The action alleges that as part of their effort to boost the price of Activision stock, the defendants misrepresented Activision’s true prospects in an effort to conceal its improper acts until they were able to sell at least $483 million worth of their own Activision stock, including a $250 million secondary offering by the company. In order to overstate revenues and assets during the applicable period, Activision allegedly violated Generally Accepted Accounting Principles and SEC rules by engaging in an illegal accounting scheme.

The defendants’ scheme had the effect of dramatically overstating revenues and assets. The true facts, allegedly known to the defendants but concealed from the investing public, were that: (1) Activision would ship products to retail customers that the defendants knew or consciously disregarded would subsequently be returned to Activision, usually within 45-60 days of the original shipment; (2) the company improperly booked revenue on “consignment sales” in which the customer had the right to return product to Activision; (3) when large orders came in from certain customers in Activision’s Southern region, certain of these orders would be shipped to the customers, but the products would subsequently be returned to Activision (the physical returns were made to the point-of-origin, i.e., whichever of the third-party manufacturers had originally made and shipped the order); (4) the company failed to account for Return Request Authorizations; (5) Activision utilized “side-letter agreements” with customers, providing extended payment terms or other beneficial terms for the customer that were not included in the formal documentation associated with the order; (6) there were some products that were so bug-ridden that the problems were never resolved and the products were shipped anyway, only to be returned or require upgrades in the future; (7) Activision would often re-package old products as being new or updated versions, when, in fact, these supposedly new products were barely different than the preceding versions; and (8) as a result of the above, the company’s projections and even its reported earnings during the applicable period were grossly overstated and misleading.

If you purchased the securities issued by Activision, Inc., you may request appointment by the court as a lead plaintiff if you do so by May 4, 2004. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that your claim is typical of the claims of other class members, and that you will adequately represent the class. Under certain circumstances, one or more class members may together serve as lead plaintiff. Your ability to share in any recovery is not affected by the decision whether or not to serve as a lead plaintiff. You may retain any counsel of your choice to serve as you in this action, or you may choose to do nothing, and remain in the class as a silent member.