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MILBERG WEISS BERSHAD & SCHULMAN LLP JEFF S. WESTERMAN (SBN 94559) KAREN T. ROGERS (SBN 185465) RAMON M. GONZALEZ (SBN 220891) 355 S. Grand Avenue, Suite 4170 Los Angeles, CA 90071-3172 Telephone: (213) 617-1200 Facsimile: (213) 617-1975 MILBERG WEISS BERSHAD & SCHULMAN LLP STEVEN G. SCHULMAN PETER E. SEIDMAN One Pennsylvania Plaza New York, NY 10119 Telephone: (212) 594-5300 Facsimile: (212) 868-1229 Lead Counsel for Plaintiffs
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
OAKLAND DIVISION
In re TIBCO SOFTWARE, INC. SECURITIES LITIGATION
This Document Relates To: ALL ACTIONS
) ) ) ) ) ) ) )
Master File No. C 05-2146 SBA CLASS ACTION
CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAW
LANCE SIEGALL, Plaintiff, v. TIBCO SOFTWARE, INC., VIVEK Y. RANADIVÉ, CHRISTOPHER G. O’MEARA, SYDNEY CAREY and RAJESH U. MASHRUWALA, Defendants.
) ) ) ) ) ) ) ) ) ) ) )
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INTRODUCTION 1
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1. This is a federal class action on behalf of purchasers of the securities of Tibco
Software, Inc. (“TIBCO” or the “Company”), between September 21, 2004 and March 1, 2005,
inclusive (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act
of 1934 (the “Exchange Act”).
2. As alleged herein, in connection with the sale of securities, defendants
published a series of materially false and misleading statements, which defendants knew and/or
deliberately disregarded, were materially false and misleading at the time of such publication,
and which omitted to reveal information necessary to make defendants’ statements, in light of
such omissions, not materially false and misleading.
OVERVIEW
3. Defendant TIBCO is a Delaware corporation with its principal place of business
located in Palo Alto, California. According to the Company, TIBCO is engaged in the
development and marketing of business services software products that purportedly enable
customers to collect, analyze and distribute real-time information about and within an
organization. In addition to offering “end-to-end” enterprise information management
systems, TIBCO also purports to offer integration solutions products that are designed
specifically to assist business consolidations following acquisitions, mergers or similar
restructurings. The Company’s products are sold individually or as product “suites” and
“complete solutions.”
4. At the inception of the Class Period, defendants’ ability to offer customers
“complete solutions” and integrated product “suites,” as well as TIBCO’s purported ability to
expand its operations in Europe, was due, in substantial part, to the successful integration of
Staffware PLC (“Staffware”). Despite the fact that TIBCO’s $245 million stock and cash
acquisition of Staffware was the Company’s first acquisition since 2002, and despite the fact
that Staffware was primarily a European company located in the U.K., it was precisely because
of TIBCO’s purported expertise in providing its customers with business integration and
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information management products, that investors had every reason to believe that TIBCO
would be able to complete the Staffware acquisition according to plan.
5. As a result of the Company’s sophisticated products and defendants’
representations about their capabilities, investors were consistently led to believe that
defendants would be able to detect any merger-related problems and disclose them on a timely
basis, as they were discovered. Accordingly, by the inception of the Class Period, investors
were also led to believe that the Staffware acquisition was having, and would foreseeably
continue to have, positive near-term effects on the Company, including:
• Broadening TIBCO’s solutions for automating and integrating business processes;
• Deepening TIBCO’s industry expertise in the finance, insurance, telecommunications and government sectors with the addition of Staffware's capabilities in these areas; and
• Increasing TIBCO’s distribution capabilities through the cross-selling of products into new regions and an expanded customer and partner base.
6. Unbeknownst to investors, however, during the Class Period, the statements
made by defendants and contained in TIBCO’s press releases and United States Securities and
Exchange Commission (“SEC”) filings, were each materially false and misleading when made,
and were known by defendants to be false or were deliberately disregarded as such for the
following reasons, among others:
• By the inception of the Class Period, it was not true that TIBCO had completed the integration of Staffware, nor was it true that this acquisition was proceeding according to plan, nor was it true that the Company was poised to capitalize on the integration of these acquired assets;
• At all times during the Class Period, as a result of defendants’ utilization of the Company’s own proprietary integration management products and information management technologies, defendants were well aware or deliberately disregarded, but failed to disclose, that TIBCO had failed to integrate Staffware into the Company, and defendants were also well aware, but failed to disclose, that Staffware was performing well below expectations;
• Throughout the Class Period, as a result of defendants’ poor merger planning, as defendants knew and/or deliberately disregarded, TIBCO had failed to adopt unified revenue recognition procedures that would allow Staffware to conform its revenue recognition policies to the standards of US Generally Accepted Accounting Principles (“GAAP”), in place at TIBCO. Again, because revenue recognition integration was exactly the type of integration management that
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TIBCO’s products were supposed to supply, unlike defendants, investors had no way of knowing that these problems then existed; 1
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• Throughout the Class Period, as defendants knew or deliberately disregarded, it was not true that TIBCO maintained adequate systems of internal financial, operational or disclosure controls so as to reasonably assure the accuracy, completeness and veracity of the Company’s public statements and representations to investors; and
• Throughout the Class Period, as a result of the aforementioned adverse conditions that defendants failed to disclose, defendants lacked any reasonable basis to claim that TIBCO was operating according to plan, or that the combined Company could reasonably attain the guidance sponsored and/or endorsed by defendants in the foreseeable near-term.
7. During the Class Period, however, defendants were motivated to and did
conceal the true operational and financial conditions of TIBCO, and materially misrepresented
and failed to disclose the adverse conditions that were adversely affecting TIBCO throughout
the Class Period, including the problems that TIBCO was having integrating Staffware into the
Company. While in possession of this material adverse information, and prior to any adverse
disclosure to the market, and prior to the collapse of the price of TIBCO shares, defendants and
Company insiders sold their TIBCO stock for proceeds of over $2 million during the Class
Period.
JURISDICTION AND VENUE
8. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of
the Exchange Act [15 U.S.C. §§78j(b) and 78t(a)] and Rule 10b-5 promulgated thereunder by
the SEC [17 C.F.R. §240.10b-5].
9. This Court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C. §§1331 and 1337, and Section 27 of the Exchange Act [15 U.S.C. §78aa].
10. Venue is proper in this District pursuant to Section 27 of the Exchange Act, and
28 U.S.C. §1391(b). TIBCO maintains its principal place of business in this District and many
of the acts and practices complained of herein occurred in substantial part in this District.
11. In connection with the acts alleged in this Complaint, defendants, directly or
indirectly, used the means and instrumentalities of interstate commerce, including, but not
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limited to, the mails, interstate telephone communications and the facilities of the national
securities markets.
PARTIES
12. Lead Plaintiffs, Ralph Felton and Sathya Rajasubramanian, as set forth in the lists
attached as Exhibits A and B, and incorporated by reference herein, purchased the common
stock of TIBCO at artificially inflated prices and suffered damages as a result of the wrongful
acts of the defendants.
13. Defendant TIBCO is a Delaware corporation with its principal place of business
at 3303 Hillview Avenue, Palo Alto, CA 94304. According to the Company’s profile,
throughout the Class Period, TIBCO was engaged in the development and marketing of a
“suite” of software products that enable businesses to link internal operations, business partners
and customer channels through the real-time distribution of information. The Company’s
business integration solutions purport to include products that provide business process
visualization and management and application integration capability, giving businesses the
ability to connect and coordinate their applications, employees, partners and customers, and
automate their business processes from end-to-end within the enterprise. The Company’s
products are sold individually but, following the acquisition of Staffware PLC, in June 2004,
the Company’s emphasis had been sales of products that can be sold together as a “complete
solution.”
14. Defendant Vivek Y. Ranadivé (“Ranadivé”) was, during the Class Period,
President, Chief Executive Officer and Chairman of the Board of Directors of the Company.
During the Class Period, defendant Ranadivé made materially false and misleading statements
regarding the financial and operational condition of the Company and/or signed or certified the
Company’s materially false and misleading SEC filings.
15. Defendant Christopher G. O’Meara (“O’Meara”) was, during the Class Period,
Executive Vice President and Chief Financial Officer of the Company. During the Class
Period, defendant O’Meara made materially false and misleading statements regarding the
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financial and operational condition of the Company and/or signed or certified the Company’s
materially false and misleading SEC filings. He also sold 20,000 shares, or 2.3%, of his stock
for proceeds of $251,400 during the Class Period. By sharp contrast, he had no sales in the
prior comparable period before the Class Period.
16. Defendant Sydney Carey (“Carey”) was, during the Class Period, Vice President,
Corporate Controller and Chief Accounting Officer of the Company. During the Class Period,
defendant Carey made materially false and misleading statements regarding the financial and
operational condition of the Company and/or signed or certified the Company’s materially
false and misleading SEC filings.
17. Defendant Rajesh U. Mashruwala (“Mashruwala”) was, during the Class Period,
Executive Vice President, Office of the CEO of the Company since September 2003. From
March 2002 through September 2003, Mashruwala served as Executive Vice President, Chief
Operating Officer. During the Class Period, defendant Mashruwala made and/or ratified the
materially false and misleading statements regarding the financial and operational condition of
the Company. He also sold 125,000 shares, or 17.2%, of his stock for proceeds of $1,339,077
during the Class Period. By sharp contrast, he had no sales in the prior comparable period
before the Class Period.
18. The defendants referenced above in ¶¶14-17 are referred to herein as the
“Individual Defendants.”
19. Because of the Individual Defendants’ positions with the Company, they had
access to the adverse undisclosed information about its business, operations, products,
operational trends, financial statements, markets and present and future business prospects via
access to internal corporate documents (including the Company’s operating plans, budgets and
forecasts and reports of actual operations compared thereto), conversations and connections
with other corporate officers and employees, attendance at management and Board of Directors
meetings and committees thereof and via reports and other information provided to them in
connection therewith.
