The opinion of the court was delivered by: SUZANNE B. CONLON
In this consolidated class action, plaintiff Claire E. Wright, Trustee U/A 7-23-81 Claire E. Wright Trust ("Wright"), individually and on behalf of others similarly situated, sues International Business Machines Corporation ("IBM") for securities fraud, in violation of § 10(b) of the Securities Exchange Act of 1934, 28 U.S.C. § 78j, and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. IBM moves for dismissal pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief may be granted.
The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990) (citation omitted). In deciding a motion to dismiss, the court must accept the well-pleaded factual allegations of the complaint as true and view those allegations in the light most favorable to the plaintiff. Gillman v. Burlington Northern R.R. Co., 878 F.2d 1020, 1022 (7th Cir. 1989).
Wright and members of the putative class purchased IBM common stock between January 17, 1991, and March 19, 1991 (the "class period"). Complaint PP6, 8. Wright alleges that during the class period, IBM, through certain of its officers, made several false and misleading statements of material fact and omitted other material facts. Id. P14. Wright specifically alleges IBM made the following misleading statements:
(a) During a January 17, 1991, telephone conference with security analysts to announce IBM's 1990 fourth quarter earnings, James Clippard, IBM director of investor relations, stated that IBM expected to experience continued revenue growth in 1991. Id. P21. Clippard's statement was intended as an assurance to investors and prompted security analysts to project 1991 IBM first quarter earnings in a range comparable to the level achieved in the first quarter of 1990. Id. P22.
(b) On January 29, 1991, IBM issued and distributed its 1990 annual report for the year ending December 31, 1990. The annual report contained a letter from John F. Akers, IBM Chairman of the Board, to shareholders stating:
Nineteen Ninety was a good year for IBM. Despite mounting economic and political uncertainties around the world, our performance improved substantially. Worldwide results were encouraging -- revenues and earnings increased while our ongoing cost and expense rate declined.
As we begin 1991, weakening economies . . . high interest rates . . . events in the Middle East and elsewhere in the world -- are affecting customer buying decisions. There are also tough challenges within our industry -- from growing customer requirements for standards and open systems, to the shift in demand from hardware to software and services, to intense pressures from lean and agile competitors.
We believe IBM is well-positioned to prosper in this environment. However, we are managing our business prudently as we pursue our long-term growth and increased profitability.
Our 1990 results were encouraging. We are on the right course, although much remains to be done. The actions we have taken to make IBM a more competitive company are serving us well, and these uncertain times call for continued prudence in managing our business.
(c) The 1990 annual report also included a question and answer section in which Akers responded to the question "What are IBM's prospects ...