MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
DARREN J. ROBBINS (168593)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
619/231-7423 (fax)
    -and-
REED R. KATHREIN (139304)
100 Pine Street, Suite 2600
San Francisco, CA 94111
Telephone: 415/288-4545
415/288-4534 (fax)

SCHIFFRIN & BARROWAY, LLP
MARC A. TOPAZ
Three Bala Plaza East, Suite 400
Bala Cynwyd, PA 19004
Telephone: 610/667-7706
610/667-7056 (fax)

Attorneys for Plaintiff

[Additional counsel appear on signature page.]
 

1. This is a securities fraud class action for violations of the Securities Exchange Act of 1934 (the "Exchange Act"), on behalf of purchasers of the publicly traded securities of Turnstone Systems, Inc. ("Turnstone" or the "Company") between June 5, 2000 and January 2, 2001 (the "Class Period"), including those who acquired their shares in connection with Turnstone's secondary offering on September 26, 2000 (the "Secondary Offering"), in which Turnstone offered and sold 3.5 million shares of common stock to the investing public at a price of $50.00 per share, generating proceeds in excess of $166.2 million, and Turnstone's top officers and directors, including defendants Richard N. Tinsley, P. Kingston Duffie and M. Denise Savoie (collectively, the "Individual Defendants"), sold 500,000 shares of Turnstone common stock for proceeds of $23.75 million.

2. Turnstone is a provider of technology for the digital subscriber line ("DSL") service industry. Turnstone's first and primary product, the Copper CrossConnect CX100, enables telephone access providers to remotely evaluate, manage, and control the DSL connections within the telephone routing system, permitting identification of copper lines which are suitable for DSL and making installation and maintenance of DSL on those lines cheaper and easier. For example, in the event of a DSL system failure, Turnstone's customers can remotely perform tests with the CX100 to determine if a particular copper line is properly connected to the central office.

3. Turnstone's customer base consists almost entirely of Competitive Local Exchange Carriers, or "CLECs." The Company's CLEC customers include, among others, NorthPoint Communications Inc., Mpower Communications, McLeod USA, Covad Communications, Rhythms NetConnections, XO Communications and Sunrise Telecom. CLECs are typically small start-up companies as opposed to major telephone companies, which are referred to as Incumbent Local Exchange Carriers, or "ILECs." Because CLECs are small companies with very limited capital, the success of the CLECs is dependent upon vendor financing extended by manufacturers of telephone hardware, which enables the CLECs to purchase DSL technology from companies such as Turnstone.

4. According to the Company, Turnstone's products provide significant barriers to entry that enhance the Company's long-term revenue potential. Defendants claimed that once the CX100 product was implemented in a carrier's network, the carrier would continue to use the CX100 for all DSL additions in order to avoid the additional equipment costs, inventory, training, and operational costs of switching to another vendor. Additionally, the Company claimed, the CrossWorks product enhanced the value of the CX100 by seamlessly integrating loop management information with a service provider's operational support systems, and Turnstone, having first-mover advantage and a superior product in the market, was well positioned to gain significant market share in all service provider market segments and to maintain that market share going forward.

5. The explosive demand for high-speed DSL solutions was straining service providers' ability to provision DSL services. According to Telechoice, problems arise in 85% of all DSL deployments, requiring additional truck rolls or technician visits to solve the problem. Defendants claimed that Turnstone products addressed the service providers' need for efficient DSL deployment by providing an easy, cost-effective, time-saving approach to qualifying, provisioning and maintaining DSL services. The Company's Copper CrossConnect CX100 product purported to provide loop testing, qualification, and protection switching functions critical to delivering high quality, DSL-based services. The CX100 is deployed in a central office collocation between the DSL access multiplexer ("DSLAM") and the customer DSL, and is typically sold with about 100 lines, or about one-fifth capacity. As service providers provision additional lines and/or add DSLAMs, more L140 modules, each of which supports 25 lines, can be added to keep supply in line with demand. Turnstone's CrossWorks software enables service providers to integrate the CX100's loop management functions into back-office Operational Support Systems ("OSSs"), enhancing their ability to efficiently scale DSL service offerings to meet rapidly growing demand. CrossWorks employs open standards-based interfaces that accelerate the integration effort and reduce the software development resources required to implement loop management.

6. The CX100 product is implemented on "dry copper," meaning the line leased by the CLEC from the ILEC is provisioned exclusively for the CLEC. With a recent FCC ruling, CLECs can now provide DSL services using the same copper pair that the ILEC uses for voice services. Line sharing adds complexity as this method requires a splitter which prohibits the functionality of the CX100 to flow through the splitter. As line sharing is expected to be increasingly common, Turnstone claimed to have developed two solutions that add additional value and should increase penetration of the ILEC market. The Company has developed the S108 integrated splitter card that combines the CX100 and the required line-sharing splitter into one product to facilitate the functionality of the CX100 on shared lines. In addition, Turnstone has created a metallic splitter bypass which invokes a "bypass" of the splitter electronics, allowing the CX100 to function as if working in a "dry copper" environment. These two options would theoretically allow service providers to participate in line sharing with the advantages of the CX100 and CrossWorks products - if the CX100 worked.

7. In Turnstone's Prospectus and Registration Statement, filed with the Securities and Exchange Commission ("SEC") in connection with the Secondary Offering and declared effective on or about September 21, 2000 ("Registration Statement/Prospectus"), defendants trumpeted the "reliability," "efficiency" and "accuracy" of Turnstone's flagship CX100 product, which Turnstone represented to be the "first commercially available solution specifically designed for the automation and remote control of installation, qualification and maintenance of copper telephone lines for DSL service." For example, the Registration Statement/Prospectus stated that the CX100 enables Turnstone's customers to "rapidly and efficiently deploy" DSL services; "improves the efficiency of installing and managing DSL services while delivering the high levels of reliability and scalability needed in a large, complex network"; and the CX100's "[a]ccurate line qualification and testing enable local exchange carriers to rapidly and efficiently deploy DSL services."

8. Contrary to defendants' representations during the Class Period, Turnstone's CX100 product was fraught with problems, including blown capacitors, malfunctioning chips, and inaccurate calibration of the CX100. As a result, and contrary to the representations in the Registration Statement/Prospectus, the CX100 product was unreliable, inaccurate and inefficient in deploying DSL services to Turnstone's customers. Moreover, Turnstone's key customers were returning the product as a result of the malfunctioning of the CX100, including NorthPoint Communications Inc. ("NorthPoint"), Covad Communications ("Covad"), and Rhythms NetConnections ("Rhythms"), which together accounted for over 50% of Turnstone' s revenues.

9. Moreover, in the Registration Statement/Prospectus, defendants represented that there was merely a future "risk" that the financial condition of Turnstone's CLEC customers might deteriorate and that its CLEC customers might have difficulty obtaining vendor financing. In truth, at the time of the Secondary Offering, the financial condition of Turnstone's CLEC customers, including, among others, NorthPoint, Covad and Rhythms, had already significantly deteriorated and they had substantially reduced their expected build-out plans and product orders for integration of Turnstone's technology. As a result, prior to the Secondary Offering, not only had Turnstone experienced a sharp decline in product orders from its primary CLEC customers, but the CLEC vendors, such as Nokia, Cisco and Lucent, had also substantially cut back vendor financing provided to the CLECs. Rather than disclose these material adverse facts, defendants falsely represented in the Company's Registration Statement/Prospectus that these were only future "risks" which may or may not occur.

10. As a result of these false and misleading statements, the Secondary Offering was completed at $50.00 per share, enabling the Company to collect approximately $166.3 million in proceeds, net of underwriter commissions, and enabling the Individual Defendants to sell 364,500 shares of Turnstone common stock in the Secondary Offering for proceeds in excess of $17.3 million.

11. On November 6, 2000, Turnstone announced that it was reducing its 4thQ 00 revenue estimates by over 30% - from $56 million to $38 million. The Company attributed the substantial downward revision in revenue estimates to financial difficulties in the CLEC sector and a decline in vendor financing for Turnstone' s CLEC customers, i.e., factors that were in existence at the time of the Secondary Offering, yet were not disclosed by defendants. Further, on the same date, Turnstone's senior management informed market analysts that the Company was "redeploying its assets" away from CLECs, the cornerstone of the Company's business model and revenues, and focusing on ILECs. Following the Company's disclosure, Turnstone's common stock immediately lost 65% of its value in one trading day, plummeting to $10-3/8 per share.

12. Less than two months later, after the market closed on January 2, 2001, Turnstone issued another press release warning investors that its 4thQ 00 revenue would be "substantially below" market estimates because its CLEC customers had cancelled and reduced their orders. As a result, the Company announced revenue of $26 million to $28 million for the 4thQ 00 - 37% lower than consensus market analyst estimates. In the same press release, the Company also disclosed that it expected to take a $13.0 to $15.5 million charge to increase its inventory reserves and bad debt reserves, thus causing Turnstone to forecast an operating loss of $12 million to $14 million for the quarter.

13. In fact, Turnstone's 3rdQ 00 reported revenues and earnings were overstated, as Turnstone was shipping what it knew was a defective product and continuing to recognize revenue on shipments to customers it knew were increasingly unable to obtain financing to sustain their own operations, let alone to pay Turnstone. The financing problems were so severe that there was a risk that even payments Turnstone might receive could get tied up in bankruptcy. As Turnstone disclosed in its 2000 Form 10-K after the Class Period:

Recently, because of their inability to obtain additional financing or generate sufficient revenues to fund their operations, a number of our customers have become delinquent in their payments for our prior sales to them. As of December 31, 2000, eight of our customers were experiencing financial difficulties and were not able to stay current in their payments. As a result, during the fourth quarter of 2000 we recorded a charge to our bad debt reserve for the receivables of these customers. We cannot assure you that we will ever be able to collect any payments from these customers. Two of these customers, Digital Broadband Communications, Inc. and Vectris Communications, Inc., have filed for bankruptcy protection. With respect to them or any of our customers that have sought or may seek bankruptcy protection in the future, the bankruptcy court may require us to return some or all of the payments we received from them prior to their bankruptcy filing. The inability of our customers to pay us for prior sales we made to them has and will continue to have a negative impact on our operating results.

14. The claims asserted herein arise under §§10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§78j(b) and 78t(a), and Rule 10b-5. This Court has jurisdiction over the subject matter of this action pursuant to §27 of the Exchange Act.

15. Venue is proper in this District pursuant to 28 U.S.C. §1391(b). Many of the acts and transactions giving rise to the violations of the federal securities laws complained of herein, including the preparation and dissemination to the investing public of materially false and misleading statements, occurred in this District. In addition, at all times relevant hereto, defendant Turnstone maintained its principal place of business in this District at 2220 Central Expressway, Santa Clara, California, 95050.

16. In connection with the acts, conduct and other wrongs complained of, the defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, the United States mail, and the facilities of the national securities markets.

17. Plaintiff Margarita Riskin purchased Turnstone publicly traded securities during the Class Period as detailed in the attached certification and was damaged thereby.

18. Defendant Turnstone is a provider of technology for the DSL services industry. Turnstone principally supplies such technology to CLECs, which are small telecommunications companies formed to compete with an existing local telephone company.

19. (a) Defendant Richard N. Tinsley ("Tinsley") is a co-founder of Turnstone and at all times relevant hereto has been President, Chief Executive Officer and a director of Turnstone. Defendant Tinsley signed the Registration Statement/Prospectus. During the Class Period and in connection with the Secondary Offering, defendant Tinsley sold 173,000 shares of Turnstone common stock at prices as high as $72.085 per share, realizing total proceeds of $9.05 million.

(b) Defendant P. Kingston Duffie ("Duffie") is a co-founder of Turnstone and at all times relevant hereto has been Chief Technology Officer and a director of Turnstone. From January 1998 to April 1999, he also served as Vice President, Engineering. Defendant Duffie signed the Registration Statement/Prospectus. During the Class Period and in connection with the Secondary Offering, defendant Duffie sold 171,500 shares of Turnstone common stock at prices as high as $71.365 per share, realizing total proceeds of $8.98 million.

(c) Defendant M. Denise Savoie ("Savoie") is a co-founder of Turnstone, served as Chief Financial Officer from January 1998 through June 2000, and has been Vice President, Business Operations of Turnstone since January 1998. During the Class Period and in connection with the Secondary Offering, defendant Savoie sold 223,500 shares of Turnstone common stock at prices as high was $76.88 per share, realizing total proceeds of $12.9 million.

20. The individuals named as defendants in 19(a)-(c) are referred to herein as the "Individual Defendants." The Individual Defendants are liable for the false statements pleaded herein at 32-33, 37-44 and 47, as those statements were each "group-published" information, the result of the collective action of the defendants.

21. Because of the Individual Defendants' positions with the Company, they each had access to the adverse non-public information about Turnstone's business, finances, products, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management and Board of Directors' meetings and committees thereof and via reports and other information provided to them in connection therewith.

22. The Individual Defendants, because of their positions with the Company, controlled and/or possessed the power and authority to control the contents of its filings with the SEC, press releases and presentations to securities analysts, which information was conveyed through the analysts to the investing public. Each of the Individual Defendants was provided with copies of the Company's reports and press releases alleged herein to be misleading prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected. Because of their positions and access to material non-public information available to them but not to the public, each of these defendants knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the positive representations which were being made were then materially false and misleading.

23. The Individual Defendants were Turnstone's top officers, and because of their respective positions in the Company were each involved in the day-to-day management of Turnstone's business. Each also had inside knowledge of the Company's adverse financial performance and the means and ability to circumvent Turnstone's financial controls and GAAP requirements, which were in fact circumvented. The Individual Defendants were Turnstone's top operating officers and managers and had constant contact with each other and regularly discussed the critical issues facing Turnstone during the Class Period, including:

(a) That Turnstone was spending less and less on development efforts and was therefore highly exposed to competition;

(b) That in March 2000, Turnstone had very little competition, but by the beginning of the Class Period Turnstone had numerous competitors with similar or superior technology;

(c) That CLECs doing business with Turnstone had severe problems and were going out of business and/or were not paying Turnstone for past purchases;

(d) That Turnstone's only hope for survival was sales to ILECs, but Turnstone's main competitors (Harris Corp. and Hekimian Laboratories) were well ahead of Turnstone with respect to these customers;

(e) That, instead of the CX100 providing "reliable," "rapid," "efficient" and "accurate" maintenance and testing of DSL services for Turnstone's customers, the CX100 had experienced severe problems that caused the CX100 to be unreliable, inaccurate, and inefficient in deploying DSL services. These problems included, among others, blown capacitors, malfunctioning chips, and inaccurate calibration of the CX100. Indeed, prior to the Secondary Offering, Turnstone's principal customers, including NorthPoint, Covad and Rhythms, who collectively accounted for over 50% of Turnstone's revenues, had returned significant amounts of the CX100 product due to the malfunctioning problems described above. Rather than disclose these severe problems, defendants concealed these problems from investors in the Registration Statement/Prospectus;

(f) That defendants failed to disclose to investors at the time of the Secondary Offering that the financial condition of Turnstone's CLEC customers had already substantially deteriorated and many of the CLECs had already decided to substantially reduce their expected build-out plans for DSL technology. For example, Turnstone's principal customers, including NorthPoint, Rhythms and Covad, had already begun reducing their product orders from Turnstone as early as July 2000. As a result of the financial deterioration of the CLECs, not only had Turnstone experienced a sharp decline in product orders from its CLEC customers, but CLEC vendors, such as Nokia, Cisco, and Lucent, had substantially reduced vendor financing to the CLECs at the time of the Secondary Offering; and

(g) That as a result of (a)-(f) above, it was impossible for defendants to achieve fiscal 2000 EPS of $0.51.

Thus, each Individual Defendant actually knew or recklessly disregarded that the public statements about Turnstone pleaded at 32-47 were false or misleading when made.

24. During the Class Period, the defendants engaged in the scheme described herein to complete the Secondary Offering, which generated $166 million in proceeds for the Company, and to sell their own shares at artificially inflated prices generating $30.98 million.

25. Turnstone is a provider of technology for the DSL market. DSL is a technology which enables individuals and businesses to access the Internet using existing copper telephone lines, rather than fiber optic or cable connections. Turnstone's first and principal product, the Copper CrossConnect CX100, enables telephone access providers to remotely evaluate, manage, and control the DSL connections within the telephone routing system, permitting identification of copper lines which are suitable for DSL and making installation and maintenance of DSL on those lines cheaper and easier.

26. Turnstone is a provider of copper loop management hardware and software enabling local exchange carriers to rapidly and cost-effectively deploy and maintain DSL services. The Company's flagship product, the Copper CrossConnect CX100, provides loop qualification, testing, and protection switching functions critical to delivering high quality DSL services. Turnstone's CrossWorks software enables service providers to integrate these loop management functions into back-office OSSs, enhancing their ability to efficiently scale DSL service offerings to meet rapidly growing demand. Turnstone has tried to leverage its first-mover advantage to achieve dominant market share among data CLECs such as Covad, Rhythms, and NorthPoint.

27. According to the Company, Turnstone's products provide significant barriers to entry that enhance the Company's long-term revenue potential. Defendants claimed that once the CX100 product was implemented in a carrier's network, the carrier would continue to use the CX100 for all DSL additions in order to avoid the additional equipment costs, inventory, training, and operational costs of switching to another vendor. Additionally, the Company claimed, the CrossWorks product enhanced the value of the CX100 by seamlessly integrating loop management information with a service provider's operational support systems, and Turnstone, having first-mover advantage and a superior product in the market, was well positioned to gain significant market share in all service provider market segments and to maintain that market share going forward.

28. The explosive demand for high-speed DSL solutions was straining service providers' ability to provision DSL services. According to Telechoice, problems arise in 85% of all DSL deployments, requiring additional truck rolls or technician visits to solve the problem. Defendants claimed that Turnstone products addressed the service providers' need for efficient DSL deployment by providing an easy, cost-effective, time-saving approach to qualifying, provisioning, and maintaining DSL services. The Company's CX100 product purported to provide loop testing, qualification, and protection switching functions critical to delivering high quality, DSL-based services. The CX100 is deployed in a central office collocation between the DSLAM and the customer DSL, and is typically sold with about 100 lines, or about one-fifth capacity. As service providers provision additional lines and/or add DSLAMs, more L140 modules, each of which supports 25 lines, can be added to keep supply in line with demand. Turnstone's CrossWorks software enables service providers to integrate the CX100's loop management functions into back-office OSSs, enhancing their ability to efficiently scale DSL service offerings to meet rapidly growing demand. CrossWorks employs open standards-based interfaces that accelerate the integration effort and reduce the software development resources required to implement loop management.

29. The CX100 product is implemented on "dry copper," meaning the line leased by the CLEC from the ILEC is provisioned exclusively for the CLEC. With a recent FCC ruling, CLECs can now provide DSL services using the same copper pair that the ILEC uses for voice services. Line sharing adds complexity as this method requires a splitter which prohibits the functionality of the CX100 to flow through the splitter. As line sharing is expected to become increasingly common, Turnstone claimed to have developed two solutions that add additional value and should increase penetration of the ILEC market. The Company has developed the S108 integrated splitter card that combines the CX100 and the required line-sharing splitter into one product to facilitate the functionality of the CX100 on shared lines. In addition, Turnstone has created a metallic splitter bypass which invokes a "bypass" of the splitter electronics, allowing the CX100 to function as if working in a "dry copper" environment. These two options would theoretically allow service providers to participate in line sharing with the advantages of the CX100 and CrossWorks products - if the CX100 worked.