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20. It is appropriate to treat the Individual Defendants as a group for pleading
purposes and to presume that the false, misleading and incomplete information conveyed in the
Company’s public filings, press releases and other publications as alleged herein are the
collective actions of the narrowly defined group of defendants identified above. Each of the
above officers of TIBCO, by virtue of their high-level positions with the Company, directly
participated in the management of the Company, was directly involved in the day-to-day
operations of the Company at the highest levels and was privy to confidential proprietary
information concerning the Company and its business, operations, products, growth, financial
statements, and financial condition, as alleged herein. Said defendants were involved in
drafting, producing, reviewing and/or disseminating the false and misleading statements and
information alleged herein, were aware, or deliberately disregarded, that the false and
misleading statements were being issued regarding the Company, and approved or ratified
these statements, in violation of the federal securities laws.
21. As officers and controlling persons of a publicly-held company whose common
stock was, and is, registered with the SEC pursuant to the Exchange Act, and was traded on the
Nasdaq National Market Exchange (the “NASDAQ”), and governed by the provisions of the
federal securities laws, the Individual Defendants each had a duty to disseminate promptly,
accurate and truthful information with respect to the Company’s financial condition and
performance, growth, operations, financial statements, business, products, markets,
management, earnings and present and future business prospects, and to correct any
previously-issued statements that had become materially misleading or untrue, so that the
market price of the Company’s publicly-traded common stock would be based upon truthful
and accurate information. The Individual Defendants’ misrepresentations and omissions
during the Class Period violated these specific requirements and obligations.
22. The Individual Defendants participated in the drafting, preparation, and/or
approval of the various public and shareholder and investor reports and other communications
complained of herein and were aware of, or deliberately disregarded, the misstatements
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contained therein and omissions therefrom, and were aware of their materially false and
misleading nature. Because of their Board membership and/or executive and managerial
positions with TIBCO, each of the Individual Defendants had access to the adverse undisclosed
information about TIBCO’s business prospects and financial condition and performance as
particularized herein and knew (or deliberately disregarded) that these adverse facts rendered
the positive representations made by or about TIBCO and its business issued or adopted by the
Company materially false and misleading.
23. The Individual Defendants, because of their positions of control and authority as
officers and/or directors of the Company, were able to and did control the content of the
various SEC filings, press releases and other public statements pertaining to the Company
during the Class Period. Each Individual Defendant was provided with copies of the
documents alleged herein to be misleading prior to or shortly after their issuance and/or had the
ability and/or opportunity to prevent their issuance or cause them to be corrected.
Accordingly, each of the Individual Defendants is responsible for the accuracy of the public
reports and releases detailed herein and is therefore primarily liable for the representations
contained therein.
24. Each of the defendants is liable as a participant in a fraudulent scheme and course
of business that operated as a fraud or deceit on purchasers of TIBCO common stock by
disseminating materially false and misleading statements and/or concealing material adverse
facts. The scheme: (i) deceived the investing public regarding TIBCO’s business, operations,
management and the intrinsic value of TIBCO common stock; (ii) enabled the defendants
and/or Company insiders to sell over $2.0 million worth of Company stock during the Class
Period; and (iii) caused plaintiffs and other members of the Class to purchase TIBCO common
stock at artificially inflated prices and to subsequently incur damage when defendants’ fraud
was revealed.
25. Plaintiffs’ allegations are supported by, among other things, the information
provided by confidential witnesses. These witnesses include former TIBCO employees who
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provided facts based on their personal experiences at the Company during the stated time
period:
(a) Confidential Witness 1 (“CW1”) is a former TIBCO Managing Director of
Channel Sales in Munich, Germany, for several years and during most of the Class Period until
early 2005.
(b) Confidential Witness 2 (“CW2”) is a former TIBCO General Manager
within the OEM sales channel in Austin, Texas, from 2003 through 2004.
(c) Confidential Witness 3 (“CW3”) is a former Staffware/TIBCO National
Account Director in New York, employed by Staffware in early 2001, and then by TIBCO (after
the acquisition in June 2004) until early 2005. CW3 was responsible for sales of Staffware
product that were used globally.
(d) Confidential Witness 4 (“CW4”) is a former Staffware/TIBCO Finance
Director throughout the Class Period. CW4 first began working for the Staffware U.K.
subsidiary in 1998 as a Finance Director and continued in that position after TIBCO acquired
Staffware, until leaving the Company in mid-2005. As part of CW4’s responsibilities over
Staffware U.K. financials, CW4 compiled balance sheets, profit and loss statements, and tracked
assets and liabilities. CW4 was also responsible for reviewing the financials and interpreting the
application of accounting rules before submitting the compiled financials to Staffware corporate.
(e) Confidential Witness 5 (“CW5”) is a former Senior Manager of IT
Operations for TIBCO for over five years until mid-2005.
(f) Confidential Witness 6 (“CW6”) was employed by TIBCO as a Pre-Sales
Consultant from early 2005 until the Fall of 2005. CW6 was responsible for supporting TIBCO
sales representatives by explaining TIBCO’s products and their capabilities to prospective
customers. According to CW6, TIBCO had a corporate training group in Palo Alto (the
Company’s headquarters) where CW6 was educated about TIBCO products and sales pitches.
CW6 was educated on Staffware products by an employee who had previously worked for
Staffware. CW6 was instructed by the training personnel at TIBCO to “pitch” TIBCO and
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Staffware BPM (business process management) products together, telling customers that the
products worked together.
PLAINTIFFS’ CLASS ALLEGATIONS
26. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or
otherwise acquired the common stock of TIBCO between September 21, 2004 and March 1,
2005 inclusive (the “Class Period.”) Excluded from the Class are defendants, the officers and
directors of the Company, at all relevant times, members of their immediate families and their
legal representatives, heirs, successors or assigns and any entity in which defendants have or
had a controlling interest.
27. The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, TIBCO common shares were actively traded on
the NASDAQ. As of October 8, 2004, the Company had over 212.13 million shares issued and
outstanding. While the exact number of Class members is unknown to plaintiffs at this time
and can only be ascertained through appropriate discovery, plaintiffs believe that there are
hundreds or thousands of members in the proposed Class. Record owners and other members
of the Class may be identified from records maintained by TIBCO or its transfer agent and may
be notified of the pendency of this action by mail, using the form of notice similar to that
customarily used in securities class actions.
28. Plaintiffs’ claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by defendants’ wrongful conduct in violation of
federal law that is complained of herein.
29. Plaintiffs will fairly and adequately protect the interests of the members of the
Class and have retained counsel competent and experienced in class and securities litigation.
30. Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
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(a) whether the federal securities laws were violated by defendants’ acts as
alleged herein;
(b) whether statements made by defendants to the investing public during the
Class Period misrepresented material facts about the business, operations and management of
TIBCO; and
(c) to what extent the members of the Class have sustained damages and the
proper measure of damages.
31. A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation make it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in the management of this action
as a class action.
SUBSTANTIVE ALLEGATIONS
Background
32. On June 7, 2004, during fiscal third quarter 2004, TIBCO closed the acquisition
of Staffware, a provider of business process management (“BPM”) solutions that enable
businesses to automate, refine and manage their processes. The addition of Staffware’s BPM
solutions purported to enable TIBCO to offer its combined customer base expanded real-time
business integration solutions. The Company’s acquisition of Staffware also purported to
increase TIBCO’s distribution capabilities through the cross-selling of products into new
geographic regions, principally in Europe and Asia. The total acquisition cost of the Staffware
acquisition was approximately $237.1 million, comprised of $139.7 million in cash and the
issuance of 10.9 million shares of TIBCO common stock, valued at $92.3 million.
33. Defendants’ ability to offer customers “complete solutions” and integrated
product “suites,” as well as TIBCO’s purported ability to expand its operations in Europe was
due, in substantial part, to the successful integration of Staffware. TIBCO’s acquisition of
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Staffware, however, was the Company’s first acquisition since 2002. Moreover, this
acquisition was complicated by the fact that Staffware was primarily a European Company
located in the U.K., while TIBCO was headquartered approximately 8600 kilometers (5300
miles) and several time zones away in Palo Alto, California.
34. It was, however, precisely because of TIBCO’s purported expertise in providing
its customers with business integration and information management products, and because of
defendants’ positive statements concerning the integration of Staffware, that investors had
every reason to believe that TIBCO would be able to complete the Staffware merger according
to plan. At least, investors expected that, as a result of the Company’s sophisticated products,
defendants would be able to detect any merger-related problems and disclose them on a timely
basis, as they were discovered. Accordingly, by the inception of the Class Period, investors
were also led to believe that the Staffware acquisition was having, and would foreseeably
continue to have, positive near-term effects on the Company, including:
• Broadening TIBCO’s solutions for automating and integrating business processes;
• Deepening TIBCO’s industry expertise in the finance, insurance, telecom and government sectors with the addition of Staffware's capabilities in these areas; and
• Increasing TIBCO’s distribution capabilities through the cross-selling of products into new regions and an expanded customer and partner base.
35. In addition to the foregoing, defendants also represented in a Company release
dated April 21, 2004 that the Staffware acquisition would further strengthen the Company’s
near-term business and operations, as follows:
Commenting on the Offer, Vivek Ranadivé, Chairman and CEO of TIBCO, said:
“We believe business processes are rapidly becoming the most valuable corporate asset. This combination brings two best-in-class technologies together to more completely deliver value to customers investing in BPM solutions. The combination with Staffware will provide TIBCO with immediate additional reach into new and emerging markets including retail banking, insurance, public sector and telecommunications, as well as increased geographic presence within Europe and Asia Pacific. We believe that the combined companies can
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accelerate market momentum relative to market peers, and set a new standard for what is needed to effectively compete in the BPM market.”1
36. Defendants’ representations about the Staffware acquisition were also widely
reported by the financial and business media. As evidence of this, on April 22, 2004,
eWeek.com reported, in part, the following:
The acquisition will build on TIBCO’s capabilities for integrating business processes--and broaden the company's potential customer base to include IT as well as business users, officials said.
The deal also will add depth to TIBCO’s increasingly vertical focus. More than half of Staffware’s customers are banks that use its software to automate loan approvals and mortgage applications, according to Hoover’s Online, a business research site. Staffware’s remaining customers are in the insurance, telecommunications and government sectors.
