Alcatel Alsthom’s woes continued last week as several shareholder lawsuits were filed against the company, connected with its earlier announcement that earnings would not meet expectations.
Alcatel’s stock fell sharply on the news, and the company initiated a stock repurchase program in response. But an allegation that Alcatel knew of the lowered earnings expectations and waited to release that information until after it completed its merger with DSC Communications Corp. has triggered several class-action lawsuits.
Lawsuits were filed on behalf of DSC shareholders by law firms Berman DeValerio & Pease L.L.P.; Abbey, Gardy & Squitieri L.L.P.; Milberg Weiss Bershad Hynes & Lerach L.L.P.; Wolf Popper L.L.P.; Wechsler Harwood Halebia & Feffer L.L.P; and Weiss & Yourman.
DSC Communications and Net Acquisition Inc., a wholly owned subsidiary of Alcatel, completed their stock-for-stock merger Sept. 8. The law firms say Alcatel may have known about cancellations of orders from its European, Russian and Asian customers as early as July 28 when a proxy statement was issued to DSC shareholders in connection with the proposed merger.
Alcatel on Sept. 17, said, “The Telecom segment’s income from operations, while growing over 1997, will be adversely impacted by the sharp investment cuts recently decided by some traditional operators and the deepening of the Southeast Asian and Russian crises. After reviewing the accounts and the currently available forecasts, Alcatel anticipates that 1998 will not meet expectations in regards to the group’s operating performance.”
Prior to filing its lawsuit, Wolf Popper said it was “investigating developing allegations that Alcatel may have withheld information that senior Alcatel management officials feared U.S. antitrust regulators would find `questionable’ in order to secure [Department of Justice] approval for the DSC transaction. Sources close to the company have strongly suggested that Alcatel management may also have rushed the closing of the DSC deal, which was originally scheduled to close in October, in order to avoid making required disclosures to federal antitrust regulators.
“These same sources also indicated that Alcatel officials were in possession of the `questionable’ information they did not want made public as early as July 1998,” said Wolf Popper.