30. Turnstone's customer base consists primarily of CLECs. Turnstone's CLEC customers include, among others, NorthPoint, Covad, Rhythms, Mpower Communications, McLeod USA, Network Access Solutions, XO Communications, and Sunrise Telecom. CLECs are typically smaller telephone companies created in order to compete with the existing major telephone company providing telephone service in an area. These major telephone companies are known as Incumbent Local Exchange Carriers, or ILECs.

31. In addition, because CLECs are smaller companies with limited capital, they typically rely on the existence of "vendor financing" to conduct business. Vendor financing refers to credit extended to the CLEC by manufacturers of telephone hardware to enable the CLEC to purchase required equipment. The ability of CLECs to purchase additional technology, such as Turnstone's CX100 product, largely hinges upon the CLEC's ability to free up capital by obtaining vendor financing for its other purchases. Vendor financing is provided by Cisco, Lucent and Nokia, among others.

32. On June 5, 2000, Turnstone announced it had unveiled new solutions for line sharing, which new products would purportedly enable Turnstone to provide best-in-class testing and maintenance for line sharing environments. The press release issued in connection with the announcement stated, in part:

Turnstone Systems unveiled today new products and technologies to address the unique testing and maintenance requirements for line sharing environments. Both the new S108 integrated splitter card and metallic bypass splitter capability provide innovative solutions to enable digital subscriber line (DSL) loop qualification and testing without the restrictions typically imposed by central office (CO)-based splitters.

The recent Federal Communications Commission (FCC) ruling, which is expected to go into effect this month, requires that incumbent local exchange carriers (ILECs) offer competitive local exchange carriers (CLECs) access to the upper frequency of existing POTS lines as a new option to provide DSL services to potential subscribers. This new provisioning model requires both CLECs and ILECs to share the same physical copper loop for delivering services to the customer, leading to some operational challenges in testing and maintenance. For example, both CLECs and ILECs will require appropriate loop management capability, although they also need to implement solutions that will minimize the impact to each other's service offering.

In order to perform proper DSL loop testing, CLECs require direct metallic test access to the loop. With the typical CO-based splitter in place, which includes DC blocking and potentially other filters, CLECs are not able to perform basic tests needed for DSL loop qualification and fault isolation from the DSL access multiplexer (DSLAM)-side of the splitter. Indeed, these splitters can also impact ILECs' ability to properly test lines from the POTS-side of the splitter. Without new solutions, the primary alternative is for manual testing of the lines on the loop-side of the splitter, which does not bode well for mass-scale consumer DSL services.

Turnstone has introduced two new solutions to address these issues: the S108 integrated splitter card and metallic bypass splitter functionality. The S108 integrated splitter card integrates eight splitters onto a line card that plugs into Turnstone's Copper CrossConnect (R) CX100 system. By combining splitters with the loop qualification and testing platform, service providers can now remotely test copper loops on either loop side or network side of the splitter, avoiding the testing restrictions typically imposed by the splitter. Additionally, the Copper CrossConnect CX100 supports key POTS features, such as checking for line-in-use, to minimize any disruption to existing services. The Copper CrossConnect CX100 supports up to 22 S108 cards, enabling up to 176 splitters with loop qualification and testing in a single chassis. By integrating splitters, metallic access and DSL testing into a single network element, Turnstone has produced the most dense line sharing solution available.

Second quarter revenues increased to $41.4 million, from $4.7 million in the same period a year earlier and up 78 percent sequentially from $23.1 million in the first quarter of fiscal 2000. Net income for the second quarter increased to $9.1 million, or [$0.14] per diluted share based on [65.6] million weighted average shares outstanding, compared to a net loss of $1.1 million or [($0.15)] per diluted share for the same period a year earlier, and net income of $4.6 million, or [$0.07] per diluted share for the first quarter of fiscal 2000.

"The second quarter was tremendous for Turnstone," said Rick Tinsley, president and chief executive officer of the company. "The increase in deployments during the quarter is indicative of accelerated demand for broadband services, especially DSL. We announced eleven new customers that selected Turnstone's Copper CrossConnect CX100 for new DSL deployment during the second quarter, including HarvardNet, NorthPoint Communications, US West and Germany's riodata."

• Turnstone was in a cycle in its business (where carriers were in an installation mode) that provided strong visibility into future earnings.

• Turnstone was on track to post 2000 and 2001 EPS of $.51 and $0.61-$.64, respectively.

Paragon Solutions Acquisition Bolsters Engineering Base - Turnstone announced its acquisition of Paragon Solutions Limited, a New Zealand-based company, which has assisted Turnstone in designing and developing several of Turnstone's products. Although the acquisition was relatively small - $10 million in cash - Paragon offers Turnstone relatively inexpensive R&D engineers to help enhance existing and develop new products. The transaction will have no impact on revenue and immaterial impact on the bottom line.

Outlook

Strong Revenue And Earnings Momentum; Forecasting 27% Sequential Revenue Growth In September Quarter - With the addition of new customers such as US West, HarvardNet, NorthPoint Communications and First Telecom, growth in the June quarter was strong, and we believe the Company has good visibility for the next quarter. We are modeling 27% sequential revenue growth in the September quarter, followed by a very conservative flat December quarter due to seasonality in Turnstone's business. Historically, the pace of CLECs' DSL build-outs has slowed in the December quarter. Nevertheless, driven by the aggressive DSL deployment schedules of its existing CLEC customers and the expected penetration of ILEC and international accounts, we expect Turnstone's revenues to grow sixfold in 2000 and nearly double in 2001.

We visited yesterday with Turnstone Systems CEO Rick Tinsley and CFO Terry Schmid at the Company's Santa Clara, California headquarters. Our visit allowed for a lively discussion of current business fundamentals, market trends, and new revenue opportunities.

We believe September quarter business is strong. The Company, like many others in the industry, is working to alleviate occasional components shortages. Component availability will, in part, dictate potential upside in quarterly results. We look for Turnstone to grow its customer base over the roughly 40 customers reported for the June quarter. The organization's accelerating customer count, in our view, is indicative of the strong value proposition that Turnstone presents within CLEC networks. New systems deployments should continue to be a large percentage of business for the foreseeable future as CLEC customers continue to roll out new co-location cages.

We note that recent concerns about data CLEC's provisioning issues and the current Verizon strike do not appear to be having any impact on the organization. Loop management system sales, because they are currently being driven by new co-location buildouts, are not being affected by these issues. Management noted that its CLEC customers are largely maintaining current forecasts for future co-location buildouts.