Most importantly, the acquisition will expand TIBCO’s reach beyond application integration to include business process management.
“We believe that the combined companies can accelerate market momentum relative to market peers and set a new standard for what is needed to effectively compete in the BPM market,” Vivek Rinadive [sic], chairman and CEO of TIBCO, said in a statement. “We believe business processes are rapidly becoming the most valuable corporate asset.”
The acquisition also will bring TIBCO a bigger presence in Europe and Asia Pacific. For Staffware, the acquisition will enable greater scale in U.S. markets, a feat the company has not been able to accomplish.
37. During the Class Period, however, defendants were motivated to and did
conceal the true operational and financial condition of TIBCO, and materially misrepresented
and failed to disclose the adverse conditions that were adversely affecting TIBCO throughout
the Class Period, including the problems that TIBCO was having integrating Staffware into the
Company, because it enabled defendants and Company insiders to sell Company stock valued
at over $2 million to the public while in possession of material adverse information and prior to
any adverse disclosure to the market and prior to the collapse of the price of TIBCO shares.
1 Unless otherwise noted, all emphasis is added.
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Defendants’ Materially False and Misleading Statements Made During the Class Period 1
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38. Q3 04 Results, Staffware Acquisition Closed and $50 Million Stock
Repurchase Program Announced. On September 21, the inception of the Class Period,
TIBCO published a release on PR Newswire that announced consensus-beating financial
results for the fiscal third quarter of 2004, the period ending August 29, 2004 (“Q3 04”), as
well as the adoption of a $50 million stock repurchase program. For Q3 04, TIBCO reported
total revenues of $105.9 million, and net income of $8.6 million or $0.04 per share, up from
$2.7 million, or 1 cent per share, in the year-ago period – a full 2 cents above analysts’
consensus earnings estimates for the quarter. This release also stated, in part, the following:
TIBCO Software Reports Third Quarter Financial Results; Announces Stock Repurchase Program
“Increasingly, companies are turning to TIBCO to obtain value from their existing assets, gain operational efficiencies and improve customer loyalty,” said Vivek Ranadivé, Chairman and CEO of TIBCO Software. “Our third quarter performance reflects these trends and the commitment and contributions of both the TIBCO and Staffware organizations.”
* * *
Stock Repurchase Program
TIBCO’s Board of Directors has approved a two-year stock repurchase program pursuant to which TIBCO may repurchase up to $50 million of its outstanding common stock from time to time on the open market or through privately negotiated transactions.
39. Following the publication of TIBCO’s Q3 04 release, defendants hosted a
conference call for analysts and investors during which they stated, in part, the following:
VIVEK RANADIVÉ: In summary, I want to leave you with three points. First, we are at the tipping point in the integration market, where the technology has received mainstream acceptance, and TIBCO has emerged as the clear winner. Second, we are better positioned today than at any time in our history. And third, while there is always room for improvement, I believe that we are executing well across all segments of our business.
* * *
VIVEK RANADIVÉ: Well, maybe people will start believing us that we are at the tipping point of this business right now, and our franchise is very strong. And we are executing well; Chris Larsen is doing a great job, and we have got a good pipeline, and we feel good about where things are.
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40. In addition to the foregoing, during the Q3 04 conference call, when asked
about the integration of Staffware by participating analysts, the following exchanges occurred:
TIM KLASELL, ANALYST, THOMAS WEISEL PARTNERS: I wonder if you can give us a little bit of color on how Staffware did relative to plan, particularly in the license line.
VIVEK RANADIVÉ: We moved very quickly to offer a common storefront, and so we blended the sales quickly after the deal closed. And we had significant success with that, so we had a common offering to our customers ... we were offering essentially a blended product....
CHRIS O’MEARA: [I] think we are pleased with the performance of both -- of the TIBCO and Staffware organizations.... I think what I would leave people with is the fact that both organizations did a really great job, in terms of staying focused and closing opportunities.
TIM KLASELL: And then I’ll sort of take a derivative off that. Asia did particularly well; Europe was strong. Did you get leverage from the Staffware sales forces in those territories with the TIBCO products?
VIVEK RANADIVÉ: Not so much in Asia, but more in Europe. In Europe we absolutely did.
* * *
KASH RANGAN, ANALYST, WACHOVIA SECURITIES: Perhaps if you could give us an update on the integration with Staffware, both from a product perspective and sales perspective, maybe touch upon when you expect to get leverage in the product acquisitions here locally in the US, following what seems to be a good start in the UK?
VIVEK RANADIVÉ: We integrated at kind of a storefront level in Q3 and Q4. And then, next year we will have even more tight integration, in terms of sales management and all of that. And we are very pleased with the way that it has gone, and we are very pleased with -- from all fronts, the way the customers have reacted. We have several wins where it was really a joint product that allowed us to have not only the win but the type of pricing that we ended up with. So that has all gone better than we had expected, and we are very happy with it.
41. Following the publication of the Company’s earnings announcement and
TIBCO’s conference call, shares of the Company traded higher on very heavy trading volume
as investors reacted positively to defendants’ statements. Accordingly, on September 22, 2004,
shares of TIBCO traded to $8.27 per share, up 10% from the prior day’s close of $7.51 per
share, on volume of over 14.23 million shares traded.
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42. Q3 04 Form 10-Q. On or about October 13, 2004, defendants filed with the
SEC the Company’s financial results for Q3 04, the period ended August 29, 2004, pursuant to
its Form 10-Q signed by defendants O’Meara, as Executive Vice President, Finance and Chief
Financial Officer, and Carey, as Corporate Controller and Chief Accounting Officer. The
Company’s Q3 04 Form 10-Q also described the Staffware acquisition in part, as follows:
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3. BUSINESS COMBINATIONS
In June 2004, we completed our acquisition of Staffware plc (“Staffware”), a provider of Business Process Management (“BPM”) solutions that enable business to automate, refine and manage their processes. The addition of Staffware’s BPM solution enables us to offer our combined customer base a more robust and expanded real-time business integration solution. The purchase price for Staffware exceeded the fair value of Staffware’s net tangible and intangible assets acquired; as a result, we have recorded goodwill in connection with this transaction.
* * *
Our acquisition of Staffware added approximately $6.0 million in cost of revenue for the quarter ended August 31, 2004, including approximately $1.1 million amortization of intangibles, contributing to the increase in costs as a percentage of revenue.
43. In addition to the foregoing, the Company’s Q3 04 Form 10-Q also stated that
the Company maintained an adequate system of internal financial, operational and disclosure
controls so as to reasonably assure the accuracy and completeness of TIBCO’s representations
and disclosures, in part, as follows:
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure . . . .
Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, subject to the limitations noted above, our disclosure controls and procedures were effective to ensure that material information relating to us, including our consolidated subsidiaries, is made
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known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared. 1
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44. Certifications. TIBCO’s Q3 04 Form 10-Q also contained certifications by
defendants Ranadivé and O’Meara which also purported to certify the accuracy and
completeness of the Company’s disclosures, as follows:
CERTIFICATION
I, Vivek Y. Ranadivé, certify that:
1. I have reviewed this quarterly report on Form 10-Q of TIBCO Software Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
c) disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
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to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 1
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b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
Date: October 13, 2004
By: /s/ VIVEK Y. RANADIVÉ
Name: Vivek Y. Ranadivé
Title: President and Chief Executive Officer
45. A substantially similar Certification, dated the same day, was also signed and
certified by defendant O’Meara, as Executive Vice President, Finance and CFO of TIBCO. In
addition, defendants Ranadivé and O’Meara also filed Certifications pursuant to the Sarbanes-
Oxley Act, which also stated the following:
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Vivek Y. Ranadivé, President and Chief Executive Officer of TIBCO Software Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(a) the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended August 29, 2004, as filed with the Securities and Exchange Commission (the Report), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: October 13, 2004
/s/ Vivek Y. Ranadivé
President and Chief Executive Officer
* * *
Dated: October 13, 2004
/s/ Christopher G. O’Meara
Executive Vice President, Finance and Chief Financial Officer
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46. Acquisition of General Interface Announced. As defendants continued to
lead investors to believe that TIBCO was operating according to plan and was continuing to
integrate Staffware according to plan, on October 12, 2004, defendants also published a release
on PR Newswire announcing the $3.5 million acquisition of General Interface.
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47. The statements contained in TIBCO’s September 21, 2004 press release and
those statements contained in TIBCO’s Q3 04 Form 10-Q, referenced above, were each
materially false and misleading when made, and were known by defendants to be false or were
deliberately disregarded as such for the following reasons, among others:
(a) By the inception of the Class Period, it was not true that TIBCO had
completed the integration of Staffware nor was it true that this acquisition was proceeding
according to plan, nor that the Company was poised to capitalize on the integration of these
acquired assets;
(b) At all times during the Class Period, as a result of defendants’ utilization
of the Company’s own proprietary integration management products and information
management technologies, defendants were well aware, or deliberately disregarded, but failed to
disclose, that TIBCO had failed to integrate Staffware’s leadership, operations or sales force into
the Company, and defendants were also well aware but failed to disclose that, as a result thereof,
Staffware was performing well below expectations;
(c) Throughout the Class Period, as a result of defendants’ poor merger
planning, as defendants knew and/or deliberately disregarded, TIBCO had failed to adopt unified
revenue recognition procedures that would allow Staffware to conform its revenue recognition
policies to the standards of GAAP. Again, because revenue recognition integration was exactly
the type of integration management that TIBCO’s products and services were supposed to
supply, investors had no way of knowing that this problem existed within the Company during
the Class Period;
(d) Throughout the Class Period, as defendants knew or deliberately
disregarded, it was not true that TIBCO maintained adequate systems of internal financial,
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operational or disclosure controls so as to reasonably assure the accuracy, completeness and
veracity of the Company’s public statements and representations to investors; and
(e) Throughout the Class Period, as a result of the aforementioned adverse
conditions, which defendants failed to disclose, defendants lacked any reasonable basis to claim
that TIBCO was operating according to plan, or that the combined Company could reasonably
attain the guidance sponsored and/or endorsed by defendants during the Class Period, in the
foreseeable near-term.
