Lawsuit against Apple for hiding iPhone-demand slowdown allowed to proceed in part
Federal judge Yvonne Gonzalez Rogers dismissed other claims in the lawsuit, according to reports, but maintained that shareholders can sue over what CEO Tim Cook said
A US federal judge has said that Apple must face a part of the lawsuit that claims that the company concealed the falling demand of iPhones, particularly in China, which lead to billions of dollars in losses to shareholders.
Federal judge Yvonne Gonzalez Rogers dismissed the other claims in the lawsuit, according to reports, but maintained that shareholders can sue over what CEO Tim Cook said about strong iPhone demands on an analyst call on November 1, 2018. This call happened just a few days before Apple asked its largest manufacturer to curb production.
“Absent some natural disaster or other intervening reason, it is simply implausible that Cook would not have known that iPhone demand in China was falling mere days before cutting production lines,” Judge Rogers said.
The judge also said that Apple's decision to stop reporting iPhone unit sales also “plausibly suggests that defendants expected unit sales to decline”.
Apple has not responded to this order, which was put out late on Tuesday.
The lawsuit is led by the Employees' Retirement System of the State of Rhode Island and was made after Cook unexpectedly reduced Apple's quarterly revenue forecast by up to $9 billion, on January 2, 2019. And this was done partly because of US-China trade tensions
This was the first time in iPhone's history, since it launched, that Apple had cut its revenue forecast. Apple's stocks fell by 10% the never next day, and approximately $74 billion of market value was just wiped off.
What essentially triggered this complaint was the fact that Cook said on the analyst call that the iPhone XS and the iPhone XS Max had a “really great start” adding that while some emerging markets were facing a decline in sales, China was not one of them.
By January 2019, Apple had lowered its revenue target to $84 billion for the first quarter, down from the initial $89 to $93 billion. Cook told shareholders, in a letter, that the lower revenue anticipation, primarily in Greater China, was responsible for the whole shortfall.
(With agency inputs)