Looking at Turnstone's customer base, we believe the Company will benefit from expansion of its U.S. customers into international markets - particularly Europe where local loop unbundling is progressing at a steady pace. Covad, for example, recently announced its international expansion plans through its newly-formed Covad International B.V. subsidiary. Expansion plans include Europe and Japan, where Covad recently formed a joint venture with NTT for deployment of DSL services. Other opportunities include VersaPoint, NorthPoint's European joint venture for DSL deployment. MCI WorldCom, similarly, may represent an international opportunity for the organization. Other opportunities include Qwest, with its KPN Qwest joint venture for European DSL service buildouts. Similarly, significant investments are being made in brand new DSL service providers in Europe and elsewhere. Turnstone is working hard to staff a European sales and marketing team to help support these emerging new market opportunities. In the meantime, many of these emerging carriers are actually seeking out Turnstone for loop management systems. The existence of the Turnstone's high profile data CLEC accounts in the U.S. and a lack of credible competitors in the marketplace helps in this regard.

Looking forward, we believe Turnstone will begin to address a number of emerging new market applications - expanding the Company's addressable market opportunity. 1) ILECs present new opportunity as these carriers could use loop management systems for copper line pre-qualification before DSL circuit deployment. While ILECs have traditionally performed loop pre-qualification and troubleshooting manually, loop management systems could automate some of these processes within ILEC central offices. 2) Remote digital loop carrier (DLC) terminals present an emerging opportunity as carriers begin to deploy DSL services from these systems. Turnstone's loop management capabilities could be used to perform loop pre-qualification, identification, and cross-connecting within these remote DLC terminals. We note that these capabilities may allow a significant cost savings for ILEC customers which do not have readily-available personnel to handle DSL service provisioning tasks within remote DLC terminals. 3) Line sharing also presents new opportunities. Line sharing allows the simultaneous use of copper lines for provisioning of voice and DSL services by ILECs and CLECs. It is expected to be generally implemented using ADSL splitters to route voice and data traffic to CO voice switches and loop management / DSLAM equipment. Turnstone, having developed ADSL splitter line cards for its CX100 loop management system, could expand its market opportunity. We note that there are many different network designs and logistical considerations which are still shaping carrier decisions in this emerging application.

The competitive environment remains relatively benign. Despite the availability of some loop testing capability within some DSLAM equipment (such as Lucent's Stinger), carrier customers are largely choosing to continue deploying Turnstone equipment. We understand, for example, that just one Lucent customer is deploying its Stinger DSLAM loop testing cards in volume applications. Nokia, with its recent acquisition of DiscoveryCom, is also working to provide loop management within its product portfolio. While the competitive acquisition will likely rule out any OEM relationship with Turnstone, we nonetheless expect Nokia, in the near term, to continue sourcing Turnstone as its carrier customers also want the CX100. Turnstone continues to also get customer referrals from other DSLAM manufacturers such as Cisco, Copper Mountain, PairGain, Paradyne, and others. Turnstone is also generating good success in getting integrated into carrier customers' OSS systems - a strong barrier to entry for potential competitors.

We believe that our update with Turnstone management is incrementally positive as the Company's emerging market opportunity with international and ILEC accounts appears very interesting. We continue to be very enthused about the fundamentals of Turnstone's business and expect the organization to be a major beneficiary of rapid growth in the DSL marketplace over the next several years. We remain very comfortable with our conservative revenues and earnings expectations and continue to rate Turnstone shares BUY.

Turnstone Systems announced today that more than 10,000 of its Copper CrossConnect CX100 systems have been shipped for revenue to service providers since the local loop management platform's introduction in October 1998. In the first two years of production, the Copper CrossConnect CX100 has gained popularity as the leading loop management platform for facilities-based service providers deploying digital subscriber line (DSL) services. Customers include incumbent local exchange carriers (ILECs) and leading voice and data competitive local exchange carriers (CLECs) located throughout the world.

"Turnstone created a service provider-formula solution that was designed from the ground up to solve real problems associated with DSL deployment and maintenance," said Claudia Bacco, Vice President - DSL Consulting with TeleChoice, Inc. "As demand for DSL increases and deregulation alters the telecommunications landscape throughout the world, service providers will continue to need products such as Turnstone's, as a means of reducing the inefficiencies associated with service delivery."

The Copper CrossConnect CX100 automates many of the tasks required to install, manage and maintain DSL circuits. By reducing the manual labor and truck rolls required to deliver services, the Turnstone solution saves incumbent and emerging carriers time and money. The Copper CrossConnect CX100 also contributes to DSL availability and uptime by providing line-side production switching.

"Turnstone is focused on delivering best of breed loop management solutions that address real service provider issues," said Rick Tinsley, president and chief executive officer of Turnstone. "Our success to date is largely attributed to our ability to continually introduce new features to the Copper CrossConnect CX100. Because different service providers have different operational requirements, providing a flexible loop management platform with robust features has been key to gaining acceptance among incumbent carriers, voice CLECs and data CLECs throughout the world."

Turnstone Systems, Inc., a provider of hardware and software products that enable local exchange carriers to rapidly deploy and efficiently maintain DSL services, today announced the filing of a registration statement with the Securities and Exchange Commission on September 1, 2000 relating to a proposed public offering of 4,000,000 shares of common stock. Of the shares to be offered, 3,500,000 shares will be offered by the company and 500,000 shares will be offered by certain existing shareholders. Should the underwriters of the offering sell more than 4,000,000 shares of common stock, the underwriters have an option to purchase up to 600,000 additional shares from certain of the selling stockholders.

Turnstone Systems announced today that it has teamed with Cisco Systems, Inc. to offer a complete solution that facilitates the provisioning of digital subscriber line (DSL) services for service providers that are deploying end-to-end Cisco DSL networks. As a new member of the Cisco New World Ecosystem program, Turnstone will integrate its loop management products with the Cisco Order-to-Service positioning solution, helping to improve the efficiency of provisioning DSL service through automation.

* * *

The Turnstone solution consists of the Copper CrossConnect(R) CX100 and Crossworks(TM) Back Office Automation Software. Sitting between customer-premise equipment (CPE) and DSL access multiplexers (DSLAMs) in a central office, the Copper CrossConnect CX100 enables service providers to perform a variety of loop management functions, such as loop qualification, cross connection and the generation of audible loop identifiers to facilitate copper provisioning. The CrossWorks management tools integrate these functions with the Cisco Order-to-Service solution, enabling service providers to automate the DSL provisioning process - from service order to service delivery.