48. Bear Stearns Raises Price Target. On November 22, 2004, Bear Stearns
analyst John DiFucci raised his price target on TIBCO, based in part on TIBCO’s
representations that its integration of Staffware was proceeding favorably. The November 22,
2004, Bear Stearns’ report stated in part: “We believe the Staffware integration is progressing
well…”
49. Jefferies & Co. Upgrade. Based in part on the statements made by defendants,
at or about that time, on December 13, 2004, CBS MarketWatch reported that Jefferies & Co.
raised its rating on shares of the Company and issued a “BUY” rating on TIBCO stock, thereby
encouraging investors to purchase shares of the Company. Analysts at Jefferies cited channel
checks that indicated a “better-than-expected quarter … an upcoming product cycle, and
increased synergy performance from Staffware.” At that time, Jefferies also lifted its price
target on TIBCO stock to $15.00 from $9.50 per share.
50. Following the Jefferies upgrade, shares of TIBCO continued to trade higher,
trading to a high of almost $11.90 per share, up from the prior trading day’s close of $11.15.
Moreover, as news of this upgrade continued to be disseminated to investors and as defendants
continued to make positive statements concerning the integration of Staffware, shares of the
Company continued to trade higher, reaching a high of over $13.45 per share on December 28,
2004.
51. “Record” Q4 and FY 04 Results Announced. Helping fuel TIBCO’s stock
price increase, on December 22, 2004, TIBCO published a release announcing “Record”
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setting results for the fourth quarter and fiscal year ended November 30, 2004 (“Q4” and “FY
04”). This release stated, in part, the following:
TIBCO Software Reports Record Fourth Quarter and Annual Financial Results
PALO ALTO, Calif., December 22, 2004 - TIBCO Software Inc. (Nasdaq:TIBX), a leading enabler of real-time business and the world's largest independent business integration software company, today announced results for its fourth fiscal quarter and year ended November 30, 2004. Total revenues for the fourth quarter were $125.7 million. License revenues for the fourth quarter were $70.6 million. Fiscal year 2004 revenues were $387.2 million. Net income for the quarter calculated in accordance with accounting principles generally accepted in the United States was $18.2 million or $.08 per share on a fully diluted basis.
* * *
“During 2004, we capitalized on the beginning of a secular growth opportunity in the Integration market, increasing our market share of those segments in which we offer products and on the hard work and dedication of the people who work at TIBCO,” said Vivek Ranadivé, Chairman and CEO of TIBCO Software. “The growth we are experiencing is further validation that our integration platform has gone from a 'nice to have' to a 'must have' for companies operating in the ever more competitive global marketplace.”
52. Following the publication of TIBCO’s Q4 and FY 04 press release, later the
same day defendants hosted a conference call for analysts and investors during which they
stated, in part, the following:
With respect to Q4, we reported another solid quarter with total revenues growing 19 percent sequentially and 72 percent year-over-year to 125.7 million . . . .
* * *
[W]e continued our track record of redefining the notion of integration by significantly expanding our solution range and adjustable market to new products such as business events released in Q4, and through our merger with Staffware, we've solidified our position as the leader in business process management and further increased our market footprint worldwide. We believe all of these events give us significant momentum as we head into 2005 and beyond.
* * *
We are in a very good position to capitalize on the secular growth opportunity ahead of us for the rest of this decade. This is what has me so very excited about TIBCO's growth potential.
[W]e are . . . better positioned today than any time in our history.
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53. In addition to the foregoing, during the Q4 and FY 04 conference call, when
asked about the integration of Staffware by participating analysts, the following exchanges
occurred:
JOHN DIFUCCI, ANALYST, BEAR STEARNS: Yes, thanks. And congratulations, guys. This looks -- this looks pretty good. Looks better than pretty good. Quickly, a couple. I guess, on some of your newer products just -- on -- just want to understand how they're developing. One, Staffware, how the cross-selling's doing. Is it -- it's still early, but are you having any traction trying to cross-sell into your current customer base or traditional customer base with the Staffware products?
VIVEK RANADIVÉ: Yes, John, we fully integrated Staffware into -- into the product set and into our sales organization. So we actually had good success with cross-selling . . . . So we're very, very excited about both opportunities -- the cross-selling of Staffware, as well as business events.
* * *
DINO DIANA [ANALYST, UBS]: Okay. And just lastly, in terms of Staffware renewal rates, when should we start to see them really kicking in, in terms of getting deferred revenue back?
CHRIS O'MEARA: I think you'll see that -- they, historically, had business cycles that led to a lot of license deals closing in the June and December time frame. So I think you'll see a lot of renewal activity in Q1 -- December, January time frame. They have their underlying license revenue weighted, due to a couple of specific periods during the year.
* * *
STERLING AUTY [ANALYST, JP MORGAN]: Okay. And then at the beginning of the Q&A session, I think somebody had asked your success level in possibly bringing the Staffware solution set to North America. Is that what's driving some of the growth in the -- in the insurance sector? What is the opportunity to bring Staffware to North America.
VIVEK RANADIVÉ: It’s huge. It’s huge.
54. On the same call, defendant O’Meara issued positive first quarter 2005 revenue
guidance to investors, stating “For Q1, we expect revenues in the range of 116 to 120 million,
which represents year-over-year growth of between 56 and 60 percent.”
55. Wachovia Securities Maintains Rating. On December 22, 2004, analyst Kash
Rangan with Wachovia Securities reiterated his Market Perform rating for TIBCO, stating that
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“[t]he outlook going into FY05 is positive,” citing the purported fact that “TIBX [TIBCO] has
recently completed the integration of Staffware.”
56. In the six trading days subsequent to and including December 22, 2004,
TIBCO’s closing stock price rose from $11.86 on December 21, 2004, to $12.95 on December
30, 2004, peaking at $13.05 on December 29, 2004. Defendant Mashruwala took advantage of
this price inflation, selling 15,000, 21,900 and 13,100 TIBCO shares on December 27, 28 and
30, respectively, for combined proceeds of $645,890.
57. The statements contained in the Company’s December 22, 2004 press release,
as well as those statements made by defendants during the Q4 and FY 04 conference call, were
each materially false and misleading and were known by defendants to be false at that time, or
were deliberately disregarded as such for the reasons stated herein.
58. $2.2 Million in Bonuses Approved. Based in substantial part on the
Company’s purported “Record” breaking financial and operational results, on or about
December 23, 2004, defendants also announced that TIBCO had approved over $2.2 million in
bonuses to the Company’s senior-most executives. According to a Form 8-K filed with the
SEC on December 21, 2004, at a meeting of the Compensation Committee of the Board of
Directors, the Committee approved fiscal year 2004 bonuses for the executive officers of the
Company. These bonuses were purportedly performance-based, paid in relation to the
financial performance of the Company during fiscal 2004.
59. Ranadivé Interview on CNBC. On December 23, 2004, defendant Ranadivé
also appeared on cable network CNBC investor commentary program “Kudlow & Cramer.” In
addition to making other very positive statements about the Company, at the beginning of this
interview defendant Ranadivé again stated that TIBCO was positioned to capitalize on the
resurgence of mergers and acquisitions activity because the Company’s unique product and
service offerings which purportedly allowed TIBCO to “quickly tie . . . systems together.”
During this interview defendant Ranadivé stated, the following:
HEADLINE: Vivek Ranadivé discusses TIBCO Software
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JIM CRAMER, co-host: 1
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All year on KUDLOW & CRAMER we have highlighted this stock. It has now doubled since we first talked about it. It's called TIBCO Software, and it is looking great. This is Vivek Ranadivé; he is TIBCO's CEO.
Vivek, welcome back to the show.
Mr. VIVEK RANADIVÉ (TIBCO CEO): Hello.
CRAMER: A monster quarter. I want people to understand--now I saw you on a competitive network, and I felt that the guy--hey, I didn't think the guy did that good a job, but that's OK. But one of the things that he did was he did not give you a chance to talk about what TIBCO Software does. I'm gonna give that. You picked up some new clients, Lehman, Procter, Lockheed Martin. Tell me what you do for those companies.
Mr. RANADIVÉ: Well, it’s really simple, Jim. What we allow companies to do is manage all of their assets at real time. Companies have assets: software, ERP systems, databases, factories. And our software brings it all together for the benefit of a company.
LARRY KUDLOW, co-host:
Vivek, let me throw something out I haven't seen yet; I just thought of this. It looks like we're kind of in the beginning of a merger and acquisition wave, an M&A wave, lots of takeovers and consolidations. Now wouldn't that be right up TIBCO's alley? I mean, you can make these systems mesh and reintegrate for companies that are consolidating?
Mr. RANADIVÉ: Absolutely. That represents huge opportunity for us. We allow you to quickly tie your systems together. In fact, if you speak to Gary Loveman at Harrah’s, he’s doing exactly that with our software.
60. Predictive Software. In addition to having the skill and expertise to sell
software that facilitates the integration of its customers acquired assets, during this interview
defendant Ranadivé also stated that TIBCO had the skill and ability to offer “Predictive”
software. According to Ranadivé, TIBCO also offered software that could predict certain
foreseeable events, based presumably upon statistical modeling, as follows:
Mr. RANADIVÉ: We're talking about things that you can anticipate. You can anticipate if your network is going to go down and you can prevent that from happening. You can anticipate that you might have a stock-out problem on a shelf somewhere and prevent that from happening. So these are problems that can be solved and we are solving them.
* * *
CRAMER: Fascinating.
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KUDLOW: Vivek Ranadivé, thank you very much. TIBCO, great story. 1
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CRAMER: Great story.
61. Staffware Personnel Integration Complete. On January 21, 2005,
ComputerWire issued a report citing Company statements that the Staffware integration was
continuing according to plan and that the integration of Staffware personnel was substantially
complete. In this regard, the ComputerWire report stated, in part, the following;
HEADLINE: Tibco Says Staffware Personnel Integration Complete
Tibco Software Inc said that it has completed the integration of the acquired Staffware personnel into its own sales and engineering organizations, and it also said that the founder, former chairman and CEO of Staffware, John O'Connell, is leaving Tibco’s management team.
