Apple will cough up $490 million to settle a class-action lawsuit alleging CEO Tim Cook concealed plummeting iPhone demand in China from shareholders.
A court document filed last Friday details a settlement [PDF] pending approval before a Northern District of California judge.
The incident dates back to late 2018 when, during an Apple earnings call, Cook stated that China – unlike Brazil, India, Russia and Turkey – was not one of the markets where Apple faced sales pressure due to weakened currency.
“In relation to China specifically, I would not put China in that category. Our business in China was very strong last quarter. We grew 16 percent, which we’re very happy with. iPhone in particular was very strong. Very strong double-digit growth there,” Cook said, according to a transcript of his remarks.
That utterance was an expensive mistake.
The shareholder class action, led by Norfolk County Council as Administering Authority of the Norfolk Pension Fund, considered the remarks deceptive, given Apple cut supplier production in China just four days after the call. And by early 2019, Apple again trimmed its forecasts by between $5 billion and $9 billion on the back of deteriorating economic conditions in China.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” explained Cook.
He added that China’s economy began to slow in the second half of 2018, with the September quarter producing the second lowest GDP in 25 years.
According to court documents, defendants alleged that Cook made “materially false and misleading statements and omissions about demand for the newly released iPhones and Apple’s business in China.”
“This $490 million recovery is not just an outstanding result for investors who purchased their Apple securities during the two-month class period, it is a testament to the perseverance of the lead plaintiff, the UK’s Norfolk Pension Fund, in pursuing the action to the brink of trial,” stated Robbins Geller Rudman & Dowd LLP partner Shawn A Williams, who served as lead counsel for investors.
According to the law firm, the settlement will be the third-largest securities class action recovery ever in the Northern District of California – a district that’s home to plenty of tech giants.
Apple’s settlement – which ends four years of litigation efforts – is not an admission of liability.
“Defendants have expressly denied and continue to deny that they have violated the federal securities laws or any other laws, or have otherwise misled investors as alleged in this Action, but in recognition that further litigation will be protracted, overly burdensome, expensive, and distracting, have determined that it is desirable and beneficial for them to resolve the Action,” court documents state.
The fruit cart sought – and failed – to have the case dismissed last June. ®
