NEW YORK, June 23, 2005 (PRIMEZONE) -- The law firm of Wechsler Harwood LLP ("Wechsler Harwood") announced that it filed a class action lawsuit on June 22, 2005 in the United States District Court for the Northern District of California on behalf of purchasers of the securities of Ditech Communications Corp. ("Ditech" or the "Company") (Nasdaq:DITC) between August 25, 2004 and May 26, 2005, inclusive (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act") against defendants Ditech, Timothy K. Montgomery (Ditech's Chief Executive Officer, President and Chairman) and William J. Tamblyn (Ditech's CFO).
The Complaint alleges that defendants made materially false and misleading misrepresentations and omissions regarding two aspects of Ditech's business: (a) Ditech's Voice Quality Assurance ("VQA") Services, and (b) the impact upon the Company of a merger between Sprint Corp. ("Sprint") and Nextel Communications, Inc. ("Nextel").
During the Class Period, defendants represented that Ditech had received two significant VQA orders from new customers in Asia. The Company touted this as the first success in its efforts to enter the VQA market in a rapidly growing geographical area. In fact, however, the orders were not solidified. The purported customers were not obligated to, and, as it turned out, did not purchase the services.
In addition, in December 2004, Nextel (which accounted for over 40% of Ditech's revenues) announced a merger with Sprint. Given the importance of Nextel to Ditech's business, certain securities analysts posited that the cost cutting and integration of Nextel and Sprint operations might result in less business for Ditech. In response, defendants represented that the merger should not be of concern to Ditech investors and that it was "quite good" for the Company. In fact, as defendants knew or recklessly disregarded, the Nextel-Sprint merger posed a serious threat to Ditech's business, one that could erase nearly half of its revenues.
While the price of Ditech shares was artificially inflated by defendants' false statements and failures to disclose, Company insiders, including defendants Montgomery and Tamblyn, sold a total of 320,000 of their personally held Ditech shares for gross proceeds of $6,715,650.
Investors began to learn the truth about the purported VQA orders on November 3, 2004, when the Company announced that the highly-touted orders had not shipped, causing the Company to miss its revenue goals for the second quarter of 2005 and calling into question the Company's VQA expansion plans. The price of Ditech common stock fell by 25.5% to $16.60 per share in response to the announcement, on unusually heavy trading volume. Defendants, however, maintained this was merely a "delay" and that they still expected the orders to ship, a claim that defendants knew, or recklessly disregarded, was misleading.
The truth about the impact of the Nextel-Sprint merger on Ditech was revealed after the close of trading on May 26, 2005. At that time, Ditech announced that orders from Nextel dropped substantially as a result of the Nextel-Sprint merger and that a continuing decline in orders was expected. Although defendants did not directly address the issue in this release, the promised VQA sales to the two new customers from Asia still did not materialize, nearly a year after defendants supposedly "secured" the orders. In response to this announcement, Ditech common stock dropped by 38%, to $7.79 per share, on unusually heavy trading volume.
If you bought the securities of Ditech between August 25, 2004 and May 26, 2005 and sustained damages, you may, no later than August 15, 2005, request that the Court appoint you as lead plaintiff. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. The requirements for serving as a lead plaintiff are set forth in the Private Securities Litigation Reform Act of 1995 (15 U.S.C. Section 78u-4).
Wechsler Harwood has taken a leading role in many important actions on behalf of defrauded shareholders. The Wechsler Harwood website (www.whesq.com) has more information about the firm and detailed information regarding this matter. If you wish to discuss this action with us, including possible claims under the Securities Act, or have any questions concerning this notice or your rights and interests with regard to the case, please contact the following:
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca.