Lack Of Windows Phone Success Prompts Nokia Class Action Suit
Nokia is facing a class action lawsuit, filed Thursday by an irate shareholder who claims that the company “misled investors with the promise of Windows Phone success,” Carly Page of the Inquirer reported Friday.
The lawsuit, filed in a New York court by investor Robert Chmielinski, claimed that the Finnish phonemaker, CEO Stephen Elop and CFO Timo Ihamuotila, violated anti-fraud laws between October 26, 2011 and April 10, 2012 by convincing backers that the move to Windows would help them rebound from losses in market share, according to Bloomberg’s Diana ben-Aaron and GigaOm’s Ryan Kim.
The filing claims that, “During the Class Period, defendants told investors that Nokia’s conversion to a Windows platform would halt its deteriorating position in the smartphone market. It did not. This became apparent on April 11, 2012, when Nokia disclosed that its first quarter performance would be worse than expected.”
Kim said that Chmielinski is accusing Nokia and its executives of knowingly issuing false claims about how well the transition over to Windows was progressing. He says that the plaintiff purchased Nokia shares following the October launch of the Lumia smartphone, but that on April 11, those shares fell 16% after the company revealed worse-than-expected first quarter earnings and lowered expectations for the following quarter as well.
“The plaintiff said the defendants perpetrated fraud because they either knew they were offering misleading information or acted with reckless disregard for the true information known to them,” the GigaOM reporter added. “The lawsuit is looking to represent all Nokia shareholders who were affected during the class action period.”
“A glitch with the Lumia 900 software, meanwhile, prompted Nokia to offer $100 rebates, ‘making the phone essentially free,’ the suit said… In the suit, Chmielinski pointed to media reports that quote Nokia chief Stephen Elop championing Nokia’s Windows Phone options,” said PCMag reporter Chloe Albanesius.
“Elop told shareholders much of the loss for Q1 was due to one-time restructuring costs, but apparently, shareholders aren’t having it,” contributed VentureBeat reporter Jolie O’Dell. “The lawsuit states Nokia executives who were making wildly positive assertions about the company’s switch to Microsoft’s mobile OS ‘had actual knowledge of the misleading nature of the statements they made or acted in reckless disregard of the true information known to them at the time… This artificially inflated the price of Nokia’s securities and operated as a fraud or deceit.’”
Chmielinski is seeking unspecified damages plus court costs, according to Bloomberg.
In a statement, the smartphone manufacturer responded to the allegations, saying, “Nokia has become aware of the filing of a securities class action complaint naming Nokia Corporation as a defendant, filed in the US District Court for the Southern District of New York on May 3, 2012. Nokia is reviewing the allegations contained in the complaint and believes that they are without merit. Nokia will defend itself against the complaint.”
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