Ascend slapped with lawsuit

Shareholders hit Ascend Communications with a class-action suit charging the company with inflating its stock price.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
Shareholders hit Ascend Communications (ASND) with a class-action lawsuit over allegations of inflating the company's stock price, according to a notice released today by the plaintiffs.

Ascend, along with some of its officers and directors, were named in the suit, which alleges that positive statements were made regarding the company's business, earnings, and growth potential despite signs that sales of the networking equipment maker's advanced modem products would cease, in part due to software and hardware problems.

The suit, filed in the U.S. District Court Central District, further alleges that the statements inflated the stock price over the course of nearly a year beginning November 5, 1996. Investors set the actionable period from November 5, 1996, when shares closed at 73-1/4, to September 30, 1997, when shares closed at 32-3/8.

Ascend traded as low as 22 per share in early trading today, down from its close of 23-3/4 yesterday.

The investors named as plaintiffs in the suit allege that the defendants allowed the company's officers and directors to sell their stock with gains exceeding $40 million, providing a more favorable stock swap in Ascend's acquisition of rival Cascade Communications. The deal, a $3.7 billion stock-swap transaction, was announced in March and closed in August.

"We have not received a copy of the complaint, and we will have a comment after we have seen it," said Eric Warren, an Ascend spokesman.

Ascend reported a weak third-quarter performance last October, when it posted net profits of $40.1 million on sales of $270.4 million. The company earlier had issued a preliminary warning that its third quarter would be hit with product delays and a sales slowdown, and noted that its earnings would fall about 33 percent from Wall Street's expectations.