On September 6, 2005, the Court dismissed several class actions that had been filed against electronic design automation software maker Synopsys, Inc. (Nasdaq:SNPS), and certain of its officers and directors by stockholders who purchased the company's common stock between December 3, 2003, and August 18, 2004. The actions claimed that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders sought to recover compensatory damages for the loss of value of their stock.

The lawsuits alleged that Synopsys knew or recklessly disregarded the fact that renewals of up-front license bookings, which it had touted as being strong, were not materializing as expected. The action also alleged the following: (1) The bookings were actually falling off due to the large up-front cash payments that Synopsys required; (2) Synopsys was not able to achieve substantial growth and was not able to capture anticipated market share gains through technological advancements in its products; (3) Synopsys knew that demand for its products would weaken due to a conservative spending environment; and that, (4) as a result, Synopsys’ positive statements were lacking any reasonable basis.

On August 2, 2004, Synopsys announced preliminary results for its Q3 ended July 31. The company expected total revenues to be $279 million to $283 million, compared to its previous target range of $300 million to $320 million. On August 18, the company reported fiscal Q3 earnings that were slightly ahead of reduced estimates, but warned that results for the current period and fiscal year would fall far short of expectations. This news caused shares to fall $6.63 per share, or 31.16%, to close at $14.65 per share on August 19.