According to the law firm press release, the Complaint alleges that during the Class Period, Defendants violated provisions of the Exchange Act by issuing false and misleading statements regarding the profitability and growth prospects of an important software product called Health Enterprise—designed to assist state agencies administer their respective Medicaid programs. Xerox is a global provider of document processing services and printing machines. Beginning in 2009, as the Company’s hardware products became less profitable, Xerox embarked on a new corporate strategy to transition into more of a computer services-related company. As part of Xerox’s computer services transition strategy, the Company acquired Affiliated Computer Services, Inc. for $6.4 billion in February 2010. Through the acquisition, Xerox took over the Health Enterprise product, which provides software solutions for states to manage all aspects of their contemporary Medicaid programs and to do so in accordance with government rules and regulations.
During the Class Period, Xerox repeatedly touted the Health Enterprise business as an important growth area for the Company, which would operate at low cost and high profit margin. However, Defendants’ Class Period statements pertaining to the profitability and growth prospects of the Health Enterprise business were materially false and misleading because Defendants failed to disclose that: (1) the Company’s existing Health Enterprise projects were experiencing major delays and cost overruns; (2) the Company would be unable to deliver Health Enterprise implementations at sustainable profits; and (3) as a result, the Company’s positive statements about its business, operations, and prospects lacked a reasonable basis.
Beginning in late 2014, this truth began to be revealed in a series of disclosures that exposed implementation delays, cost overruns, and customer disputes. Finally, in October 2015, two key state agencies terminated Health Enterprise contracts with Xerox. By then, Xerox had taken more than $500 million in related asset write-downs. In reaction to these revelations, Xerox’s stock lost hundreds of millions of dollars in market capitalization, with the Company’s stock price falling from a Class Period closing high of $13.57 per share on December 5, 2014, to close at $9.01 per share on October 27, 2015.
On February 28, 2017, the Court appointed Lead Plaintiffs and Counsel. Lead Plaintiffs filed an amended complaint on May 1, 2017. Defendants filed Motions to Dismiss on June 30. On March 20, 2018, the Court issued an Order granting Defendants' Motions to Dismiss. On April 20, Lead Plaintiffs filed a Notice appealing the Court's decision. On June 28, 2019, the Court of Appeals issued an Order affirming the decision of the District Court.