"Turnstone is pleased to be a part of the Cisco New World Ecosystem program because it provides us with the opportunity to work with industry-leading vendors to create best-of-breed solutions," said Eric Andrews, vice president of Marketing, Turnstone. "Through the Cisco Order-to-Service solution and future initiatives, we can help service providers overcome many of the real-world challenges they face when deploying and provisioning DSL."

Our initial target customers are competitive local exchange carriers specifically focused on offering DSL services to business users. We expect that our target market will grow as new competitive local exchange carriers emerge and as established competitive local exchange carriers supplement their existing services with DSL service offerings for businesses. We believe our early success with competitive local exchange carriers such as Covad Communications, Digital Broadband Communications, First: telecom plc, Mpower Communications (formerly MGC Communications), Network Access Solutions, NorthPoint Communications, Rhythms NetConnections and Riodata GmbH will better enable us to market to other competitive local exchange carriers as they deploy DSL.

* * *

The CX100 is compatible with a variety of DSL equipment as well as analog telephone equipment. The CX100 may be used with multiple DSL access multiplexers from a number of vendors, including Alcatel, Cisco, Copper Mountain, Lucent, Nokia and Paradyne. Because our solution is complementary to DSL access multiplexers, we believe DSL access multiplexer vendors are likely to recommend our products to their customers. We intend to make our product an attractive complement to all DSL access multiplexer vendors and to further encourage joint sales and marketing activities. We are also working with vendors of hand-held line test equipment in order to provide more sophisticated capabilities.

The Copper CrossConnect CX100, our first and only volume product, enables local exchange carriers to rapidly and efficiently deploy high speed digital services on existing copper telephone lines.

* * *

-RAPID AND EFFICIENT DSL DEPLOYMENT. Our CX100 enables carriers to remotely identify and qualify any copper telephone line in their network, without the need for on-site labor

-IMPROVED NETWORK RELIABILITY. The CX100 improves network reliability and availability and allows service to be restored rapidly in the event of failure in DSL equipment, enabling local exchange carriers to offer guaranteed levels of service.

* * *

THE TURNSTONE SOLUTION

Our Copper CrossConnect CX100 product family improves the efficiency of installing and managing DSL services while delivering the high levels of reliability and scalability needed m a large, complex network.... The CX100 product family is designed specifically to enable the rapid and efficient deployment of high-speed digital services on the existing local loop.

* * *

RAPID AND EFFICIENT DSL DEPLOYMENT. Our CX100 enables carriers to remotely perform line qualification, testing and maintenance on any line connected through the system. Accurate line qualification and testing enable local exchange carriers to rapidly and efficiently deploy DSL services.

SUBSTANTIALLY ALL OF OUR REVENUES COME FROM NEW AND EMERGING COMPETITIVE LOCAL EXCHANGE CARRIERS, WHOSE INABILITY TO OBTAIN CAPITAL COULD CAUSE THEM TO REDUCE OR DISCONTINUE THE PURCHASE OF OUR PRODUCTS AT ANY TIME.

Because our customer base consists principally of new and emerging businesses, we will not be able to increase our revenues if our customers' business models, which are largely unproven, are not successful or if the financial condition of our customers deteriorates. To date, our customers have consisted principally of competitive local exchange carriers. These carriers require substantial capital for the development, construction and expansion of their networks and the introduction of their services. Financing may not be available to emerging competitive local exchange carriers on favorable terms, if at all. A reduction in the financing available to our customers, or the inability of our customers to obtain financing, could impair our ability to make future sales as well as to collect for sales we have already made.

Turnstone System, Inc. a leading provider of hardware and software products that enable local exchange carriers to rapidly deploy and efficiently maintain DSL services, today announced the completion of its follow-on public offering of 4,000,000 shares of common stock at a price of $50 per share. The proceeds to Turnstone from 3,500,000 shares offered by the company in this transaction, net of underwriters' commissions, totaled approximately $166.3 million. Turnstone did not receive any of the proceeds from the sale of the 500,000 shares offered by the selling stockholders. Goldman, Sachs & Co. was the lead manager for the offering and the co-managers were Dain Rauscher Wessels, Deutsche Banc Alex. Brown, Robertson Stephens and U.S. Bancorp Piper Jaffray.

44. After the close of the market on October 17, 2000, Turnstone reported 3rdQ 00 results, including revenues that grew to $56.2 million and EPS of $0.19. The press release stated, in part:

Turnstone Systems, Inc., a leading provider of loop management hardware and software products that enable local exchange carriers to rapidly deploy and efficiently maintain digital subscriber line (DSL) services, today announced financial results for the quarter ending September 30, 2000.

Third quarter revenues increased to $56.2 million, from $9.0 million in the same period a year earlier, an increase of 524 percent. Net income for the third quarter increased to $12.8 million, or $0.19 per diluted share based on 66.6 million weighted average shares outstanding, compared to a net income of $1.0 million or $0.02 per diluted share for the same period a year earlier, an 850% increase in earnings per share. Gross profit for the quarter was $32.9 million and gross profit margin was 58.5%. Operating profit was $19.9 million or 35.4% of net revenue.

"We are very pleased with our performance in the third quarter of 2000," said Rick Tinsley, President and Chief Executive Officer. "We continue to enjoy healthy market leadership as a growing number of DSL service providers around the world standardize on Turnstone for comprehensive loop management solutions. Our competitive position remains strong and we believe we have significant opportunities with customers in multiple market segments as deregulation of the local loop continues to prompt investments in loop management systems in an increasing number of countries around the world. Our international customers accounted for approximately 19% of our revenues for the quarter."

During the quarter the company completed a follow-on offering of its common stock. Net proceeds to the company from the offering totaled approximately $166.3 million and as of September 30, 2000, the company had cash and short-term investments of $285.6 million. The company also completed a 2-for-1 split of its common stock during the quarter. All per share amounts have been adjusted to account for the split.

• Turnstone's results were solid despite uncertainty in the CLEC sector regarding funding because of its strong relationships with customers which did not have funding problems.

• Turnstone's results would have been even better than reported, except that some of its inventory was at customer locations awaiting acceptance and this phenomena added increased visibility into Turnstone's future results.

• Turnstone's results would grow significantly in 2001 due to the success its new ILEC sales force was having penetrating Qwest and ILEC accounts.

• Turnstone's dominant position in the copper loop management market would help Turnstone withstand problems with the CLEC sector obtaining funding. Turnstone was on track for 2000 and 2001 EPS of $0.56 and $0.69, respectively.