Tibco said O’Connell will still act as a strategic consultant to the company, but he is said to be pursuing other non-executive director roles outside of Tibco. O’Connell is thought to have had a big hand in promoting the initial approach for business process management (BPM) company Staffware by Tibco in April 2004.
Tibco said in its latest quarterly report that it has made a number of headcount reductions related to the acquisition of Staffware -- it set aside $3.2m to cover the liability incurred as a result of workforce reductions and the cancellation of marketing programs, but has thus far not said what the total headcount reduction came to.
62. The statements made by defendant Ranadivé during the CNBC interview on
December 23, 2004, and those statements issued by the Company and reported by
ComputerWire on January 21, 2005, were each materially false and misleading and were
known by defendants to be false at that time, or were deliberately disregarded as such, for the
reasons stated herein.
63. TIBCO Presents at Merrill Lynch Conference. On or about February 9,
2005, TIBCO appeared at the Merrill Lynch Computer Services & Software Conference, held
that day at the Fairmont Miramar Hotel, 101 Wilshire Blvd., Santa Monica, California. During
this conference, representatives of the Company continued to make positive but false
statements about the Company, and omitted to disclose the material adverse conditions that
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were then negatively impacting the Company that made those representations false and
misleading.
64. Sarbanes-Oxley Act Compliance. On February 14, 2005, defendants
published a release on PR Newswire announcing that TIBCO was in full compliance with
Section 404 of the Sarbanes-Oxley Act, which stated, in part, the following:
PALO ALTO, Calif., Feb. 14 /PRNewswire-FirstCall/ -- TIBCO Software Inc. (NASDAQ:TIBX), a leading enabler of real-time business and the world's largest independent business integration software company, today announced that it achieved compliance with Section 404 of the Sarbanes-Oxley Act. Today TIBCO filed its Annual Report on Form 10-K with the Securities Exchange Commission containing its Management's Report on Internal Control over Financial Reporting. TIBCO management assessed the effectiveness of TIBCO's internal control over financial reporting and concluded that such controls were effective as of November 30, 2004.
TIBCO is one of the first companies required to test for Section 404 compliance due to its November 30 year end and is also one of the first to obtain Section 404 compliance. Section 404 of the Sarbanes-Oxley Act requires companies to establish and attest to an effective control structure for reporting financial results.
“TIBCO is pleased to have achieved Section 404 compliance -- this is an affirmation of the integrity of TIBCO’s financial statements, internal controls and systems,” said Vivek Ranadivé, Chairman and CEO, TIBCO Software Inc. “This achievement is a testament to the hard work and determined efforts of the individuals involved on this project.”
65. FY 04 Form 10-K. On or about February 14, 2005, defendants also filed with
the SEC, TIBCO’s year-end financial report pursuant to Form 10-K (“2004 Form 10-K), which
stated, in part, the following:
On June 7, 2004, we acquired Staffware plc (“Staffware”), a provider of BPM solutions that enable businesses to automate, refine and manage their processes. The addition of Staffware’s BPM solutions enabled us to offer our combined customer base an expanded real-time business integration solution, by making it easier for our customers to utilize their existing systems through real-time information exchange and automation and management of enterprise business processes regardless of where such processes reside. BPM enables companies to save time and money by driving costs and time out of business processes (for example, reducing error rates or manual steps), while at the same time ensuring that business processes are compliant with internal procedures and external regulations. Our acquisition of Staffware also increased our distribution capabilities through the cross-selling of products into new geographic regions, as well as an expanded customer and partner base.
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66. The Company’s 2004 Form 10-K also contained statements concerning
TIBCO’s Controls and Procedures which were the same as or substantially similar to those
statements contained in the Company’s Q3 04 Form 10-Q, reproduced herein, in part, supra.
In addition, the Company’s 2004 Form 10-K also contained Certifications by defendant
Ranadivé and O’Meara that were the same as or substantially similar to those Certifications
contained in the Company’s Q3 04 Form 10-Q, reproduced herein, in part, supra.
67. The statements contained in the Company’s February 14, 2005 press release, as
well as those statements contained in TIBCO’s 2004 Form 10-K, were each materially false
and misleading and were known by defendants to be false at that time, or were deliberately
disregarded as such for the reasons stated herein.
68. TIBCO Presents at Goldman Sachs Conference. On or about February 23,
2005, representatives of TIBCO appeared at the Goldman Sachs Technology Investment
Symposium, held in Phoenix, Arizona. During this presentation, defendant O'Meara, as Chief
Financial Officer of TIBCO, made positive but false statements about the condition of the
Company, and omitted to disclose the material adverse conditions and known problems that
were then negatively impacting the Company and preventing the full and successful integration
of Staffware.
THE TRUE FINANCIAL AND OPERATIONAL CONDITION
OF TIBCO IS BELATEDLY DISCLOSED
69. On March 1, 2005, just six days after the Goldman Sachs conference, and two
weeks after they filed their 2004 Form 10-K report, defendants shocked the market when
TIBCO announced that results for the first quarter of 2005, the period ending February 27,
2005 (“Q1 05”), were well below guidance previously sponsored and/or endorsed by
defendants. In fact, shares of TIBCO were halted in after-market trading after the Company
revealed that preliminary data showed that Q1 05 revenues would reach only between $100 to
$102 million, well below the FirstCall consensus mean estimate of $119 million. While
defendants had previously stated that the Staffware acquisition was substantially completed
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and that the integration was proceeding according to plan, defendants now revealed that this
was not true and that weakness in Europe and delays in closing deals would result in non-
GAAP earnings per share between $0.04 and $0.05, below analysts’ consensus mean of $0.08
earnings per share.
70. Worse still, during TIBCO’s preliminary Q1 05 conference call, held on
March 1, 2005, defendant Ranadivé revealed that Staffware not only remained unintegrated,
but because of integration related problems, European sales had been paralyzed. During this
conference call, defendant Ranadivé used the term “paralysis” at least eight times to describe
the Company’s European sales (i.e., Staffware), in addition to stating, in part, that:
• “[T]he shortfall was primarily due to a lack of execution in certain geographic areas, most specifically Europe” with every region throughout Europe performing significantly below forecast;
• Europe sales were experiencing “paralysis” due to, among other things, “poor execution” and a failure to integrate Staffware;
• Integration issues related to problems managing Staffware leadership, operations and sales force; “[w]e had some Staffware guys in many of the countries, and then we had old TIBCO guys”; “[t]here were 2 sets of salespeople in Europe”;
• “[T]here was the old TIBCO and the new TIBCO ... there were 2 armies and they were both old army/new army, and it was just paralysis”; and
• Other integration and assimilation issues had to do with revenue recognition; specifically, that what Staffware considered revenue, TIBCO would not have considered revenue under U.S. GAAP.
71. Defendants knew about these facts throughout the Class Period, but concealed
them from investors. CW3, a former National Account Director for Staffware/TIBCO,
confirmed that defendants Ranadivé (CEO) and Mashruwala (EVP, Office of the CEO) were
responsible for the planning and execution of TIBCO’s integration of Staffware after its
acquisition. According to CW3, there were execution issues with the sales in Europe that led
to the first quarter 2005 earnings shortfall announced on March 1, 2005. These issues with
executing sales (i.e. failure to complete some large sales) in Europe were attributable to the
Staffware acquisition, according to the witness. Another witness, CW5, a former Operations
Manager, corroborated that it was known internally at the Company that the failure to complete
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some Staffware-related sales deals contributed to the Q1 05 earnings shortfall. CW5
corroborated defendants’ knowledge of the connection between the Staffware acquisition and
TIBCO’s Q1 05 earnings miss, saying that CEO/defendant Ranadivé blamed Staffware for the
miss.
72. CW2, a former TIBCO General Manager within the OEM sales channel in
Austin, Texas from 2003 through 2004, confirmed that defendant Ranadivé personally
monitored TIBCO’s major sales transactions. According to CW2, defendant Ranadivé was the
“de facto” sales leader at TIBCO; that is, defendant Ranadivé was personally involved in major
sales transactions and often took over the negotiations when any sales representative started a
major sales deal. In fact, CW2 described an example of having personally worked on a sales
deal for approximately $1.5 million in sales each year for five or six years when defendant
Ranadivé became involved in the deal, ending CW2’s participation in it. As a result, CW2
never received any commission for the sale. CW2 further stated that each quarter, TIBCO
seemed to be reliant on a large sales deal that would be finalized by Ranadivé. Thus, defendant
Ranadivé (among others), was continually apprised of, and involved in, all significant sales
deals and, therefore, knew about the sales issues caused by the Staffware acquisition and its
incomplete and/or unsuccessful integration.
73. According to CW4, a former Staffware/TIBCO Finance Director throughout the
Class Period, defendant Carey (Corporate Controller and Chief Accounting Officer) visited
Staffware headquarters in London frequently and spoke with Staffware personnel about the
integration of Staffware into TIBCO. Based on his/her personal experience and familiarity
with Carey’s visits, CW4 stated that defendant Carey was responsible for, and directed, the
financial/accounting integration of the two companies. In addition, CW4 visited TIBCO’s
headquarters in Palo Alto, California in the October 2004 along with other Staffware finance
personnel, to discuss the financial integration of the two companies. Other Staffware attendees
included, but were not limited to, the Staffware Secretary of Finance and Staffware accountants
from Germany and Australia. During CW4’s three-day visit, the witness participated in several
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meetings concerning the financial integration of Staffware and TIBCO, which defendant Carey
conducted. Based on the witness’s own observations and experience, CW4 stated that TIBCO
handled the Staffware acquisition horribly, and that there were difficulties with the integration,
including a major culture clash between the two companies. These significant difficulties were
not disclosed to the public.
74. Plaintiffs’ sources also confirm that the Information Technology (IT) integration
of the two companies was neither complete nor successful during the Class Period. CW5, a
former IT Operations Manager at TIBCO throughout the Class Period, explained that the
TIBCO IT staff in the U.K. worked directly with Staffware on the IT integration, but that
TIBCO’s IT staff in the U.K. was not knowledgeable enough to handle this integration and, as
a result, the IT integration proceeded poorly. Indeed, CW5 said that Staffware’s email had not
yet been integrated (or combined to the same system) when CW5 left TIBCO in June 2005 – or
a full year after the acquisition.
