernstein Liebhard, Eck Decl., Exs. 4-5.

During the Class Period, proposed lead plaintiffs purchased 29,839 shares of StorMedia stock at a price artificially inflated by defendants' false and misleading statements during the Class Period and have incurred damages in excess of $372,324.00. See Eck Decl., Ex. 1. Proposed lead plaintiffs have a significant financial interest in this case. As no other class members have filed a complaint or made a motion pursuant to §21D(a)(3)(B), Moving Plaintiffs are presumed to be the most adequate plaintiffs. §21D(a)(3)(B)(iii), 15 U.S.C. §78u-4(a)(3)(B)(iii).

Therefore, proposed lead plaintiffs satisfy the prerequisites for appointment as lead plaintiffs pursuant to §21D(a)(3)(B).

B. The Proposed Lead Plaintiffs Are Qualified Under Rule 23

Section 21D(a)(3)(B)(iii)(I)(cc) of the Exchange Act further provides that, in addition to possessing the largest financial interest in the outcome of the litigation, the lead plaintiff or plaintiffs must also "otherwise satisf[y] the requirements of Rule 23 of the Federal Rules of Civil Procedure." 15 U.S.C. §78u-4(a)(3)(B)(iii)(I)(cc). With respect to the qualifications of the class representative, Rule 23(a) requires that the claims be typical of the claims of the class and that the representative will fairly and adequately protect the interests of the class.

As detailed below, the proposed lead plaintiffs satisfy the typicality and adequacy requirements of Rule 23(a), thereby justifying their appointment as lead plaintiffs.

1. The Claims Of The Proposed Lead Plaintiffs Are Typical Of The Claims Of The Class

The typicality requirement of Rule 23(a)(3) is satisfied when the lead plaintiff(s) have: (i) suffered the same injuries as the absent class members; (ii) as a result of the same course of conduct by defendants; and (iii) his or her claims are based on the same legal issues. Shields v. Smith [1992 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶97,001, at 94,376 (N.D. Cal. 1992); In re Activision Sec. Litig., 621 F. Supp. 415 (N.D. Cal. 1985).

The claims asserted by the proposed lead plaintiffs are typical of the claims of the members of the class. The proposed lead plaintiffs, as do all members of the class, allege that defendants violated the Exchange Act by publicly disseminating a series of false and misleading statements about StorMedia during the Class Period. The proposed lead plaintiffs, as did all of the members of the class, acquired StorMedia stock at prices inflated by defendants' misrepresentations and omissions and were damaged thereby. Thus, typicality is satisfied since the claims asserted by the proposed lead plaintiffs are based on the same legal theory and arise "from the same event or course of conduct giving rise to the claims of other class members." In re United Energy Corp. Solar Power Modules Tax Shelter Inv. Sec. Litig., 122 F.R.D. 251, 256 (C.D. Cal. 1988).

2. The Proposed Lead Plaintiffs Will Fairly And Adequately Represent The Interests Of The Class

The interests of the proposed lead plaintiffs are clearly aligned with the members of the class, and there is no evidence of any antagonism between the interests of proposed lead plaintiffs and the class members. As detailed above, the proposed lead plaintiffs share substantially similar questions of law and fact with the members of the class, and their claims are typical of the members of the class. Further, the proposed lead plaintiffs have already demonstrated themselves to be zealous advocates on behalf of the class, by signing certifications, filed with the Court, stating that they are willing to assume the responsibilities of a class representative. In addition, the proposed lead plaintiffs have selected counsel highly experienced in prosecuting securities class actions such as this to represent the class.

V. THIS COURT SHOULD APPROVE THE PROPOSED LEAD PLAINTIFFS' CHOICE OF CO-LEAD COUNSEL

The PSLRA vests authority in the Lead Plaintiffs to select and retain lead counsel, subject to court approval. See §21D(a)(3)(B)(v), 15 U.S.C. §78u-4(a)(3)(B)(v). Thus, the Court should not disturb the Lead Plaintiffs' choice of counsel unless "necessary to protect the interests of the plaintiff class." See H. R. Conf. Rep. No. 104-369, at 62, 104th Cong. 1st Sess., Statement of the Managers (November 28, 1995), Eck Decl., Ex. 6. In this case, the proposed lead plaintiffs have selected and retained the law firms of Milberg Weiss and Bernstein Liebhard to serve as co-lead counsel for the class.

Milberg Weiss and Bernstein Liebhard possess extensive experience in the area of securities litigation and have successfully prosecuted numerous securities fraud class actions on behalf of injured investors. See Eck Decl., Exs. 4-5. Thus, the Court may be assured that, in the event the instant motion is granted, the members of the class will receive the highest caliber of legal representation available.

VI. CONCLUSION

For all the foregoing reasons, Moving Plaintiffs respectfully request that the Court: (i) appoint the proposed lead plaintiffs as lead plaintiffs, pursuant to §21D(a)(3)(B); and (ii) approve the proposed lead plaintiffs' choice of Milberg Weiss and Bernstein Liebhard as co-lead counsel for the class.

STORMEDI\BMG06242.mtn

1. All paragraph references ("¶__") will be to the Complaint unless otherwise indicated.

2. Unless otherwise noted, all per share prices have been adjusted to reflect StorMedia's 3-for-2 stock split in May 1996.

3. A related action was filed on September 18, 1996 in Santa Clara Superior Court, entitled Werczberger v. StorMedia, Inc., et al., Case No. CV760825.

4. Thus, the statutory language provides that a "member or members" of the class or a "person or group of persons" may combine to constitute "the largest financial interest" and thereby jointly serve as the "most adequate plaintiff."

I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Diego, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 600 West Broadway, Suite 1800, San Diego, California 92101.

2. That on August 14, declarant served the NOTICE OF MOTION AND MOTION TO BE APPOINTED LEAD PLAINTIFFS PURSUANT TO §21D(a)(3)(b) OF THE SECURITIES EXCHANGE ACT OF 1934 AND FOR APPROVAL OF LEAD PLAINTIFFS' CHOICE OF CO-LEAD COUNSEL; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF by depositing a true copy thereof in a United States mailbox at San Diego, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at:

http://securities.milberg.com

3. That there is a regular communication by mail between the place of mailing and the places so addressed.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 14th day of August, 1997, at San Diego, California.