Securities Lawsuit Alleges Zebra Technologies Corp Business Segment Could Not Change Its Stripes
WASHINGTON, DC (July 27, 2017) — U.S. Market Advisors Law Group PLLC announces that a class action lawsuit has been filed against Zebra Technologies Corporation (“Zebra” or the “Company”) (NASDAQ:ZBRA). The class action is on behalf of investors who purchased or otherwise acquired Zebra stock, seeking to recover compensable damages caused by defendants’ violations of the Securities Exchange Act of 1934. The case has been docketed under 7-cv-04412 in United States District Court for the Eastern District of New York.
If you are a shareholder who purchased Zebra stock between March 17, 2015 and May 9, 2016 (“Class Period”), you have until September 25, 2017 to ask the Court to appoint you as Lead Plaintiff for the class. The Lead Plaintiff is a representative for absent members of the class.
Investors do not need to seek appointment as Lead Plaintiff to share in any class recovery in this action. If you are a class member and there is a recovery for the class, you can share in that recovery as an absent class member. You may retain counsel of your choice to represent you in this action. Contact USMA Law Group to discuss this action.
Zebra designs, manufactures, and sells a wide range of products that capture and move data, including, inter alia, mobile computers, barcode scanners and imagers, radio frequency identification device readers, wireless LAN solutions and software, and specialty printers for barcode labeling and personal identification.
Defendant Zebra first established its own Enterprise Solutions Group (“Enterprise”) in 2008. In April 2014, Zebra announced that it was acquiring Motorola Enterprise – formerly the fraud-plagued Symbol company – for $3.45 billion in cash. The Motorola Enterprise assets acquisition was completed on October 27, 2014. The Master Acquisition Agreement between Zebra and Motorola Solutions expressly stated that the assets being acquired included all “Trade Receivables,” i.e., “[a]ll of the accounts and notes receivable and unbilled revenues to the extent relating to or arising from the sale of goods or materials and the rendering of services in connection with the operation of the Business (the ‘Accounts Receivable’), together with all unpaid interest accrued thereon, if any.” As the Wall Street Journal would later point out, the Motorola Enterprise assets acquisition, “Zebra’s biggest, was a bid to fend off competition by combining bar-code labels and radio tags with Motorola’s computers and scanners.”
During the Class Period, as of December 31, 2015, the Enterprise segment was responsible for 65% of net sales and 49% of operating income, while the Legacy Zebra segment was responsible for 35% of Zebra’s net sales and 51% of its operating income.
Allegations Against Zebra
The Complaint alleges that, throughout the Class Period, defendants issued materially false and/or misleading statements and/or omissions regarding Zebra’s business, prospects and financial results. Specifically, as defendants would later acknowledge in the form of a restatement, Zebra understated its income taxes through the end of 2015, underaccrued certain 2015 estimates, in particular with respect to its sales commission plan, and overstated the net realizable value of trade receivables acquired in connection with the Company’s acquisition of Motorola Enterprise. In addition, Zebra failed to disclose the impact of material weaknesses identified in its internal controls and procedures over financial reporting and disclosure, which caused the misstatements.
The misstatements also rendered the Company’s financial guidance for 2015 and the first and second quarters of 2016 materially false and misleading. Specifically, defendants provided false and misleading guidance to investors concerning pretax-income-related metrics despite contemporaneous deficiencies in internal controls that impacted the Company’s ability to accurately forecast pretax income.
Further, defendants downplayed the existence of any integration problems in connection with the Motorola Enterprise acquisition, even though: (1) the accounting department at Zebra was undermanned following the Enterprise acquisition as a result of no senior-level financial executives joining Zebra from Motorola; and (2) the underlying reporting systems Zebra inherited from Motorola were a disaster.
On February 29, 2016, Zebra announced that, following its acquisition of Motorola Enterprise, material weaknesses related to the process to prepare and review its quarterly and annual income tax provision had “impacted [its] ability to accurately forecast pretax income and deferred taxes, by legal entity, in a timely manner.” On November 1, 2016, Zebra acknowledged that it was required to restate the “known errors” made in its previously issued financial statements for the fiscal year ended December 31, 2015, as well as the quarterly periods ended April 2, 2016 and July 2, 2016.
On February 25, 2016, Zebra issued a press release announcing its fourth quarter 2015 financial results for the three months ended December 31, 2015. Zebra reported a GAAP net loss and the Company’s sales did not meet investors’ expectations. Further, the Company warned of a sharp decline in sales growth. Yet, defendants continued to make additional positive statements about the Motorola Enterprise acquisition.
On this news, the price of Zebra stock dropped $10.26 per share from its close of $70.04 per share on February 24, 2016, to close at $59.78 per share on February 25, 2016, a decline of over 14%, on unusually high trading volume.
On February 29, 2016, Zebra filed its annual financial report on Form 10-K for its FY15. The FY15 10-K reiterated, inter alia, that Zebra had identified defects in its internal controls dating back to 1Q15, but provided specific information on the serious impact of these deficiencies on the Company’s ability to accurately forecast pretax income.
On May 10, 2016, Zebra issued a press release announcing the financial results from its 1Q16. Zebra missed revenue and EPS expectations it had led the investment community to anticipate – reporting figures less than its own prior guidance on February 25, 2016.
On this news, the price of Zebra stock dropped $11.12 per share from its close of $62.58 per share on May 9, 2016 to close at $51.46 per share on May 10, 2016, a decline of approximately 18%, on unusually high trading volume.
Post-Class Period Events: On September 14, 2016, Zebra issued a press release announcing that it had agreed to sell its WLAN business unit acquired as part of the Motorola Enterprise assets acquisition to Extreme Networks for $55 million in cash.
Finally, on November 1, 2016, Zebra issued a press release disclosing that it had decided to restate its previously issued financial statements for FY15 and 1Q16 and 2Q16.
About USMA
U.S. Market Advisors Law Group PLLC is a national law firm based in Washington, D.C. The firm represents investors worldwide in U.S. securities class action lawsuits.
Contact
David P. Abel
(202) 274-0237
[email protected]