IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
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BERGER, et al.,
Plaintiffs,
v.
COMPAQ COMPUTER CORP., et al.,
Defendants.
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Consolidated Civil Action No. 98-1148
CONSOLIDATED AMENDED COMPLAINT FOR
VIOLATION OF FEDERAL SECURITIES LAWS
Plaintiffs, as and for their consolidated amended complaint, allege
the following upon personal knowledge as to themselves, their counsel,
and their own acts, including plaintiffs' suitability to serve as
class representatives. All other allegations herein are based upon the
investigation of Compaq Computer Corp. ("Compaq" or the "Company")
conducted by plaintiffs by and through their attorneys, which
included, inter alia, a review of public filings of defendant Compaq
SNIPPETS:
COMPAQ COMPUTER CORP., et al.,
VIOLATION OF FEDERAL SECURITIES LAWS
Plaintiffs, as and for their consolidated amended complaint, allege the following upon
This Court has jurisdiction over this litigation under Section 27 of the Securities Exchange
Venue is proper in this district pursuant to Section 27 of the Exchange Act because defendant
In connection with the conduct complained of herein, defendants, directly or indirectly, used
largest personal computer manufacturer in the world.
Combined, its three largest competitors, IBM, Hewlett Packard and Dell Computer Corp.,
Dell builds each PC to order and keeps virtually no inventory of finished PC's or components
Compaq's sales model requires it to project customer demand and manufacture enough product in
In addition, Compaq delivers all its finished product to distributors and dealers, known in
Compaq's sales model, therefore, unlike Dell's, has been historically heavily dependent upon
By mid-1996, approximately one year prior to the beginning of the Class Period, Company
By July 10, 1997, the beginning of the Class Period, defendants realized that the ODM was
However, for several reasons, defendants were determined to postpone this negative news about
Defendants used the high price of Compaq's stock to purchase both Tandem computers, Inc. for
Second, the Individual Defendants had much of their wealth tied up in Compaq stock and
Third, much of the Individual Defendants' compensation was in the form of year-end bonuses,
Although these practices allowed the Company to report high sales and profitability figures
channel stuffing was never acknowledged by defendants during the Class Period.
Second, to prevent the market from discovering this channel stuffing, defendants began
The market, including numerous securities analysts closely following the Company, bought
Defendant Mason sold over $3,700,000 of his own Compaq shareholdings at artificially inflated
Defendant John T. Rose was elected Senior Vice President of Enterprise Computing Group for
As officers, directors and/or controlling persons of a company that is and, at all relevant
sults of Compaq, so that the market price of the Company's publicly traded securities would be
The first phase of the ODM was Compaq's Build-to-Order concept, pursuant to which Compaq
"I think most of our channel partners would like that," said Earl Mason, Compaq's chief
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