Law Firm Starting Class Action Over ‘Flawed’ Voq Smartphone

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Lerach Coughlin Stoia Geller Rudman & Robbins LLP has begun a class action lawsuit against the maker of the Voq smartphone. This was started on behalf of purchasers of Sierra Wireless common stock during 2004.

Sierra Wireless made much of its revenue by selling parts to palmOne for the Treo 600. However, when it introduced its own smartphone, palmOne brought their relationship to an end.

Therefore, Lerach Coughlin says that Sierra Wireless’ plan to introduce its own smartphone hurt the company’s shareholders.

Although the lawsuit has been started, this firm has not yet been able to find a lead plaintiff, a requirement for a class action lawsuit.

The lawsuit asserts

  1. that Sierra’s strategy to correct its deficiency in technology as compared to its competitors by introducing the Voq Smartphone was flawed and its business model was not working;
  2. that Sierra was facing increasing competition, intensified by its failure to enter into the WCDMA (wideband code-division multiple access) market;
  3. that Sierra’s recent venture into the Smartphone market with the introduction of its new Voq line was a serious misstep, as it did little to add revenue and further seriously harmed Sierra’s relationship with a prime customer palmOne as its Voq Smartphone would compete with palmOne’s Treo — the product for which Sierra was a supplier;
  4. that Sierra’s dependence on revenue from palmOne in its original equipment manufacturer (“OEM”) business — selling embedded modules that allow other device manufacturers to give their products wireless connectivity — was substantially greater than had been reported; and
  5. that Sierra’s customers were materially over-inventoried, which would lead to greatly diminished orders and sales in future quarters.

On January 26, Sierra Wireless announced that its revenue for the fourth quarter of 2004 was well below the previous guidance that it had given to investors and further announced that it expected a steep decline in its revenue going forward. The next day of trading, Sierra’s stock plunged 38 percent to a 52-week low of $8.97 per share, on extremely heavy trading volume.

Lerach Coughlin’s lawsuit seeks to recover damages on behalf of all purchasers of Sierra Wireless common stock during the previous year.

More information is available on the Lerach Coughlin web site.

Thanks to Engadget for the tip.

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