Robbins Arroyo LLP: Commvault Systems, Inc. (CVLT) Misled Shareholders According to a Recently Filed Class Action
Robbins Arroyo LLP announces that a second amended class action complaint was filed against Commvault Systems, Inc. (NASDAQGS: CVLT) in the U.S. District Court for the District of New Jersey. The complaint is brought on behalf of all purchasers of Commvault securities between May 7, 2013 and April 24, 2014, for alleged violations of the Securities Exchange Act of 1934 by Commvault’s officers and directors. Commvault provides data and information management software applications and related services in North America, Europe, Australia, and Asia.
Commvault Accused of Engaging in Accounting Scheme
According to the complaint, Commvault communicated to investors that it intended to become a company with $1 billion in annual revenue over the next few years. Analysts predicted that to meet that goal, Commvault’s software revenue would need to regularly grow 20% as measured quarterly on a year-over-year basis. However, upon losing its primary business partner, Dell, Inc., on which it relied for 20% of its revenue, Commvault engaged in an accounting scheme that involved delaying the company’s recognition of software revenue in order to hide the fact that the company’s growth was decelerating. Specifically, to mask the slowdown in growth during the second and third fiscal quarters of 2014, the company moved revenue between reporting periods to ensure that its reported revenue numbers were consistent, in violation of generally accepted accounting principles.
Commvault officials allegedly knew that the company would not be able to meet its revenue targets without Dell. In fact, according to the complaint, Commvault officials falsely assured investors in a conference call that they had “completely mitigated any Dell risk” by replacing the revenue lost from Dell through other business partners. However, on April 25, 2014, when Commvault ran out of deferred software revenue, it shocked the market with a poor fiscal 2014 fourth quarter, stating that current period software growth was only 10% year-over-year—half of what investors were led to expect—and that fiscal fourth quarter profit had declined 7.8% due to significant deceleration in software revenue growth. On this news, the company’s stock fell from $68.58 per share to close at $47.56 per share, or over 30%, on April 25, 2014.
Commvault Shareholders Have Legal Options
Concerned shareholders who would like more information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.
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