Recently, Pitney Bowes Inc. (PBI) won the 2007 security fraud lawsuit. As per the lawsuit, Pitney was accused of not disclosing material facts and that resulted in missing the financial projections in 2007. The U.S. District Judge Vanessa Bryant in Hartford, Connecticut, announced that Pitney had used appropriate and required cautionary statements to signal possible business threats and risks.
The accusation was filed in the month of Oct 2009 by the Laborers' Pension Fund of Central and Eastern Canada. The allegation was against certain executives of the company who were well aware of the potential threats, but did not communicate those to the common investors.
The prosecutors mentioned that this falsification was made during the months of July 2007 to October 2007, at the end of which the company reported disappointing results on Oct 29, 2007.
As per the results of the second quarter of 2007, management projected GAAP EPS in the range of 68 cents to 72 cents. But the company’s reported GAAP EPS of only 63 cents, which was far below the outlook range.
As a result, the company’s stock price was severely affected. The stock price declined 15 basis points, to $39.93 on October 30, from its previous day’s closing at $ 46.99.
The main reason for the company to miss the estimates was its inability to offer new products; which led to customer dissatisfaction. The revenue of its US mailing segment also declined due to weak market demand for digital analogue mail meters. These factors were beyond the company’s capacity as they are primarily market driven and above all did not come to the management’s notice when the statement was made in the second quarter of 2007. Therefore, considering all these factors, the court ordered that the complainants failed to prove their standing.
Pitney Bowes currently has a Zacks Rank #4 (sell), However, some other companies that are worth looking into include Symantec Corp. (SYMC) which has a Zacks Rank #1 (Strong Buy) and Tyco International (TYC) and Xerox Corp. (XRX), both have a Zacks Rank # 3 (Hold).
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