According to a press release dated October 21, 2005, the complaint alleges defendants Pixar and certain of its executive officers violated sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5, by issuing a series of material misrepresentations to the market during the Class Period.

Specifically, the complaint alleges that Pixar creates, develops, and produces animated films and related products. During the Class Period, the Company had a co-production agreement with The Walt Disney Company ("Disney") for the development and production of animated feature-length theatrical motion pictures. Defendants claimed that one such film, The Incredibles, was a "Box-Office smash hit" and would also be successful in the home video market. According to the complaint, defendants stated, among other things, that during the Class Period, sales of The Incredibles home videos, including DVDs and VHS, would enable the Company to produce earnings of at least $0.15 per share by the second fiscal quarter of 2005. Unbeknownst to investors, however, defendants' statements were materially false and misleading because defendants knew, or recklessly disregarded, that recent trends in the home video market indicated a slow down in the sales of new home video releases and therefore, increased returns of unsold copies from retailers that would negatively impact the Company's earnings. In fact, according to an article published in The Wall Street Journal, a new DVD release would realize approximately 50-70% of its total sales in its first week, compared to 33% and a steady increase in sales thereafter five years ago. Defendants' response to the change in sales trends of home videos was to flood the market with units of The Incredibles home video, far in excess of what retailers could sell, prior to and during the first weeks of release to maximize sales. Defendants knew or recklessly disregarded, however, that this strategy would result in a disproportionate number of early sales followed by a disproportionate number of product returns, but failed to make the necessary adjustments to account therefor. As a result of defendants' wrongful and illegal scheme, the price of Pixar securities became artificially inflated during the Class Period and enabled Company insiders, including defendants Bax and Catmull, to sell hundreds of thousands of shares of their personally held Pixar stock for over $27.1 million in proceeds.

The complaint further alleges that on or around June 30, 2005, the last day of the Class Period, the Company issued a press release lowering its second quarter 2005 earnings guidance to $0.10 per diluted share from $0.15, the difference of approximately $6 million in net income, as a result of disappointing sales of The Incredibles home video units and an increase in the Company's reserves for returns. As a result of this news, the price of Pixar common stock fell more than $9.00 per share to $43.00 from the prior day's close of almost $52.00 per share, representing a one-day decline of over 17% on very heavy trading volume. On August 26, 2005, defendants announced that the SEC had commenced an investigation of Pixar in connection with reported sales of The Incredibles DVD and that the SEC had "requested information leading up to the filmmaker's report earlier this month of lower second-quarter earnings." As a result of this news, Pixar shares fell an additional $1.01 per share to close at below $42.00.

If you bought Pixar securities between January 18, 2005 and June 30, 2005, inclusive, and would like to obtain information about the Pixar lawsuit, then you are invited to call (866) 467-1400 to speak with an attorney.