A federal judge said Apple Inc must face part of a lawsuit claiming it fraudulently concealed falling demand for iPhones, especially in China, leading to tens of billions of dollars in shareholder losses.
KEY POINTS:
- Federal judge said Apple must face part of a lawsuit claiming it fraudulently concealed falling demand for iPhones
- US District Judge Yvonne Gonzalez Rogers dismissed most of the claims against the company
- Ruled that shareholders can sue over the CEO’s comments touting strong iPhone demand only a few days before Apple told its largest manufacturers to curb production
- The complaint is led by the Employees’ Retirement System of the State of Rhode Island
While dismissing most claims, US District Judge Yvonne Gonzalez Rogers ruled that shareholders can sue over CEO Tim Cook’s comments touting strong iPhone demand on a November 1, 2018 analyst call, only a few days before Apple told its largest manufacturers to curb production.
“Absent some natural disaster or other intervening reason, it is simply implausible that Cook would not have known that iPhone demand in China was falling mere days before cutting production lines,” Rogers wrote.
The Oakland, California-based judge also said a decision by Apple to stop reporting iPhone unit sales “plausibly suggests that defendants expected unit sales to decline.”
Apple did not immediately respond on Wednesday to requests for comment.
The complaint, led by the Employees’ Retirement System of the State of Rhode Island, came after Tim Cook on January 2, 2019 unexpectedly reduced Apple’s quarterly revenue forecast by up to $9 billion, in part because of US-China trade tensions.
It was the first time since the iPhone’s 2007 launch that the Cupertino, California-based company had cut its revenue forecast. Apple stock fell 10% the next day, erasing $74 billion of market value.
Cook had said on the analyst call that the iPhone XS and XS Max had a “really great start,” and that while some emerging markets faced downward sales pressures “I would not put China in that category.”
By mid-November 2018, Apple had told the manufacturers Foxconn and Pagatron to halt plans for new iPhone production lines, and a key supplier had been told to materially reduce shipments, the complaint said.
The case is In re Apple Inc Securities Litigation, US District Court, Northern District of California, No. 19-02033.
The team at Platform Executive hope you have enjoyed the ‘[post_title]’ article. Automatic translation from English to a growing list of languages via Google AI Cloud Translation. Initial reporting via our official content partners at Thomson Reuters. Reporting by Jonathan Stempel in New York. Editing by Steve Orlofsky.
