Apple to pay $490 million for allegedly concealing iPhone demand slump

WEB DESK: Apple has reached a settlement of $490 million in a class-action lawsuit that accused Chief Executive Tim Cook of deceiving shareholders by hiding declining demand for iPhones in China.

The preliminary settlement, filed on Friday with the US District Court in Oakland, California, is subject to approval by US District Judge Yvonne Gonzalez Rogers.

The lawsuit originated from Apple’s unexpected announcement on January 2, 2019, when the tech giant revealed plans to reduce its quarterly revenue forecast by as much as $9 billion, citing tensions in US-China trade.

Prior to this revelation, Cook assured investors during a November 1, 2018, analyst call that China did not face similar sales pressures as other markets such as Brazil, India, Russia, and Turkey, where currency values had weakened.

Subsequently, Apple instructed its suppliers to scale back production. This marked Apple’s first downward revenue forecast since the launch of the iPhone in 2007, causing a 10 per cent drop in its shares the following day and erasing $74 billion of market value.

While Apple and its legal representatives have not responded immediately to requests for comment on the ruling, court documents reveal that the Cupertino-based company denied any wrongdoing but opted for settlement to avoid the expenses and disruptions associated with prolonged litigation.

Shawn Williams, a partner at Robbins Geller Rudman & Dowd representing the shareholders, hailed the settlement as a significant victory for the class affected.

The settlement extends to investors who purchased Apple shares within the two months between Cook’s statements and the revenue forecast.

Apple, which reported a net income of $97 billion in its latest fiscal year, will cover the settlement amount, equivalent to nearly two days of its profits.

In a previous ruling last June, Judge Rogers declined to dismiss the lawsuit, citing plausible evidence suggesting that Cook’s remarks pertained to Apple’s sales projections rather than currency fluctuations, and that the company was aware of the slowing economy in China and potential decline in demand.

The lead plaintiff in the case is the Norfolk County Council as the Administering Authority of the Norfolk Pension Fund, based in Norwich, England.

Legal representatives for the shareholders may seek fees of up to 25 per cent of the settlement amount.

Despite the legal challenges, Apple’s share price has surged more than fourfold since January 2019, propelling the company’s market value to over $2.6 trillion.