News by Michael Oryl on Friday May 04, 2012.
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Nokia is the subject of a securities class action lawsuit that has been filed in New York state. The plaintiff in the case, who claims to represent the class, is named Robert Chmielinski. Chmielinski bought shares of Nokia stock during what his suit defines as the class period: October 26, 2011 through April 10, 2012.
Chmielinski's suit claims that Nokia committed an act of securities fraud when it told investors that the company's switch to Microsoft's Windows Phone smartphone platform would halt its slide in the industry, a slide that has seen the the company fall from being the number one cell phone and smartphone manufacturer in the world to its pedestrian position in the market today.
"During the Class Period, defendants told investors that Nokia's conversion to a Windows platform would halt its deteriorating position in the smartphone market. It did not. This became apparent on April 11, 2012, when Nokia disclosed that its first quarter performance would be worse than expected."
The complaint also mentions the Lumia 900 launch snafu on AT&T that saw Nokia offering a $100 discount on the price of the phone to those that purchased it during its initial few weeks of availability. The complaint says that this act made the phone "essentially free," which, of course, is far from the truth. It merely reduced the subsidized price of the phone to $0, with AT&T still paying its portion to Nokia.
Most of the journalists we know, however, thought that Nokia made the absolute best of a terrible situation with that $100 rebate and handled it quite well. We totally agree. Had Nokia not responded so, the Lumia 900 would likely have had a limited future in the U.S.
The suit specifically names Nokia CEO Stephen Elop and company CFO Timo Ihamuotila as defendants, in addition to the company itself. It claims that not only did the defendants have opportunity to commit the alleged fraud, but also motive.
Most all statements issued by companies today come with what is called a "safe harbor statement," which warns the reader that "forward-looking" statements that refer to future performance and benefits are, by nature, educated guesses and the opinions of those making the statements and should not be interpreted as facts. The suit claims that the safe harbor statements issued by Nokia were "ineffective." That will be part of what the court has to decide. Common sense tells us that nobody can predict the future, and that's basically what the safe harbor statements are meant to remind people of. The plaintiff's claim is that Nokia's forward looking statements, at the time they were being made, were already known by Nokia to be false and misleading, which would constitute fraud and invalidate the protection offered by safe harbor.
The suit seeks damages and interest based on the alleged loss of stock value for the class during the class period and also seeks recuperation of the plaintiff's legal fees and any injunctive relief that the court might deem appropriate for the class members.
Nokia has issued the following in response to the suit:
"Nokia has become aware of the filing of a securities class action complaint naming Nokia Corporation as a defendant, filed in the US District Court for the Southern District of New York on May 3, 2012. Nokia is reviewing the allegations contained in the complaint and believes that they are without merit. Nokia will defend itself against the complaint."source: http://www.rgrdlaw.com/media/cases/140_Complaint.pdf