Eircom has poured cold water on claims by a US law firm that the software company at the centre of a shareholder class action lawsuit made a misleading statement regarding the signing of a key deal with the Irish telecoms carrier. Eircom has confirmed that the deal had actually taken place.
In a statement last week, US-based law firm Schiffrin & Barroway LLP said that it had filed a class action lawsuit on behalf of shareholders in Portal Software Inc, which makes converged billing platforms for telecoms.
The law firm alleged that Portal Software had issued numerous misleading public statements concerning its revenue growth as well as product and marketing initiatives that hinted at increased revenues and market growth whilst “failing to disclose that demand for the company’s products was materially declining”.
The statement said: “Prior to the disclosure of this adverse information to the market, the company completed a public offering of Portal common stock raising over US$56m in net proceeds and the individual defendants, as well as other high-level executives of Portal, sold their personally held Portal common stock to the unsuspecting public reaping proceeds of more than US$4.8m.”
Among a list of complaints and allegations made against Portal Software regarding misleading financial results and licence growth was the argument that in the June 2003 issue of Worldwide Telecom, Portal announced that Eircom had successfully implemented Portal’s converged billing platform, Infranet.
However, a spokesperson for Eircom told siliconrepublic.com that Portal Software Inc has had a working relationship with the company for over two years. While she said she could not comment on the other aspects of the US law firm’s suit, she could definitely say that Portal Software Inc had indeed successfully implemented its technology within Eircom.
She said: “Eircom has an existing arrangement in place in respect of the software package Infranet which they provide to Eircom Net. The reference to the Eircom statement is true insofar as the company had successfully implemented its technology with Eircom.”
In the statement, Schiffrin & Barroway added: “On 12 September, 2003, Portal announced that it had priced a public offering of more than 22 million shares of its common stock, raising more than US$56m for the Company. In connection with the offering, Portal filed a registration statement with the SEC [Securities and Exchange Commission] which included, among other things, positive representations concerning the Company’s business and its core product, Infranet.”
Schiffrin & Barroway argued that such statements were false and misleading as they misrepresented and/or omitted a number of adverse facts: that sales and marketing efforts were not performing well, that the company was experiencing declining demand for its products and services, that sales cycles were lengthening, that it was unable to service existing customers and that the defendants lacked a reasonable basis for their earnings projections at all times.
In its statement last week, the law firm said: “The Class Period ends on 13 November, 2003. On that date, Portal issued a press release announcing that it expected net losses of US$0.36 – 0.40 per share for the third quarter fiscal 2004 versus prior earnings guidance of net profits of US$0.04 per share. Defendants cited contract delays and revenue recognition deferrals. Market reaction to defendants’ belated disclosures was swift and severe. In after-hours trading on 13 November, 2003, the price of Portal common shares fell more than 42.5pc to open at US$8.77 per share on 14 November, 2003, and have decreased more than 51pc from a Class Period high of US$17.93 per share reached less than a month before on 15 October, 2003.”
By John Kennedy
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