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Tumbleweed probably sounded like a catchy name for
a Redwood City, California provider of secure Internet
communications solutions for enterprises and government.
Lately, however, the price of Tumbleweed Communications
Corp. (TMWD) has been tumbling and its investors aren’t
amused. Nor should they be amused.
On January 9, 2006, after the close of trading, the Company
revealed two troubling items. First, it expected a net loss
of 1 cent to 2 cents a share, on revenue of $11.6 million to
$11.8 million (which was below its prior guidance for the
quarter of a profit of 1 cent to 2 cents on revenue of
$13.5 to $14.5 million). Second, its Chief Executive Officer
and Chairman had resigned. The market reacted strongly.
On January 10, 2006, shares of Tumbleweed declined from
$3.05 to $2.44, or 20%, on heavier than usual volume.
The Company attributed the missed guidance to a shift toward
a longer sales cycle that pushed several deals into 2006.
However, this trend was not mentioned when the Company
announced its guidance for the quarter on October 19, 2005.
The speed with which the Company fired and replaced the
new CEO seems to indicate they knew well before this
disclosure the Company was in trouble. Two directors sold
their shares during the period, including one director who
sold 100% of his stock.
It appears that investors who purchased Tumbleweed
Communications between October 19, 2005 and
January 9, 2006, are affected.
A Troubling Picture for Terayon Investors
Terayon Communications Systems (TERNE) is a provider of
digital video networking applications and is based in Santa
Clara, California. But lately, TERNE investors haven’t liked
the picture they have been receiving from the Company.
The Company indicated that it may restate its financial
statements for prior periods. Investors who purchased
Terayon between October 28, 2004 and January 10, 2006,
have been affected.
Three events have shocked Terayon investors.
First, in September 2005, the Company replaced its outside
auditor Ernst and Young, with Stonefield Josephson.
Second, on November 7, 2005, after the market closed,
Terayon announced (1) it was reviewing the recognition of
revenue in the second half of fiscal year 2004 from a
customer that may have been recorded in incorrect periods;
(2) the Company may restate prior period financials;
(3) the filing of Terayon’s Form 10-Q for the third quarter
of fiscal year 2005 will be delayed; (4) that the accounting
review included an examination of Terayon’s internal controls
over financial reporting; and (5) the Audit Committee decided
to conduct an independent inquiry into the circumstances
relating to the accounting treatment of certain of the
transactions at issue with the assistance of independent
legal counsel.
Finally, on January 10, 2006, after the market closed,
Terayon disclosed the following: (1) the Company was in
violation of Nasdaq rules because it had not filed its 10-Q
for the 3Q 2005; (2) the Company was not in compliance
with its obligations under its 5% convertible subordinated
notes due 2007 and warned a default may occur; and
(3) the Company was subject to delisting from the Nasdaq
because the Company failed to solicit proxies and hold an
annual meeting before 12/31/2005.
If you are an affected investor in Tumbleweed
Communications, Terayon Communications Systems or
any of the other cases listed below under investigation,
you may wish to contact us at info@securitiessleuth.com.
Cases Under Investigation
PRA International (PRAI) On January 11, 2005, the
Company announced expected revenue which was below
its prior guidance. There was significant insider selling in
the 2 months prior to this disclosure, including the selling
by the CFO of 100% of his stock. Investors who purchased
between October 26, 2005 and January 10, 2006, are affected.
Dominion Homes (DHOM) The Company is under investigation
by state and federal regulators concerning its mortgage
operations. In particular, Dominion is under investigation
for an abnormally high default rate on mortgages used to
purchase Dominion properties. Investors who purchased
between July 9, 2003 and January 12, 2006, are affected.
Bausch & Lomb (BOL) At the end of December the Company
indicated that it would restate its financial results dating back
to 2000 following an investigation into improper conduct by
management of its Brazilian subsidiary.
SFBC International Inc. (Nasdaq: SFCC) Since
November 2, 2005, shares of SFBC, have plummeted 62%,
from $41.49 per share to $15.78 per share. A series of
Bloomberg News articles reported that SFBC lacked adequate
quality controls and as a result endangered the safety of
patients enrolled in its test – many of whom are poor
immigrants. Bloomberg also reported that the Company
failed to adequately disclose the risks involved in its drug
trials. Investors, who purchased SFCC between
August 4, 2003 and November 1, 2005, are affected by the
recent revelations.
NL Industries (NYSE: NL) On November 14, 2005,
NL Industries disclosed that it will restate its financial statement
for the year ended December 31, 2004 and the quarters
ended March 31, 2005 and June 30, 2005. Investors who
purchased NL stock between May 4, 2004 and
November 14, 2005 may be affected.
Ciphergen Biosystems, Inc. (NasdaqNM: CIPHE) Investors were
stunned on November 16, 2005, Ciphergen disclosed that its
Audit Committee had determined that the Company's previously
reported results for the quarter-ended June 30, 2005 should no
longer be relied upon. As a result, Ciphergen common stock
declined from a prior day close of $1.73 to close at $1.36
per share, a decline of approximately 21%, on unusually heavy
volume. Investors who purchased the common stock of
Ciphergen between August 8, 2005 and November 16, 2005,
are affected.
Now with respect to settled cases. If you are an affected
investor – you purchased any of these stocks during the
relevant class period, you may wish to contact the claims
administrator to obtain additional information. Remember,
if you don’t submit your claim form, you won’t receive your
proportionate share of recovery.
Solectron Corp. (SLR)
Class Period: June 18, 2001 to September 26, 2002
Claims Deadline: March 28, 2006
Claims Administrator: Garden City
NUI Corp. (NUI)
Class Period: November 8, 2001 to October 17, 2002
Claims Deadline: March 7, 2006
Claims Administrator: Garden City
Asia Pulp & Paper Company, Ltd. (APUUY)
Class Period: August 28, 1999 to April 4, 2001
Claims Deadline: March 6, 2006
Claims Administrator: Analytics
Cornell Companies, Inc. (CRN)
Class Period: March 6, 2001 to March 5, 2002
Claims Deadline: March 3, 2006
Claims Administrator: Gilardi
Corvis Corp. (CORV)
Class Period: August 22, 2000 to May 25, 2001
Claims Deadline: January 27, 2006
Claims Administrator: Berdon Claims
Ultimate Electronics, Inc. (ULTE)
Class Period: May 1, 2002 to August 26, 2002
Claims Deadline: January 27, 2006
Claims Administrator: Gilardi
Metromedia Fiber Network, Inc. (MFNX)
Class Period: January 8, 2001 to July 2, 2001
Claims Deadline: January 27, 2006
Claims Administrator: Gilardi
Again, if you are affected by a settled case, then you should
contact the claims administrator (rather than us). However,
if you are an affected investor in any of the companies under
investigation, you many wish to contact us so that you
can consider your options.
Likewise, if you happen to be aware of corporate restatements
or other financial fraud -- especially if you're a victim --
you're encouraged to contribute to the Sleuth by giving your
own tip-offs at www.securitiessleuth.com or by e-mailing
info@securitiessleuth.com. You can also call Mark McNair
at 877-511-4717. If you have a friend or colleague you
think would benefit from The Sleuth, please pass along
this issue and ask them to sign up at
www.cartville.com/app/join.asp?MerchantID=47994.
Warmest regards,
Mark McNair
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