According to an article dated April 30, 2007, the U.S. District Court for the Southern District of New York April 18 tossed out a consolidated class securities fraud action charging that Sierra Wireless Inc. and its officials misrepresented the telecom concern's future prospects and business strategies (In re Sierra Wireless Inc. Securities Litigation, S.D.N.Y., No. 05-md-1696 (SHS), 4/18/07). "In sum," Judge Sidney H. Stein wrote for the court, "the statements that form the basis of this action are broadly optimistic projections of future performance that plaintiffs allege are false and misleading. However, plaintiffs have not specified why or how these statements are false or misleading and therefore have not supplied sufficient facts in their lengthy complaint to support their allegations." The court declared that the securities laws "neither require corporate officers to adopt a crabbed, defeatist view of the company's business prospects nor permit dissatisfied shareholders to assert serious allegations of fraud based on the perfect hindsight afforded by the passage of time." … The court found that the plaintiffs' other allegations likewise failed to state a claim for securities fraud and dismissed the suit without prejudice. The court granted the plaintiffs 21 days to file an amended complaint.
On August 26, 2005, the Court entered the Order from the Multidistrict Litigation Panel. According to the Order, the actions were coordinated or consolidated under 1:05-md-1696. On December 19, 2005, the Court entered the Order appointing co-lead plaintiffs and approving co-lead plaintiffs’ selection of co-lead counsel. On February 21, 2006, the plaintiffs filed a Consolidated Amended Class Action Complaint. The defendants have filed a motion to dismiss the Consolidated Amended Class Action Complaint.
The original Complaint alleges that Sierra and certain of its officers and directors violated federal securities laws by issuing a series of material misrepresentations to the market during the Class Period concerning the Company's prospects and financial performance, thereby artificially inflating the price of Sierra Wireless securities.
Specifically, defendants failed to disclose the following materially adverse facts: (i) that Sierra's strategy to correct its deficiency in technology by introducing the Voq Smartphone was flawed and its business model was not working; (ii) that Sierra was facing increasing competition, intensified by its failure to enter into the WCDMA (wideband code-division multiple access) market; (iii) that Sierra's recent venture into the Smartphone market with the introduction of its new Voq line was a serious misstep, as it did little to add revenue and further seriously harmed Sierra's relationship with a prime customer palmOne as its Voq Smartphone would compete with palmOne's Treo -- the product for which Sierra was a supplier; (iv) that Sierra's dependence on revenue from palmOne in its original equipment manufacturer ("OEM") business was substantially greater than had been reported; and (v) that Sierra's customers were materially over- inventoried, which would lead to greatly diminished orders and sales in future quarters.
Further, on or around January 26, 2005, Sierra issued a press release announcing that its revenue for the fourth quarter of 2004 was well below the previous guidance and that it expected a steep decline in its revenue going forward. As a result, on the next trading day, January 27, 2005, Sierra's stock plummeted 38% to $8.97 per share.
Several class action lawsuits have also been filed in the United States District Court for the Southern District of California.