75. The day after TIBCO’s preliminary Q1 05 conference call, as shares of TIBCO
resumed trading, the Company’s stock price declined precipitously, falling from a close of
$8.90 per share in regular trading on March 1, 2005, to just above $7.00 the following day, on
very high trading volume of over 52 million shares. Market commentators stated that the
decline would have been worse had TIBCO stock not evidenced an uncharacteristic trading
pattern in the days immediately prior to defendants’ belated disclosure. The chart below
evidences this anomalous trading price and volume of activity in the days leading up to the
Company’s March 1, 2005 disclosure, as follows:
Date Open High Low Close Volume 22-Feb-05 11.75 11.86 11.53 11.72 1,749,800 23-Feb-05 11.71 11.79 11.41 11.43 1,831,200 24-Feb-05 11.35 11.39 10.87 11.00 4,840,300 25-Feb-05 10.96 11.03 10.51 10.62 4,563,700 28-Feb-05 10.54 10.75 9.48 9.76 13,683,000 01-Mar-05 9.64 9.65 8.59 8.90 24,730,400
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76. On March 2, 2005, TheStreet.com reported on the anomalous trading in TIBCO
shares in the days leading up to the Company’s announcement as well as the sudden and
dramatic decline in the price of TIBCO shares on March 2, 2005, in part, as follows:
The stock, which has been in freefall for days, last traded on Instinet for $7.36, down $1.54, or 17%.
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* * *
Tibco’s nearly 9% drop during the regular session was on volume that was about six times heavier than normal. Tuesday's selloff follows a drop of 8% on Monday, and a series of down days that have knocked 25% off the stock's value since Feb. 18.
77. Following defendants’ belated disclosures, Jefferies analyst Katherine Egbert,
immediately cut her rating on TIBCO to “hold” from “buy,” saying that she expected it to take
at least two quarters for TIBCO’s sales “to see a meaningful recovery, which is the typical time
frame for shoring up sales glitches.” At or about the same time, ThinkEquity analyst Seihun
Kong lowered his price target on TIBCO shares to $10.00 from $15.00 per share.
78. On March 2, 2005, CBS MarketWatch also reported on the TIBCO share
decline, attributing this collapse to integration problems relating to the Staffware merger. This
report stated, in part, the following:
HEADLINE: TIBCO plunges on fiscal Q1 shortfall
Friedman, Billings, Ramsey & Co. analyst David Hilal said he's not convinced the weakness represents a "one-quarter blip" given the size of the shortfall.
"The problems appear to stem from the integration of its Staffware acquisition and sales force execution," Hilal said. "Although longer-term we believe TIBCO can address these issues, we do not believe they are immediately fixable in the enterprise software model.”
* * *
Hilal cut his financial estimates for the company and lowered his target price to $9 from $11 previously.
79. On March 4, 2005, TheStreet.com issued a follow-up report on the suspicious
trading in shares of the Company leading up to TIBCO’s March 1, 2005, belated disclosures.
This report titled “Another Little-Guy Lesson” stated, in part, the following:
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It’s bad enough to lose money in the market, but when you think you’ve been had, it really smarts.
This week’s meltdown of TIBCO Software (TIBX:Nasdaq), a business software vendor that shed 40% of its value in less than two weeks, has a lot of retail investors feeling like they are not playing on a level field.
“There should be an SEC investigation into this,” fumed one investor who wrote to TheStreet.com this week. “As usual, Average Joe investor gets no news and somehow institutions have been leaked this news so they sell and once again we get screwed. This is criminal activity.”
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* * *
And TIBCO’s ugly slide shows how quickly the average investor can take a hit while the pros are making money on the same stock.
During much of February, TIBCO’s daily trading volume averaged 2.4 million shares a day, and on Feb. 18 the stock closed at $11.88 -- its best price since early January. By the next day, the stock was pulling back, in what seemed like a normal spate of profit-taking. But five days later, volume spiked to 4.8 million shares and was almost as high the next day. By then, the stock was off 10% from its monthly high -- on no news.
The slide became a rout on Monday when Bear Stearns analyst John DiFucci published a note before the market’s open saying the company was likely to miss its first-quarter numbers. DiFucci’s report pushed volume to 13.7 million shares and knocked another 8% off the stock. Interestingly, DiFucci referenced the stock's earlier slide and fears that TIBCO would not make the quarter saying, “Recent declines in the stock price probably already reflect some of this.”
DiFucci was right about the quarter: TIBCO warned after the bell on Tuesday and investors capitulated, selling off 75 million shares in just two days. And he was probably right about the leak.
It’s worth noting that more than 80% of TIBCO’s public float is controlled by institutions, so once a serious move started, it became a stampede. And that’s not a good place for a small investor to be caught.
The pattern of trading is suspicious, suggested Greg Taxin, CEO of proxy advisory firm Glass Lewis.
But portfolio managers and analysts at an investment conference in San Francisco this week said they didn't need to wait for an investigation. “Of course someone leaked the information,” said the manager of one West Coast hedge fund. “Nothing else would explain that kind of stock movement.”
* * *
But smaller investors were also irked because of their impression that rules were broken. Another reader who wrote to TheStreet.com asked: “If the company announced its disappointing results post-closing yesterday, how does the high volume decline begin a week ago?”
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80. On TIBCO’s final Q1 05 conference call, held on March 24, 2005, defendant
Ranadivé again confirmed that TIBCO had not in fact fully integrated Staffware – contrary to
defendants’ previous representations – and that such was in fact one cause of the Company’s
poor Q1 05 financial results: “the shortfall was primarily due to a lack of execution in certain
geographic areas, most specifically Europe” … “[t]here was too much confusion over who
was doing what and how accounts were being managed.”
81. The market for TIBCO’s common stock was open, well-developed and efficient
at all relevant times. As a result of these materially false and misleading statements and
failures to disclose, TIBCO common stock traded at artificially inflated prices during the Class
Period. Plaintiffs and other members of the Class purchased or otherwise acquired TIBCO
common stock upon the integrity of the market price of TIBCO common stock and market
information relating to TIBCO, and have been damaged by purchasing TIBCO securities at
artificially inflated prices and having the value of their investment decline once the true facts
were revealed. During the Class Period, defendants materially misled the investing public,
thereby inflating the price of TIBCO common stock by publicly issuing false and misleading
statements and omitting to disclose material facts necessary to make defendants’ statements, as
set forth herein, not false and misleading. Said statements and omissions were materially false
and misleading in that they failed to disclose material adverse information and misrepresented
the truth about the Company, its business and operations, as alleged herein.
82. At all relevant times, the material misrepresentations and omissions
particularized in this Complaint directly or proximately caused or were a substantial
contributing cause of the damages sustained by plaintiffs and other members of the Class. As
described herein, during the Class Period, defendants made or caused to be made a series of
materially false or misleading statements about TIBCO’s business, prospects and operations.
These material misstatements and omissions had the cause and effect of creating in the market
an unrealistically positive assessment of TIBCO and its business, prospects and operations,
thus causing the Company’s common stock to be overvalued and artificially inflated at all
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relevant times. Defendants’ materially false and misleading statements during the Class Period
resulted in plaintiffs and other members of the Class purchasing the Company’s common stock
at artificially inflated prices, thus causing the damages complained of herein.
LOSS CAUSATION
83. Defendants’ wrongful conduct, as alleged herein, directly and proximately
caused the damages suffered by plaintiffs and the Class.
84. During the Class Period, plaintiffs and the Class purchased securities of TIBCO
at artificially inflated prices and were damaged when the truth about the Company’s financial
condition was revealed and the artificial inflation was removed from the stock. The price of
TIBCO common stock declined when the misrepresentations made to the market, and/or the
information alleged herein to have been concealed from the market, and/or the effects thereof,
were revealed, causing investors’ losses.
85. In announcing to the market that TIBCO’s Q1 05 financial results would not
meet forecasts, defendants publicly admitted the great magnitude and materiality of the
shortfall. Indeed, on TIBCO’s Q1 05 preliminary earnings conference call, held on March 1,
2005, defendant Ranadivé stated that “every region throughout Europe came in significantly
under forecast,” “we are coming in at a fraction of what the forecast said,” and on TIBCO’s
final 1Q 05 conference call on March 24, 2005, that “we’re sitting here having had a big miss.”
Analysts also confirmed the large degree of the revenue shortfall. On March 1, 2005, analyst
Sterling Auty with JP Morgan reported that “Tibco had a disastrous first quarter in Europe.”
TIBCO itself also further confirmed that the poor Q1 05 results had in fact caused its stock
price to decline. In TIBCO’s Q1 05 Form 10-Q, the Company stated: “[O]ur operating results
in the first quarter of fiscal year 2005 did not meet the expectations of stock market analysts,
and our stock price declined as a result.”
ADDITIONAL SCIENTER ALLEGATIONS
86. As alleged herein, defendants acted with scienter in that each defendant knew
that the public documents and statements issued or disseminated in the name of the Company
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were materially false and misleading; knew that such statements or documents would be issued
or disseminated to the investing public; and knowingly and substantially participated or
acquiesced in the issuance or dissemination of such statements or documents as primary
violations of the federal securities laws. As set forth elsewhere herein in detail, defendants, by
virtue of their receipt of information reflecting the true facts regarding TIBCO, their control
over, and/or receipt and/or modification of TIBCO’s allegedly materially misleading
misstatements and/or their associations with the Company, which made them privy to
confidential proprietary information concerning TIBCO, participated in the fraudulent scheme
alleged herein.
87. Also, at times defendant Ranadivé made certain public statements indicating
that he monitored those aspects of TIBCO’s operations involved in defendants’ fraud. On
TIBCO’s Q3 04 earning conference call, held on September 21, 2004, defendant Ranadivé
demonstrated that he monitored Staffware’s performance in Europe:
TIM KLASELL [Analyst, Thomas Weisel Partners]: And then I’ll sort of take a derivative off that. Asia did particularly well; Europe was strong. Did you get leverage from the Staffware sales forces in those territories with the TIBCO products?
