Tellabs suit can proceed, judge rules
Tellabs Inc., the Naperville Illinois telecommunications equipment maker, must face a securities fraud suit claiming the company and a former chief executive officer made misleading statements about its financial prospects.
The case previously reached the U.S. Supreme Court, which ordered a lower court to reconsider whether the plaintiff investors had shown ex-CEO Richard Notebaert knew the statements were misleading when he allegedly made them.
"It is conceivable," wrote U.S. Circuit Judge Richard Posner in Chicago in a decision Thursday, that Notebaert was unaware of problems at the company and was repeating misstatements fed to him by others, "but it is exceedingly unlikely."
Investors sued Tellabs in 2002 claiming that between December 2000 and June 2001, Notebaert made overly optimistic claims about the company's performance while demand for its principal products was declining.
Tellabs fell from $67.18 on Dec. 2, 2000, to $16.04 the following June 20 as the company began scaling back projections.
U.S. District Judge Amy St. Eve in Chicago dismissed the suit in 2004, ruling shareholders had not satisfied the heightened standards of the federal Private Securities Litigation Reform Act of 1995. When the U.S. Court of Appeals in Chicago reversed St. Eve's ruling, Tellabs appealed to the Supreme Court.
Company spokesman George Stenitzer said "the allegations will ultimately be shown to be without merit." Investor lawyer Richard Weiss didn't immediately return a call seeking comment. Notebaert, who later worked as CEO of Qwest Communications International Inc., couldn't be immediately reached for comment.
Tellabs fell 4 cents to $6.35 Thursday in Nasdaq Stock Market trading.
On Wednesday, shares of Tellabs jumped after a UBS analyst upgraded the company and said this could be the year it's "finally" bought.
Analyst Nikos Theodosopoulos upgraded the stock to "Buy" from "Hold," with a target price of $8.
With two chief executives resigning since 2002, no obvious internal replacement, a low-growth industry and low stock valuation, the analyst said 2008 could be the year Tellabs is acquired.
The company, he added, could be a "strategic value" to Nortel Networks Inc., Nokia Siemens Networks, "or perhaps private equity."
Nokia Siemens is a joint venture between Finland's Nokia Corp. and Germany's Siemens AG. Theodosopoulos said Tellabs could be of value to Nokia Siemens or Nortel given its "leading supply status" with Verizon, along with high-growth products.