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IN RE SYMBOL TECHS. CLASS ACTION LITIG.

January 13, 1997

In Re: SYMBOL TECHNOLOGIES CLASS ACTION LITIGATION


The opinion of the court was delivered by: GLEESON

 JOHN GLEESON, United States District Judge:

 Plaintiffs have brought this securities fraud class action on behalf of all persons who purchased the common stock of Symbol Technologies, Inc. ("Symbol"), during the period from June 8, 1992 to September 14, 1992. Defendants move for summary judgment. For the reasons set forth below, the motion is granted.

 BACKGROUND

 Symbol is a high technology company in Bohemia, New York. It designs, manufactures, markets and sells bar code laser scanning systems, portable data collection systems and radio frequency data communications. Like many high technology companies, Symbol has a history of large, short-term fluctuations in profits, and its filings with the Securities Exchange Commission ("SEC") have consistently warned of the highly volatile nature of the company's stock price.

 The Second Amended Complaint, filed on October 14, 1993, alleges (a) that Symbol and the five individual defendants *fn1" violated Section 10(b) of the Securities Exchange Act of 1934 (the "Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5; and (b) that all of the individual defendants except Archambault are liable under Section 20 of the Act, 15 U.S.C. § 78t, as control persons for the company's violations of Section 10(b) and Rule 10b-5. *fn2"

 The case involves public announcements and press reports by Symbol during the class period. Plaintiffs point to three public statements by Symbol that they contend were false and misleading, effecting a fraud on the market that artificially inflated the price of Symbol shares. Symbol did not engage in a public offering of its securities during this period. Plaintiffs do not allege that Symbol has filed false statements with the SEC. Nor have plaintiffs alleged that Symbol or any of its officers or directors profited from this alleged fraud. To the contrary, the company and at least three of its senior officers were buying Symbol stock during the class period.

 The backdrop to the statements at issue was as follows. In 1991, Symbol achieved record revenues ($ 319 million) and earnings per share ($ 0.90). Those numbers exceeded Symbol's 1990 performance by 30% and 173%, respectively. In late 1991, Symbol prepared an internal business plan for 1992. This plan was referred to as the "Business Plan." After management discounted by approximately 5% the financial goals in the plan, it was submitted to the Board of Directors, which adopted a final product known within Symbol as the "Board Plan." The 1992 Board Plan projected revenues of $ 385 million and earnings per share of $ 1.20. *fn3" The Business Plan and the Board Plan were not updated during the year as performance information became available. Symbol contends that it was generally known, by the company as well as the investment community, that there could be no accurate prediction of the future performance of Symbol. Indeed, this was explicitly stated in Symbol's previous SEC filings.

 Symbol's revenues and earnings per share in the first quarter of 1992 exceeded both the Board Plan forecasts and the results from the first quarter of 1991. The documents distributed before the regularly-scheduled board meeting on May 4, 1992, forecasted revenues of $ 396,666,000 (exceeding the Board Plan forecast by $ 11 million) and earnings per share of $ 1.19 ($ 0.01 less than the Board Plan forecast). Several days later, an internal Quarterly Business Review meeting resulted in the distribution of additional financial material.

 On June 29, 1992, Symbol held another regularly-scheduled board meeting. At the meeting, management informed the board that earlier forecasts for the year's revenues and earnings per share might not be achieved unless an action plan were adopted to counter certain economic trends. Specifically, they warned that, in the event the plan were not followed, projected revenues would be decreased by $ 10 million (to $ 375 million) and earnings per share would be reduced by $ 0.19 (to $ 1.01). The action plan, it was predicted, would result in revenues of $ 380 million and earnings per share of $ 1.15.

 Against this backdrop, plaintiffs contend that Symbol made three fraudulent statements. The first was a report dated June 8, 1992, in Crain's New York Business, which quoted an officer of Symbol, defendant Michael G. Archambault, as saying that Symbol "expected the second half of the year to be strong and to continue with the momentum that we exited 1991 with."

 The second was made on June 26, 1992, a day that saw a marked increase in the buying and selling of Symbol shares. The New York Stock Exchange ("NYSE") halted trading in Symbol securities that afternoon to inquire into the reason for this increased activity. It turned out that short-sellers were spreading rumors that Symbol's earnings in the second quarter of 1992 -- earnings that would be announced imminently -- would be lower than expected. At the request of the NYSE, Symbol issued a press release to rebut these rumors. The statement reassured investors, stating that the revenues and earnings per share for Symbol's second quarter would be even higher than in the first quarter.

 The third purportedly misleading statement was made on July 22, 1992, when Symbol made its regularly-scheduled public announcement of its results for the second quarter. These results conformed with the statements contained in Symbol's press release of June 26, 1992. In the July 22, 1992, press release, Symbol again stated that it had achieved record revenues in the second quarter, and went on to state that "although we are pleased with our record revenues in the first half, we have concerns that continued weakness in the U.S. retail market could result in slower than expected growth in the second half of 1992." *fn4"

 On September 14, 1992, Symbol publicly disclosed that it would sustain substantial losses in the second half of the year. This date ...


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