VIVEK RANDIVE: Not so much in Asia, but more in Europe. In Europe we absolutely did.
On the same call, defendant Ranadivé also confirmed that he was personally involved in sales of
TIBCO’s products:
KEN KIARASH [Analyst, Buckingham Research]: And Vivek, can you give us an update on business events, and tell us if there are any customer news or any beta news that you can share with us?
VIVEK RANDIVE: Actually, the product becomes available in this quarter, Q4. And we have huge interest for this, and I’ve been out, actually, personally selling it and evangelizing it.
88. Defendants were motivated to materially misrepresent to the SEC and investors
the true financial condition of the Company because this allowed TIBCO insiders, including
certain of the defendants named herein, to sell over $2.0 million of their privately held
Company shares while in possession of material adverse, non-public information about the
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Company. These defendant and insider stock sales, which occurred within the Class Period,
are set forth below:
Defendant Rajesh Mashruwala: Executive VP, Office of the CEO Transaction Date Shares Sold Price ($) $ Value
9/24/2004 8,000 $8.37 $66,960 9/29/2004 8,000 $8.50 $68,000 9/30/2004 5,000 $8.60 $43,000 10/1/2004 5,000 $8.80 $44,000 10/1/2004 4,000 $8.90 $35,600
10/21/2004 10,000 $9.48 $94,800 10/27/2004 5,000 $9.46 $47,300 10/28/2004 8,151 $9.85 $80,287 10/28/2004 5,000 $9.55 $47,750 10/29/2004 10,000 $9.70 $97,000 11/3/2004 6,849 $10.00 $68,490
12/27/2004 15,000 $12.79 $191,850 12/28/2004 21,900 $13.01 $284,919 12/30/2004 13,100 $12.91 $169,121
Total for Mashruwala: 125,000 $1,339,077
Defendant Christopher O’Meara: Executive VP & CFO
Transaction Date Shares Sold Price ($) $ Value 1/7/2005 20,000 $12.57 $251,400
Total for O’Meara: 20,000 $251,400
Murray Rode: Executive VP
Transaction Date Shares Sold Price ($) $ Value 12/28/2004 11,000 $13.13 $144,430 12/28/2004 5,499 $13.13 $72,202 12/28/2004 2,625 $13.13 $34,466
Total for Rode: 19,124 $251,098
William Hughes: General Counsel
Transaction Date Shares Sold Price ($) $ Value 2/4/2005 12,866 $11.20 $144,099 2/4/2005 5,467 $11.20 $61,230 2/4/2005 1,250 $11.20 $14,000 2/8/2005 1,014 $11.60 $11,762
Total for Hughes: 20,597 $231,092
The total number of shares sold by these Individual Defendants and insiders during the Class
Period was 184,721 for proceeds of $2,072,667. For defendants Mashruwala and O’Meara, their
Class Period sales represented 17.2% and 2.3%, respectively, of their total holdings.
89. The Class Period sales by these Individual Defendants and insiders were
dramatically out of line with their pre-class sales of TIBCO stock. In fact, in the comparable
time period preceding the Class Period (i.e. 161 days before the Class Period), these defendants
and insiders sold no TIBCO stock:
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90. Plaintiffs’ allegations are further corroborated by information from several
confidential witnesses who are former TIBCO employees. CW1 is a former TIBCO Managing
Director of Channel Sales in Munich, Germany before and during 2004 until early 2005, who
had 14 sales representatives globally in channel sales reporting to him. According to CW1,
from the time of the Staffware acquisition (June 2004) until at least December of 2004, CW1’s
commission structure did not include any Staffware products. Accordingly, CW1 had no
instructions or incentive to sell Staffware products and did not sell any Staffware products
during this time period. Similarly, CW3, a former Staffware/TIBCO National Account
Director until early 2005, confirmed that after the Staffware acquisition until December 2004,
Staffware and TIBCO remained separate for sales purposes. CW3 did not sell TIBCO
products, but continued on his/her existing commission structure (which did not include
TIBCO products) and continued selling only Staffware products during this period.
91. Thus, defendants’ statements in connection with TIBCO’s Q3 04, Q4 04 and FY
04 announcements (see, e.g., ¶¶40, 42, 53), for example, that sales were “blended,” that
TIBCO products gained leverage in Europe through the addition of Staffware sales forces, that
Staffware was fully integrated into the TIBCO product set and sales organization, and that they
had success with “cross-selling,” were knowingly false when made. In truth, there was no
instruction, nor incentive, to cross-sell at that time, and cross-selling wasn’t being done,
according to former employees and contrary to defendants’ public representations.
92. CW6, a Pre-Sales Consultant at TIBCO from early 2005 until the Fall of 2005,
was trained to “pitch” TIBCO and Staffware BPM (business process management) products
together and inform prospective customers that the products worked together, although the
witness learned these products did not work together. CW6 was informed by a former
Staffware employee who taught CW6 about the Staffware products, that the products did not
actually work together. CW6 described the idea to pitch the products together as an effort to
force the products to do something that they could not. CW6 explained that TIBCO’s
integration software made it possible for different applications, such as PeopleSoft and Oracle,
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to communicate with each other. While Staffware’s BPM products were application specific,
TIBCO’s products were more technical, according to the witness. CW6 believed that TIBCO
was in the process of trying to make the products work together but was not successful before
CW6 left the Company in the Fall of 2005.
93. As further evidence of defendants’ scheme to defraud, at the inception of the
Class Period defendants also authorized TIBCO to spend at least $50 million of the Company’s
cash reserves to acquire shares of the Company. In effect, defendants used the profits earned
by the Company to further inflate and support the price of TIBCO shares at the same time that
defendants omitted to disclose the problems that the Company was having with the integration
of Staffware and during the time that TIBCO insiders were liquidating millions of dollars
worth of their privately held TIBCO stock, while in possession of material adverse non-public
information about the Company.
APPLICABILITY OF PRESUMPTION OF RELIANCE:
FRAUD-ON-THE-MARKET DOCTRINE
94. At all relevant times, the market for TIBCO’s common stock was an efficient
market for the following reasons, among others:
(a) TIBCO’s stock met the requirements for listing, and was listed and
actively traded on the NASDAQ stock exchange, a highly efficient and automated market;
(b) As a regulated issuer, TIBCO filed periodic public reports with the SEC
and the NASDAQ stock exchange;
(c) TIBCO regularly communicated with public investors via established
market communication mechanisms, including through regular disseminations of press releases
on the national circuits of major newswire services and through other wide-ranging public
disclosures, such as communications with the financial press and other similar reporting services;
and
(d) TIBCO was followed by several securities analysts employed by major
brokerage firm(s) who wrote reports which were distributed to the sales force and certain
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customers of their respective brokerage firm(s). Each of these reports was publicly available and
entered the public marketplace.
95. As a result of the foregoing, the market for TIBCO securities promptly digested
current information regarding TIBCO from all publicly available sources and reflected such
information in TIBCO’s stock price. Under these circumstances, all purchasers of TIBCO
common stock during the Class Period suffered similar injury through their purchase of TIBCO
common stock at artificially inflated prices and a presumption of reliance applies.
NO SAFE HARBOR
96. The statutory safe harbor provided for forward-looking statements under certain
circumstances does not apply to any of the allegedly false statements pled in this Complaint.
Many of the specific statements pled herein were not identified as “forward-looking
statements” when made. To the extent there were any forward-looking statements, there were
no meaningful cautionary statements identifying important factors that could cause actual
results to differ materially from those in the purportedly forward-looking statements.
Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking
statements pled herein, defendants are liable for those false forward-looking statements
because at the time each of those forward-looking statements was made, the particular speaker
knew that the particular forward-looking statement was false, and/or the forward-looking
statement was authorized and/or approved by an executive officer of TIBCO who knew that
those statements were false when made.
BASIS OF ALLEGATIONS
97. Plaintiffs have alleged the following based upon the investigation of plaintiffs’
counsel, which included a review of SEC filings by TIBCO, as well as regulatory filings and
reports, securities analysts’ reports and advisories about the Company, press releases and other
public statements issued by the Company, and media reports about the Company, and plaintiffs
believe that substantial additional evidentiary support will exist for the allegations set forth
herein after a reasonable opportunity for discovery.
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Violation Of Section 10(b) Of The Exchange Act And Rule 10b-5
Promulgated Thereunder Against All Defendants’
98. Plaintiffs repeat and reallege each and every allegation contained above as if
fully set forth herein.
99. During the Class Period, defendants carried out a plan, scheme and course of
conduct, which was intended to and, throughout the Class Period, did: (i) deceive the investing
public, including plaintiffs and other Class members, as alleged herein; (ii) enable the
Individual Defendants and other TIBCO insiders to sell more than $2 million of their
personally-held TIBCO common stock to the unsuspecting public while in possession of
material adverse non-public information about the Company; and (iii) cause plaintiffs and
other members of the Class to purchase TIBCO common stock at artificially inflated prices. In
furtherance of this unlawful scheme, plan and course of conduct, defendants, jointly and
individually (and each of them,) took the actions set forth herein.
100. Defendants (a) employed devices, schemes, and artifices to defraud; (b) made
untrue statements of material fact and/or omitted to state material facts necessary to make the
statements not misleading; and (c) engaged in acts, practices, and a course of business which
operated as a fraud and deceit upon the purchasers of the Company’s common stock in an
effort to maintain artificially high market prices for TIBCO’s common stock in violation of
Section 10(b) of the Exchange Act and Rule 10b-5. All defendants are sued either as primary
participants in the wrongful and illegal conduct charged herein or as controlling persons as
alleged below.
101. Defendants, individually and in concert, directly and indirectly, by the use,
means or instrumentalities of interstate commerce and/or of the mails, engaged and participated
in a continuous course of conduct to conceal adverse material information about the business,
operations and future prospects of TIBCO as specified herein.
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102. These defendants employed devices, schemes and artifices to defraud, while in
possession of material adverse non-public information and engaged in acts, practices, and a
course of conduct as alleged herein in an effort to assure investors of TIBCO’s value and
performance and continued substantial growth, which included the making of, or the
participation in the making of, untrue statements of material facts and omitting to state material
facts necessary in order to make the statements made about TIBCO and its business operations
and future prospects in the light of the circumstances under which they were made, not
misleading, as set forth more particularly herein, and engaged in transactions, practices and a
course of business which operated as a fraud and deceit upon the purchasers of TIBCO
common stock during the Class Period.
