SOURCE: Schiffrin & Barroway

April 25, 2005 19:00 ET

Shareholder Class Action Filed Against Blue Coat Systems, Inc. by The Law Firm of Schiffrin & Barroway, LLP

RADNOR, PA -- (MARKET WIRE) -- April 25, 2005 -- The following statement was issued today by the law firm of Schiffrin & Barroway, LLP:

Notice is hereby given that a class action lawsuit was filed in the United States District Court for the Northern District of California on behalf of purchasers of the publicly traded securities of Blue Coat Systems, Inc. (NASDAQ: BCSI) ("Blue Coat" or the "Company") between February 19, 2004 and May 27, 2004 inclusive (the "Class Period").

If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Schiffrin & Barroway, LLP (Marc A. Topaz, Esq. or Darren J. Check, Esq.) toll free at 1-888-299-7706 or 1-610-667-7706, or via e-mail at

The complaint charges that Blue Coat, Brian M. NeSmith, and Robert Verheecke violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing numerous positive statements throughout the Class Period regarding the Company's financial performance. As alleged in the complaint, these statements were each materially false and misleading when made as they failed to disclose and misrepresented the following material adverse facts which were then known to defendants or recklessly disregarded by them: (1) that the Company's gross margin range of 68-69% was unrealistic because the Company's gross margin calculations were result-driven, and did not reflect any realistic expectations as to what could be achieved, given material business issues of which the defendants were aware of such; (2) that Blue Coat's service staff had not grown in line with its business growth and had to be augmented during the quarter ended April 30, 2004; (3) that the sales incentives and other difficulties associated with the introduction of the Series 8000 product line put downward pressure on the Company's gross margins; and (4) that as a result of the above, the Company's statements about its future financial performance were lacking in any reasonable basis when made.

On May 27, 2004, Blue Coat made a surprise announcement that its purported gross margin calculations had fallen short for the fourth quarter of fiscal 2004, and that profitability was lower than that achieved in the third quarter. Instead of increasing only 2-3%, operating expenses increased 8.5%. The next trading day, May 28, 2004, Blue Coat shares plummeted $11.45 per share to close at $27.80 per share. By August 2004, Blue Coat shares fell as low as $10 per share.

In the summer of 2004, the SEC began an informal inquiry into trading in Blue Coat's stock concerning the fourth quarter of fiscal 2004, which the Company initially characterized as only involving "individuals or organizations outside the company." On February 28, 2005, however, the SEC asked for additional information, and subpoenaed two unidentified company executives to testify. Following this, the SEC upgraded its informal investigation into a formal investigation. Blue Coat admitted on April 7, 2005 that the SEC insider trading investigation was now focusing on whether certain present or former officers, directors, employees, affiliates or others made selective disclosure of material nonpublic information, traded in the Company's stock while in possession of such information, or communicated such information to others who then traded in the Company's stock.

If you are a member of the class described above, you may, not later than June 13, 2005 move the Court to serve as lead plaintiff of the class, if you so choose. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Schiffrin & Barroway, or other counsel of your choice, to serve as your counsel in this action.

Plaintiff seeks to recover damages on behalf of class members and is represented by the law firm of Schiffrin & Barroway, which prosecutes class actions in both state and federal courts throughout the country. Schiffrin & Barroway is a driving force behind corporate governance reform, and has recovered in excess of a billion dollars on behalf of institutional and high net worth individual investors. For more information about Schiffrin & Barroway, or to sign up to participate in this action online, please visit

Please contact the Schiffrin & Barroway website at for more information about the firm. If you wish to discuss this action with us, or have any questions concerning this notice or your rights and interests with regard to the case, please contact:

Schiffrin & Barroway, LLP
Marc A. Topaz, Esq.
Darren J. Check, Esq.
280 King of Prussia Road
Radnor, PA 19087
1-888-299-7706 (toll free) or 1-610-667-7706
Or by e-mail at

Contact Information

  • Schiffrin & Barroway, LLP
    Marc A. Topaz, Esq.
    Darren J. Check, Esq.
    280 King of Prussia Road
    Radnor, PA 19087
    1-888-299-7706 (toll free)

    Or by e-mail