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In re Oracle Corp. Derivative Litigation11/24/2004
for Pipeline Conversion, Oracle's Pipeline was sufficient to enable the company to have easily exceeded the License Revenue Market Estimate of about 25%.
Furthermore, the fact that Minton reduced her Best Estimates and the Pipeline over time suggests that Oracle had a responsible financial forecasting system that was actively taking into account new information. When a system results in a Best Estimate that the Company would exceed its Market Estimates by a nice margin and when the plaintiffs cannot point to any materially significant fact (e.g., loss of a large contract) that compromised the integrity of the Best Estimate, no rational mind can conclude that material, nonpublic information existed.
In sum, on the record before me, there is no basis for a rational fact-finder to conclude that Henley possessed material, adverse information on January 4, 2001 that created a substantial likelihood that Oracle would not meet the Market Estimates for 3Q 01. Therefore, it is of course even more certain that the record would not support an inference that Henley had information that created a substantial likelihood that Oracle's results would markedly depart from the Market Estimates, and thus the plaintiffs have failed to meet their burden under Shaw.
2. Did Ellison Possess Material, Adverse Information At The Time Of His Trades?
Ellison began trading on January 22 and continued trading until January 31, 2001. As a result, he had access to several weeks of additional data beyond that available to Henley on January 4.
In determining whether Ellison possessed material, adverse information, it is useful, however, to begin with some data that the plaintiffs try to pin on Henley as well: the actual Oracle results for December 2000.
I reiterate my finding that the plaintiffs have failed to provide a rational basis for concluding that Henley had access to the Flash Report containing Oracle's actual December results as of his trades because that Report was not distributed until January 17, 2001. Nonetheless, even assuming that he had access to the Flash Report, or the information contained in it, nothing in that Report, as I will next discussed, constituted material, adverse information.
a. The December Results
The plaintiffs place great weight on Oracle's December 2000 performance, which they believed presaged a quarter that would fall well short of the Market Estimates. What is most striking about this belief is that there is absolutely no evidence that anyone at Oracle perceived the December results as predicting any debacle of that kind.
As described earlier, the Flash Report for December indicated that the Covisint transaction was quite important for that month. That transaction brought in $60 million in revenue for Oracle and was the company's biggest deal ever, although by no means its first big deal. Critical to the plaintiffs' argument is the proposition that Oracle insiders should have totally disregarded that transaction and looked at the data they were receiving as if it did not contain any of the Covisint revenue.
From that perspective, the plaintiffs contend, Oracle's outlook for 3Q 01 looked bleak. As the December Flash Report indicates:
The license revenues growth rate was 35% in USD, 25 points better than the 10% growth we experienced in December FY00 over December FY99. However, excluding the $60 million Covisint license deal, the USD Growth Rate would have been only 6%.
The plaintiffs also point out that the 6% figure was wrong and that the correct number was 1%. There is evidence that Ellison was aware of the error. From this, the plaintiffs argue t
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