Apple has agreed to pay $490 million to settle a class-action lawsuit alleging that CEO Tim Cook misled investors about a sharp decline in iPhone sales in China that culminated in a stark revision to the company's revenue forecasts.
The preliminary settlement filed Friday in Oakland federal court stems from a shareholder lawsuit that focused on the way Apple conveyed information about how iPhone models released in September 2018 performed in China, one of the company's largest markets.
Cook noted that the new iPhones were off to a good start during an investor conference call in early November 2018, according to the complaint.
This reassurance turned into major disappointment on January 2, 2019, when Cook issued a warning that Apple's revenue for the just completed quarter would fall $9 billion below management's expectations for the period. Moreover, almost all of the decline in sales is attributable to weak demand in China.
It was the first time Apple had cut its revenue guidance since releasing the iPhone in 2007, and caused its stock price to fall 10% in the next day of trading, wiping out more than $70 billion in shareholder wealth.
Apple has strongly denied Cook deceived investors about iPhone sales in China between early November and early January. The Cupertino, California, company maintained that position in settlement documents, but said it decided to make the payment after more than four years of legal wrangling to avoid an “extremely burdensome, expensive and distracting” hassle.
The settlement was reached through a mediator after U.S. District Judge Yvonne Gonzalez Rogers denied Apple's motion to dismiss the case and set a trial date for September 9.
Gonzalez-Rogers is now required to approve the settlement at a hearing scheduled for April 30.
Thousands of shareholders who bought Apple stock in late 2018 could be eligible for part of the settlement, which would be less than $490 million after lawyers involved in the case are paid. They plan to get up to a quarter of the settlement, or about $122 million.
Liedtke writes for the Associated Press.
