Stockholders v Conexant Systems, Inc.
Conexant System's Stockholders Sue for $94M in Lost Stock Value
A class action has been filed in the District Court of New Jersey against Conexant Systems, Inc., (NASDAQ:CNXT) a New Jersey based fabless semiconductor company, and certain of its officers and directors by stockholders who purchased the company's common stock between March 1, 2004 and November 4, 2004. The action claims 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 seek to recover compensatory damages for the loss of value of their stock.
Specifically, the complaint alleges that on March 1, 2004, Conexant completed its acquisition of Globespan in a merger transaction claiming that "We have made outstanding progress toward integrating the organizations, systems, technologies and processes of Conexant and GlobespanVirata over the past two months and are in a strong position as we begin combined operations today."
In fact, as would later be admitted, the merger had not been successful and the Company was facing severe integration problems with respect to the combined companies' parallel DSL and wireless technology offerings, as well as their sales and administration functions. Additionally, Conexant would claim throughout the Class Period that its wireless LAN ("WLAN") business was experiencing reduced growth, citing competition from Taiwan-based chip suppliers when, in fact, its WLAN business, which had been the premier and top producer for wireless local area networks, was not being integrated properly in the merger, and defendants were neglecting to develop and build products, resulting in massive loss of market share.
On November 4, 2004, Conexant released its financial and operational results for the fourth quarter ended October 1, 2004, reporting that its "fourth fiscal quarter 2004 revenues of $213.1 million decreased 20 percent from the third fiscal quarter revenues of $267.6 million," and stating that "'Conexant's sequential decline in revenues to $213.1 million in the fourth fiscal quarter was largely due to excess channel inventory that resulted from lower-than-expected customer demand ....'" On this news, Conexant stock fell 10% on November 5, 2004.