We are raising our Q4 and FY00 revenue and earnings estimates to reflect Turnstone's current quarter upside and international opportunity. We are raising Q4 revenue and earnings estimates from $53.8 million and $0.14 to $56.0 million and $0.16, respectively, and raising FY00 revenue and earnings estimates from $170 million and $0.51 to $176.4 million and $0.56, respectively. We are maintaining our FY01 estimates pending further positive visibility in the fourth quarter. We are maintaining our Strong Buy rating, but are lowering our price target to $60 based on 15x times 2001 revenues of $280 million to reflect current market conditions.

* * *

Historically, the pace of CLECs' DSL buildouts has slowed in the December quarter. Nevertheless, driven by the expected penetration of ILEC and international accounts, we expect Turnstone's revenues to grow significantly in 2001 to $280 million, with potential upside if the recently hired ILEC-focused sales force is successful in penetrating Qwest and other ILEC accounts. Based on our recent discussions with our industry contacts, we believe Turnstone is well positioned at Qwest.

* * *

More than half of Turnstone's revenues come from customers which we believe are not at risk of curtailing capex in 2001. These customers include international CLECs (19% of Q3 revenues), Lucent (#), and Nokia (27%), and XO Communications, McCLeodUSA, and Qwest (which we believe accounted for more than 15% of revenues in Q3). Copper Mountain (#) recently provided guidance to the Street for 2001 that was approximately 40% lower than previously stated. Assuming the remaining 40% of Turnstone's revenues are from customers at risk of curtailing their 2001 capital expenditures to the same extent as indicated by Copper Mountain, we see at most 16% of Turnstone's total FY01 revenue at risk. However, we believe Turnstone's dominant share of the copper loop management market and its demonstrated ability to add new customers and penetrate new markets offsets this risk and provides potential upside to our 2001 revenue estimate.

Turnstone Systems, Inc. announced today that it is lowering its revenue estimate for the quarter ending December 31, 2000, due to increased weakness among its competitive local exchange carrier (CLEC) customers and recent changes to their capital spending plans.

Since providing guidance during its third quarter conference call on October 17, 2000, the company has experienced major changes in customer demand which have caused it to alter the assumptions upon which it previously based guidance for revenue in the current quarter. In particular, weakness in the CLEC sector has intensified, resulting in an unanticipated scaling back of network build-out plans by certain customers. In addition, concerns about reduced capital spending have broadened to international markets. Also, DSLAM vendors that have traditionally finance Turnstone products purchased by certain data CLEC customers have begun to scale back financing activities as a result of heightened concerns about the financial condition of these customers.

As a result of these changes, the company is revising revenue guidance to approximately $38 million for the December quarter. The company is leaving previous guidance with respect to operating expenses unchanged. The company will provide an updated view of the first quarter of 2001 when it announces its fourth quarter results.

49. Following these adverse disclosures, Turnstone's shares fell to $6.31, inflicting millions of dollars of damage on plaintiff and the Class. Turnstone stock has fallen more than 93% from its Class Period high of over $100 per share as the truth about Turnstone, its operations and prospects began to reach the market.

50. Each of the statements made by defendants between June 5, 2000 and January 2, 2001 was false or misleading when issued. The true facts, which were known to defendants, were:

(a) That Turnstone was spending less and less on development efforts and was therefore highly exposed to competition;

(b) That in March 2000, Turnstone had very little competition, but by the beginning of the Class Period Turnstone had numerous competitors with similar or superior technology;

(c) That CLECs doing business with Turnstone had severe problems and were going out of business and/or were not paying Turnstone for past purchases;

(d) That Turnstone's only hope for survival was sales to ILECs, but Turnstone's main competitors (Harris Corp. and Hekimian Laboratories) were well ahead of Turnstone with respect to these customers;

(e) That, instead of the CX100 providing "reliable," "rapid," "efficient" and "accurate" maintenance and testing of DSL services for Turnstone's customers, the CX100 had experienced severe problems that caused the CX100 to be unreliable, inaccurate and inefficient in deploying DSL services. These problems included, among others, blown capacitors, malfunctioning chips, and inaccurate calibration of the CX100. Indeed, prior to the Secondary Offering, Turnstone's principal customers, including NorthPoint, Covad and Rhythms, who collectively accounted for over 50% of Turnstone's revenues, had returned significant amounts of the CX100 product due to the malfunctioning problems described above;

(f) That defendants failed to disclose to investors at the time of the Secondary Offering that the financial condition of the CLEC customers had already substantially deteriorated and many of the CLECs had already decided to substantially reduce their expected build-out plans for DSL technology. For example, Turnstone's principal customers, including NorthPoint, Rhythms and Covad, had already begun reducing their product orders from Turnstone as early as July 2000. As a result of the financial deterioration of the CLECs, not only had Turnstone experienced a sharp decline in product orders from its CLEC customers, but CLEC vendors, such as Nokia, Cisco, and Lucent, had substantially reduced vendor financing to the CLECs at the time of the Secondary Offering; and

(g) That as a result of (a)-(f) above, it was impossible for defendants to achieve fiscal 2000 EPS of $0.51.

51. In fact, Turnstone's 3rdQ 00 reported revenues and earnings were overstated as Turnstone was shipping what it knew was a defective product and continuing to recognize revenue on shipments to customers it knew were increasingly unable to obtain financing to sustain their own operations, let alone to pay Turnstone. The financing problems were so severe that there was a risk that even payments Turnstone might receive could get tied up in bankruptcy. As Turnstone disclosed in its 2000 Form 10-K after the Class Period:

Recently, because of their inability to obtain additional financing or generate sufficient revenues to fund their operations, a number of our customers have become delinquent in their payments for our prior sales to them. As of December 31, 2000, eight of our customers were experiencing financial difficulties and were not able to stay current in their payments. As a result, during the fourth quarter of 2000 we recorded a charge to our bad debt reserve for the receivables of these customers. We cannot assure you that we will ever be able to collect any payments from these customers. Two of these customers, Digital Broadband Communications, Inc. and Vectris Communications, Inc., have filed for bankruptcy protection. With respect to them or any of our customers that have sought or may seek bankruptcy protection in the future, the bankruptcy court may require us to return some or all of the payments we received from them prior to their bankruptcy filing. The inability of our customers to pay us for prior sales we made to them has and will continue to have a negative impact on our operating results.

