This is a securities class action lawsuit against Novatel Wireless, Inc.
Novatel provides wireless broadband access solutions for the mobile communications market worldwide.
The class action lawsuit alleges that Novatel made material omissions and disseminated materially false and misleading statements concerning Novatel's financial performance and prospects causing Novatel's stock price to become artificially inflated, inflicting damages on investors.
The class action complaint alleges that Novatel's public statements failed to disclose or indicate the following:
(1) that Novatel improperly recognized revenue in violation of its own revenue cut-off procedures;
(2) that, as a result of this improper revenue recognition, Novatel misstated its financial results during the Class Period;
(3) that Novatel's financial results were not prepared in accordance with Generally Accepted Accounting Principles (GAAP);
(4) that Novatel lacked adequate internal and financial controls; and
(5), as a result of the foregoing, Novatel's financial statements were materially false and misleading at all relevant times.
Throughout most of the Class Period, Novatel issued favorable revenue guidance and touted Novatel's financial performance and prospects. For example, on February 20, 2008, Novatel provided revenue guidance of approximately $110 million for first quarter 2008, based in part on "expectations of strong demand for the Company's products, particularly its USB products, as well as assumptions about industry wide supply constraints on certain components."
On May 20, 2008, however, Novatel filed a Form 8-K with the SEC stating that Novatel "will notify the Nasdaq Stock Market that it did not timely file its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008," and that "the Company and its Audit Committee have undertaken an expanded enhanced review of the Company's revenue cut off procedures and internal controls related to certain customer contracts, which review is ongoing." Then, on August 19, 2008, following the close of trading Novatel shocked investors when it issued a press release which revealed that the Audit Committee of Novatel's board of directors had reviewed the accounting for six transactions and made a preliminary determination to move approximately $3.4 million of revenues from the first quarter of 2008 to the second quarter of 2008. Moreover, Novatel disclosed for the first time that this was not a minor accounting issue and that there was a possibility that Novatel may have to restate its audited financial statements for the 2007 fiscal year.
As a result of this news, shares of Novatel declined $2.11 per share, more than 25%, to close on August 20, 2008 at $6.29 per share, on unusually heavy volume.
Name (Stock Symbol)
Novatel Wireless, Inc. (NVTL)
Novatel Wireless, Inc. is a provider of wireless broadband access solutions for the worldwide mobile communications market.
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