According to a press release dated October 31, 2005, the Eighth U.S. Circuit Court of Appeals found that class plaintiffs in a securities fraud action against an information-systems corporation failed to establish the fraud and scienter elements of their claims so as to satisfy the Private Securities Reform Act (PSLRA) and affirmed dismissal of the lawsuit.
In a press release dated June 29, 2004, U.S. District Judge Dean Whipple of Kansas City threw out a lawsuit filed by a group of investors last spring. Whipple said the plaintiffs didn't detail the fraud alleged in the lawsuit and dismissed the case. "Conspicuously absent from these generalized allegations is the name of a single customer Cerner lost to a competitor," Whipple said in his order. "Plaintiff also fails to even approximate the number of customers Cerner lost to competition or the amount of revenue Cerner lost as a result."
The Complaint alleges that defendants violated Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder, by issuing a series of material misrepresentations to the
market between January 23, 2003 and April 2, 2003, thereby artificially
inflating the price of Cerner common stock. The Complaint alleges that
these statements were materially false and misleading because they
failed to disclose and misrepresented the following adverse facts, among
others: (a) that the Company was experiencing an increased level of
competition as competitors slashed prices in order to take business from
the Company. As a result, the Company was losing a material amount of
sales to competitors; (b) that certain of the Company's clients were
delaying or deferring the purchase of products from the Company or
determining not to proceed with those purchases at all; (c) that the
Company had reorganized its sales force and that the reorganization was
negatively impacting the ability of the Company to close certain sales;
and (d) as a result of the foregoing, defendants' earnings projections
were lacking in a reasonable basis at all times and were materially
false and misleading.
On April 3, 2003, Cerner shocked the market by announcing that "it
expects its first quarter 2003 revenue and earnings to be below
expectations because of a lower level of new business bookings in the
quarter." The press release further revealed that the Company expected
bookings for the first quarter of 2003 to be between $145 and $150
million and that earnings would be between $0.13 to $0.15 per share as
compared to analysts earnings estimates of $0.38 per share. In response
to this announcement, the price of Cerner common stock declined
precipitously falling from $32.09 per share to as low as $18.35 per
share on extremely heavy trading volume.