103. Each of the Individual Defendants’ primary liability, and controlling person
liability, arises from the following facts: (i) the Individual Defendants were high-level
executives and/or directors at the Company during the Class Period and members of the
Company’s management team or had control thereof; (ii) each of these defendants, by virtue of
his responsibilities and activities as a senior officer and/or director of the Company, was privy
to and participated in the creation, development and reporting of the Company’s internal
budgets, plans, projections and/or reports; (iii) each of these defendants enjoyed significant
personal contact and familiarity with the other defendants and was advised of and had access to
other members of the Company’s management team, internal reports and other data and
information about the Company’s finances, operations, and sales at all relevant times; and
(iv) each of these defendants was aware of the Company’s dissemination of information to the
investing public, which they knew or deliberately disregarded was materially false and
misleading.
104. The defendants had actual knowledge of the misrepresentations and omissions
of material facts set forth herein, or acted with deliberate disregard for the truth in that they
failed to ascertain and to disclose such facts. Such defendants’ material misrepresentations
and/or omissions were done knowingly or deliberately for the purpose and effect of concealing
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TIBCO’s operating condition and future business prospects from the investing public and
supporting the artificially inflated price of its common stock. As demonstrated by defendants’
overstatements and misstatements of the Company’s business, operations and earnings
throughout the Class Period, defendants, if they did not have actual knowledge of the
misrepresentations and omissions alleged, were deliberate in failing to obtain such knowledge
by refraining from taking those steps necessary to discover whether those statements were false
or misleading.
105. As a result of the dissemination of the materially false and misleading
information and failure to disclose material facts, as set forth above, the market price of
TIBCO common stock was artificially inflated during the Class Period. In ignorance of the
fact that market prices of TIBCO’s publicly-traded common stock were artificially inflated,
and relying directly or indirectly on the false and misleading statements made by defendants, or
upon the integrity of the market in which the securities trade, and/or on the absence of material
adverse information that was known to or deliberately disregarded by defendants but not
disclosed in public statements by defendants during the Class Period, plaintiffs and the other
members of the Class acquired TIBCO common stock during the Class Period at artificially
high prices and were damaged.
106. At the time of said misrepresentations and omissions, plaintiffs and other
members of the Class were ignorant of their falsity, and believed them to be true. Had
plaintiffs and the other members of the Class and the marketplace known the truth regarding
the problems that TIBCO was experiencing, which were not disclosed by defendants, plaintiffs
and other members of the Class would not have purchased or otherwise acquired their TIBCO
common stock, or, if they had acquired such common stock during the Class Period, they
would not have done so at the artificially inflated prices which they paid.
107. By virtue of the foregoing, defendants have violated Section 10(b) of the
Exchange Act, and Rule 10b-5 promulgated thereunder.
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108. As a direct and proximate result of defendants’ wrongful conduct, plaintiffs and
the other members of the Class suffered damages in connection with their respective purchases
and sales of the Company’s common stock during the Class Period.
SECOND CLAIM Violation Of Section 20(a) Of
The Exchange Act Against Individual Defendants
109. Plaintiffs repeat and reallege each and every allegation contained above as if
fully set forth herein.
110. The Individual Defendants acted as controlling persons of TIBCO within the
meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level
positions, and their ownership and contractual rights, participation in and/or awareness of the
Company’s operations and/or intimate knowledge of the false financial statements filed by the
Company with the SEC and disseminated to the investing public, the Individual Defendants
had the power to influence and control and did influence and control, directly or indirectly, the
decision-making of the Company, including the content and dissemination of the various
statements, which plaintiffs contend are false and misleading. The Individual Defendants were
provided with or had unlimited access to copies of the Company’s reports, press releases,
public filings and other statements alleged by plaintiffs to be misleading prior to and/or shortly
after these statements were issued and had the ability to prevent the issuance of the statements
or cause the statements to be corrected.
111. In particular, each of these defendants had direct and supervisory involvement
in the day-to-day operations of the Company and, therefore, are presumed to have had the
power to control or influence the particular transactions giving rise to the securities violations
as alleged herein, and exercised the same.
112. As set forth above, TIBCO and the Individual Defendants each violated Section
10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of
their positions as controlling persons, the Individual Defendants are liable pursuant to Section
20(a) of the Exchange Act. As a direct and proximate result of defendants’ wrongful conduct,
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plaintiffs and other members of the Class suffered damages in connection with their purchases
of the Company’s common stock during the Class Period.
PRAYER FOR RELIEF
WHEREFORE, plaintiffs pray for relief and judgment, as follows:
A. Determining that this action is a proper class action, certifying plaintiffs as class
representatives under Rule 23 of the Federal Rules of Civil Procedure and plaintiffs’ counsel as
class counsel;
B. Awarding compensatory damages in favor of plaintiffs and the other Class
members against all defendants, jointly and severally, for all damages sustained as a result of
defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;
C. Awarding plaintiffs and the Class their reasonable costs and expenses incurred in
this action, including counsel fees and expert fees;
D. Awarding extraordinary, equitable and/or injunctive relief as permitted by law,
equity and the federal statutory provisions sued hereunder, and any appropriate state law
remedies to assure that the Class has an effective remedy; and
E. Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiffs hereby demand a trial by jury. DATE: March 16, 2006 MILBERG WEISS BERSHAD
& SCHULMAN LLP JEFF S. WESTERMAN KAREN T. ROGERS RAMON M. GONZALEZ
/s/ Karen T. Rogers KAREN T. ROGERS 355 South Grand Avenue, Suite 4170
Los Angeles, CA 90071 Telephone: (213) 617-1200 Facsimile: (213) 617-1975
Lead Counsel for Plaintiffs
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SCOTT + SCOTT, LLC ARTHUR L. SHINGLER III 600 B Street, Suite 1500 San Diego, CA 92101 Telephone: (619) 233-4565 Facsimile: (619) 233-0508
SCOTT + SCOTT, LLC DAVID R. SCOTT (DS-8053) 108 Norwich Ave. P. O. Box 192 Colchester, CT 06415 Telephone (860) 537-5537 Facsimile: (860) 537-4432
Plaintiffs’ Counsel
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EXHIBIT A
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Schedule A
Ralph Felton Transactions in TIBCO Software, Inc. (Nasdaq:TIBX)
Purchase(s):
Date Shares Price
Sales(s)
Date Shares Price
4/15/05 800 6.72 4/15/05 3,740 6.72
11/15/04 1,100 10.51 11/15/04 1,000 10.50 11/22/04 800 10.14 12/15/04 1,640 11.92
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EXHIBIT B
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Schedule A
Sathya Rajasubramanian Transaction(s) in TIBCO Software, Inc. (Nasdaq:TIBX)
Purchase(s):
Date Shares Price
11/29/04 2,500 11.23
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DECLARATION OF SERVICE BY MAIL
I, the undersigned, declare:
1. That declarant is and was, at all times herein mentioned, a citizen of the United
States and a resident of the County of Los Angeles, over the age of 18 years, and not a party to or
interest in the within action; that declarant’s business address is 355 South Grand Avenue, Suite
4170, Los Angeles, California 90071.
2. That on March 16, 2006, declarant served the CONSOLIDATED AMENDED
COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAW by depositing a true
copy thereof in a United States mailbox at Los Angeles, California in a sealed envelope with
postage thereon fully prepaid and addressed to the parties listed on the attached Service List.
3. That there is a regular communication by mail between the place of mailing and
the places so addressed.
4. That on the above date, declarant served via email to: [email protected].
I declare under penalty of perjury that the foregoing is true and correct. Executed this
16th day of March, 2006, at Los Angeles, California.
/s/ Faith Farina FAITH FARINA
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TIBCO 1
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Service List
Attorneys for Plaintiffs Party Represented
Robert S. Green Avin P. Sharma GREEN WELLING LLP 595 Market Street, Suite 2750 San Francisco, California 94105 Telephone: (415) 477-6700 Facsimile: (415) 477-6710 E-Mail: [email protected] [email protected]
Ronald Bernheim
Richard A. Maniskas Marc A. Topaz SCHIFFRIN & BARROWAY LLP 280 King of Prussia Road Radnor, Pennsylvania 19087 Telephone: (610) 667-7706 Facsimile: (610) 667-7056 E-Mail: [email protected] [email protected]
David R. Scott SCOTT + SCOTT LLC 108 Norwich Avenue Colchester, Connecticut 06415 Telephone: (860) 537-3818 Facsimile: (860) 537-4432 E-Mail: [email protected]
James J. Guzzetti
Arthur L. Shingler III SCOTT + SCOTT LLC 600 B Street, Suite 1500 San Diego, California 92101 Telephone: (619) 233-4565 Facsimile: (619) 233-0508 E-Mail: [email protected]
Ralph Felton Sathya Rajasubramanian
Jeff S. Westerman Karen T. Rogers Ramon M. Gonzalez MILBERG WEISS BERSHAD & SCHULMAN LLP 355 S. Grand Avenue, Suite 4170 Los Angeles, California 90071
Lance Siegal
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Telephone: (213) 617-1200 Facsimile: (213) 617-1975 E-Mail: [email protected] [email protected] [email protected] Steven G. Schulman Peter E. Seidman MILBERG WEISS BERSHAD & SCHULMAN LLP One Pennsylvania Plaza New York, NY 10119 Telephone: (212) 594-5300 Facsimile: (212) 868-1229
Attorneys for Defendants
Ignacio E. Salceda Douglas John Clark Kyle Anthony Wombolt WILSON SONSINI GOODRICH & ROSATI 650 Page Mill Road Palo Alto, California 94304-1050 Telephone: (650) 493-9300 Facsimile: (650) 565-5100 E-Mail: [email protected] [email protected] [email protected]
TIBCO Software, Inc., Christopher G. O’Meara, Rajesh U. Mashruwala, Sydney Carey, Vivek Y. Ranadivé
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