52. During the Class Period, defendants sold the following amounts of their Turnstone stock despite their possession of adverse information about Turnstone's business which they knew had not been disclosed to the public:

                             Shares
Insider            Date       Sold          Price         $Value

DUFFIE           7/25/00     20,000        $65.575      $1,311,500
                 7/25/00     20,000        $71.365      $1,427,300
                 9/26/00    131,500        $47.500      $6,246,250
                            171,500                     $8,985,050

SAVOIE           8/01/00      6,000        $59.850       $ 359,100
                 8/02/00     14,000        $58.680       $ 821,520
                 8/03/00     10,000        $59.730       $ 597,300
                 8/04/00     10,000        $61.560       $ 615,600
                 8/07/00     10,000        $67.370       $ 673,700
                 8/08/00      8,000        $74.170       $ 593,360
                 8/08/00      2,000        $75.000       $ 150,000
                 8/09/00     10,000        $76.880       $ 768,800
                 8/10/00      5,000        $68.940       $ 344,700
                 8/11/00     10,000        $72.030       $ 720,300
                 8/14/00      5,000        $74.170       $ 370,850
                 8/15/00      5,000        $70.490       $ 352,450
                 8/16/00      5,000        $69.590       $ 347,950
                 8/17/00      5,000        $68.550       $ 342,750
                 8/18/00      5,000        $64.570       $ 322,850
                 8/24/00     10,000        $60.690       $ 606,900
                 8/25/00      3,500        $61.370       $ 214,795
                 9/26/00    100,000        $47.500     $ 4,750,000
                            223,500                    $12,952,925

TINSLEY          7/24/00     20,000        $72.085      $1,441,700
                 7/26/00     20,000        $64.515      $1,290,300
                 9/26/00    133,000        $47.500      $6,317,500
                            173,000                     $9,049,500

      TOTAL:                568,000                    $30,987,475

53. Defendants' insider sales during the Class Period were highly suspicious given their proximity to the date of the bad news and the fact that they occurred before the stock had dropped and while defendants were making positive statements.

54. Plaintiff repeats and realleges 1-53.

55. During the Class Period, defendants disseminated or approved the false statements specified above, which they knew were misleading in that they contained misrepresentations and failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

56. Defendants violated §10(b) of the Exchange Act and Rule 10b-5 in that they:

(a) Employed devices, schemes and artifices to defraud;

(b) Made untrue statements of material facts or omitted to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading; or

(c) Engaged in acts, practices and a course of business that operated as a fraud or deceit upon plaintiff and others similarly situated in connection with their purchases of Turnstone publicly traded securities during the Class Period.

57. Plaintiff and the Class have suffered damages in that, in reliance on the integrity of the market, they paid artificially inflated prices for Turnstone's publicly traded securities. Plaintiff and the Class would not have purchased Turnstone publicly traded securities at the prices they paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by defendants' misleading statements.

58. As a direct and proximate result of these defendants' wrongful conduct, plaintiff and the other members of the Class suffered damages in connection with their purchases of Turnstone publicly traded securities during the Class Period.

59. Plaintiff repeats and realleges 1-58.

60. Defendants acted as controlling persons of Turnstone within the meaning of §20(a) of the Exchange Act. By reason of their positions with Turnstone and ownership of Turnstone stock, the Individual Defendants had the power and authority to cause Turnstone to engage in the wrongful conduct complained of herein. Turnstone controlled each of the Individual Defendants and all of its employees. By reason of such conduct, defendants are liable pursuant to §20(a) of the Exchange Act.

61. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of all persons who purchased Turnstone publicly traded securities (the "Class") during the Class Period. Excluded from the Class are defendants.

62. The members of the Class are so numerous that joinder of all members is impracticable. The disposition of their claims in a class action will provide substantial benefits to the parties and the Court. Turnstone had more than 64 million shares of stock outstanding, owned by hundreds, if not thousands, of persons.

63. There is a well-defined community of interest in the questions of law and fact involved in this case. Questions of law and fact common to the members of the Class, which predominate over questions which may affect individual Class members include:

(a) Whether the Exchange Act was violated by defendants;

(b) Whether defendants omitted and/or misrepresented material facts;

(c) Whether defendants knew that their statements were false and misleading;

(d) Whether the prices of Turnstone publicly traded securities were artificially inflated; and

(e) The extent of damage sustained by Class members and the appropriate measure of damages.

64. Plaintiff's claim is typical of those of the Class because plaintiff and the Class sustained damages from defendants' wrongful conduct.

65. Plaintiff will adequately protect the interests of the Class and has retained counsel who are experienced in class action securities litigation. Plaintiff has no interests which conflict with those of the Class.

66. A class action is superior to other available methods for the fair and efficient adjudication of this controversy.

WHEREFORE, plaintiff, on behalf of herself and the Class, prays for judgment as follows:

A. Declaring this action to be a class action properly maintained pursuant to Rule 23 of the Federal Rules of Civil Procedure;

B. Awarding plaintiff and other members of the Class damages together with interest thereon;

C. Awarding plaintiff and other members of the Class costs and expenses of this litigation, including reasonable attorneys' fees, accountants' fees and experts' fees and other costs and disbursements; and

D. Awarding plaintiff and other members of the Class such equitable/injunctive or other and further relief as may be just and proper under the circumstances.

Plaintiff demands a trial by jury.
 

DATED: April 5, 2001

MILBERG WEISS BERSHAD  HYNES & LERACH LLP WILLIAM S. LERACH DARREN J. ROBBINS 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax) MILBERG WEISS BERSHAD HYNES & LERACH LLP REED R. KATHREIN         _________________________ REED R. KATHREIN 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415/288-4545 415/288-4534 (fax) SCHIFFRIN & BARROWAY, LLP MARC A. TOPAZ Three Bala Plaza East, Suite 400 Bala Cynwyd, PA 19004 Telephone: 610/667-7706 610/667-7056 (fax) CAULEY, GELLER, BOWMAN & COATES, LLP PAUL J. GELLER One Boca Place, Suite 421A 2255 Glades Road Boca Raton, FL 33431 Telephone: 561/750-3000 561/750-3364 (fax) LAW OFFICES OF BRIAN M. FELGOISE BRIAN M. FELGOISE 230 South Broad Street, Suite 404 Philadelphia, PA 19102 Telephone: 215/735-6810 215/735-5185 (fax) BRODSKY & SMITH, LLC EVAN J. SMITH 11 Bala Avenue, Suite 39 Bala Cynwyd, PA 19004 Telephone: 610/668-7987 610/660-0450 (fax) Attorneys for Plaintiff

Pursuant to Civil L.R. 3-16, the undersigned certifies that as of this date, other than the named parties, there is no such interest to report.
 

______________________________
ATTORNEY OF RECORD FOR
PLAINTIFF MARGARITA RISKIN

1. All share and per-share amounts have been adjusted to reflect Turnstone's 2-for-1 stock split in August 2000.