A California district court recently dismissed Mellanox Technologies Ltd. investors’ claims that the company made false statements about both its prominence in the interconnect market and its revenue and growth prospects. The District Court determined that many of the statements were corporate “puffery” protected by the Private Securities Litigation Reform Act and the “bespeaks caution” doctrine because the company’s forward-looking representations contained appropriate cautionary language.Plaintiffs alleged in the complaint that the company made false statements in its revenue projections. Mellanox exceeded its earnings projects by about $4 million in the second and third quarters of 2012, largely because of demand for its InfiniBand computer chips. However, the company missed a projected $150 million revenue baseline by $30 million in the fourth quarter. Plaintiffs claimed that the company knew that much of the growth was not sustainable because it was due to short-term sale boosts attributable to a new platform roll-out. The suit also alleged that Mellanox knew that Intel Corporation was poised to develop its own InfiniBand product, which would detrimentally increase competition in the InfiniBand market in which Mellanox had previously enjoyed a near monopoly. 

However, the District Court ruled that the company made clear that the deal with Intel was a one-time opportunity, and that most of the statements at issue were either general assertions of corporate optimism or accompanied by proper disclosures. Plaintiffs argued that the cautionary language was boilerplate and was not specific to Mellanox’s projections. The District Court, however, held that the disclaimers did not need to specifically accompany each statement. It stated that “[s]uch cautionary language, coupled with language identifying statements as forward-looking, immunizes the company’s forward-looking statements from securities liability.”            

In Re: Mellanox Technologies Ltd. Securities Litigation, No. 3:13-CV-04909-JST (N.D. CA Mar. 29, 2014)