(CN) - The 9th Circuit on Tuesday tossed a securities fraud lawsuit against software maker Oracle Corp., saying the company's stock price dropped by more than $5 per share in 2001 due to reaction to the dot-com bubble burst and a looming recession, not fraud.
The federal appeals court in San Francisco said Oracle investors lacked the evidence to show that the company and three officers engaged in "an elaborate scheme to defraud the public about the quality of Oracle products" and its revenue.
Instead, the software giant missed its quarterly projections by 2 cents, which caused its stock price to drop from $21.38 to $16.88 in March 2001, because of its customers' reaction to the dot-com crises and an approaching recession.
The appellate panel upheld a federal judge's ruling for Oracle.
"Evaluating the totality of evidence in this case, we hold that plaintiffs are unable to create a triable dispute that Oracle's share price dropped as a result of the market learning of and reacting to defendants' purported fraud, as opposed to Oracle's poor financial health generally," Judge Richard Tallman wrote.
"The overwhelming evidence produced during discovery indicates the market understood Oracle's earnings miss to be a result of several deals lost in the final weeks of the quarter due to customer concern over the declining economy. Numerous analyst reports support this conclusion."
Investors claimed Oracle lied about problems with its Suite 11i software and tried to hide the fact that customers had shied away from the defective software.
But, again, investors offered no direct evidence that this was the case, Tallman said.
"To be sure, the miss was caused by customers not buying Oracle's products," he wrote. "But the market did not learn on March 1, 2001, that customers did not buy Suite 11i as a result of defects. Instead, the market learned that customers did not buy Oracle's products in the final weeks of the quarter as a result of uncertainty in an economy that would slide into a recession within the next month. In other words, the market reacted to reports of Oracle's 'poor financial health generally.'"
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