A San Diego-based law firm that successfully represented investors in the Enron Corp. accounting scandal has filed a class-action lawsuit against Powerwave Technologies Inc. It alleges the Santa Ana-based company issued “materially false and misleading statements” regarding its business operations and market opportunities.
Robbins Geller Rudman & Dowd LLP filed the lawsuit Feb. 9 on behalf of shareholders in the U.S. District Court for the Central District of California. It alleges that Powerwave executives failed to disclose adverse facts facing the company from Feb. 1 to Oct. 18, such as:
• A dramatic decline in demand from North American customers.
• Burning through cash flow as revenue declined and expenses increased.
• Defendants lacked a reasonable basis for positive statements about business operations and earnings.
Powerwave makes antennas, filters and other equipment for cell phone towers.
Its devices capture and boost radio signals between cell phones and base stations inside towers.
The lawsuit highlights problems that began surfacing when the company drastically cut third-quarter revenue expectations on Oct. 18 to $75 million to $79 million, down roughly 50% from a year earlier.
Powerwave shares plummeted 35% in afterhours trading that day to a market value of about $231 million.
Executives cited in the announcement and reiterated in a conference call the following day a “significant” slowdown in spending by North American network operators and the stalled merger between AT&T Inc. in Dallas and Bellevue, Wash.-based T-Mobile USA Inc.
The lawsuit stemmed from an investigation by Atlanta-based Holzer Holzer & Fistel LLC, which sought to determine whether Powerwave knew but failed to disclose in a timely manner that it was experiencing declining demand from North American customers.
The lawsuit filed by Robbins Geller seeks to recover damages on behalf of common stock holders during the defined period.
The national law firm, which also has offices in San Francisco, New York and other locations, gained prominence after securing more than $7.2 billion in damages for Enron investors following one of the largest corporate scandals in U.S. history.
A Powerwave spokesperson declined comment on the suit.
This is the first stage of the proceedings. The law firm has 60 days from the filing date to find a lead plaintiff, or investor. A complaint then will be filed, said David Rosenfeld, a partner in the New York office of Robbins Geller.
“Nothing happens for the next two months,” Rosenfeld said. “It will be a number of years for this case to sort itself out.”
The lawsuit is the latest setback for Powerwave, which has initiated a series of moves in the last four months to conserve cash or build up capital.
Investors sent Powerwave’s thinly traded shares—which had continued to slide since October—down more than 7% to a market value of about $54 million on Feb. 10.
Revenue Decline
Lantronix Inc. gained industry kudos with its latest product launch, but the plaudits couldn’t prevent the Irvine-based gear maker from posting a revenue and net loss in the December quarter.
The company reported a 17% decline in revenue to $10.5 million amid lower sales in Europe, the Middle East and Africa regions compared to a year earlier. The European economic crisis was partly to blame.
Lantronix recorded $629,000 in red ink in the most recent quarter, compared to an adjusted profit of $629,000 in the comparable period last year.
The company lowered costs by $400,000 to $6.4 million in the quarter. That achieved a major goal implemented by Chief Executive Kurt Busch, who took the helm in August after months of upper-management turmoil.
Busch called the results “disappointing” but highlighted recent management changes and a new product strategy to capture market share and expand reach.
Lantronix launched an external print server in December that’s compatible with Apple Inc.’s iPads, iPod touch, iPhone and other devices running the Cupertino-based company’s mobile operating system.
The plug-and-play product allows users to access printers remotely at work and at home for wireless printing, potentially opening up new growth markets. The xPrintServer supports thousands of printers from brands such as HP, Brother, Epson, Canon, Dell, Lexmark and Xerox.
The server garnered accolades at the recent Macworld expo, winning the Best of Show and Mac Observer Editors Choice awards.