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Case 3:04-cv-02401-MJJ Document 25-1 Filed 01/07/2005 Page 1 of 42 1 LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 2 WILLIAM S. LERACH (68581) JONAH H. GOLDSTEIN (193777) 3 DAVID W. MITCHELL (199706) 401 B Street, Suite 1600 4 San Diego, CA 92101 Telephone: 619/231-1058 5 619/231-7423 (fax) 6 Lead Counsel for Plaintiffs 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 10 In re BUSINESS OBJECTS S.A SECURITIES ) Master File No. C-04-2401-MJJ LITIGATION ) 11 ) CLASS ACTION ) 12 This Document Relates To: ) CONSOLIDATED COMPLAINT FOR ) VIOLATIONS OF THE FEDERAL 13 ALL ACTIONS. ) SECURITIES LAWS ) 14 DEMAND FOR JURY TRIAL 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case 3:04-cv-02401-MJJ Document 25-1 Filed 01/07/2005 Page 2 of 42 1 JURISDICTION AND VENUE 2 1. Jurisdiction is conferred by §27 of the Securities Exchange Act of 1934 (“1934 Act”). 3 The claims asserted arise under §§10(b) and 20(a) of the 1934 Act. 4 2. Venue is proper in this District pursuant to §27 of the 1934 Act. Defendants maintain 5 corporate headquarters and conduct business at 3030 Orchard Parkway, San Jose, California, 95134, 6 and the wrongful conduct took place in this District. 7 NATURE AND SUMMARY OF THE ACTION 8 3. This is a securities class action on behalf of purchasers of Business Objects S.A. 9 (“Business Objects” or the “Company”) publicly traded securities during the period from April 23, 10 2003 to April 29, 2004 (the “Class Period”). 11 4. Business Objects is a worldwide provider of business intelligence (“BI”) solutions. 12 The Company offers a suite of BI software that includes data integration, query, reporting, online 13 analytical processing, information broadcasting, business alerts for end users, analytic application 14 frameworks and pre-packaged analytic applications. Its software also includes administration tools 15 that enable information technology professionals to set up and deploy the Company’s products 16 across an enterprise. The Company’s software can be deployed in Web, Windows or mobile 17 environments. The Business Objects product line is divided into three families of products: data 18 integration, BI platform and enterprise analytic applications. 19 5. Business Objects had been the leader in the BI solutions market for several years. 20 However, its competitor, Cognos, emerged and challenged Business Objects as the new leader in this 21 industry. Additionally, Microsoft made efforts to break into BI as well. In order to keep its leading 22 status, Business Objects had to become a full service provider of BI solutions. A key step towards 23 this goal was Business Objects’ acquisition of Crystal Decisions Inc. (“Crystal Decisions”) in 24 December 2003, and the integration of that company’s product line. 25 6. Throughout the Class Period, Business Objects reported record results in publicly 26 disseminated press releases and Securities and Exchange Commission (“SEC”) filings, and 27 forecasted positive earnings and revenue targets. Defendants claimed that the Company’s positive 28 results and forecasts were attributable to, in material part, an increase in the Company’s market share CONSOLIDATED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - C-04-2401-MJJ - 1 - Case 3:04-cv-02401-MJJ Document 25-1 Filed 01/07/2005 Page 3 of 42 1 through: (1) the sales of its Enterprise 6 software; and (2) its acquisition of Crystal Decisions. 2 Defendants claimed that there was incredible symmetry and synergies between the two companies, 3 and that Crystal Decisions was “extremely complementary” to Business Objects. Defendants also 4 stated that the acquisition would make the Company the ‘“clear leader in business intelligence, with 5 the largest customer base, the strongest product line, and the highest revenue in the sector.’” 6 Unbeknownst to the class, however, the Company’s apparent success was the result of defendants’ 7 fraudulent scheme to conceal: (1) the Company’s failure to integrate Crystal Decisions, and the 8 defection of many of the Company’s customers/partners to its competitors due to confusion about 9 the synchronization of pricing and new solution bundles; (2) that the Company improperly inflated 10 its balance in deferred revenue due to manipulations in the deferred revenue balance of Crystal 11 Decisions upon acquisition; (3) that the Company had improperly recognized deferred revenues from 12 a backlog of customer contracts, thereby materially inflating the Company’s reported financial 13 results; (4) that the demand for Business Objects’ Enterprise 6 software was less than that reported 14 by the Company, and that the software was unstable and potentially incompatible with other of the 15 Company’s products; and (5) that the Company was experiencing slower than projected revenue 16 growth, including a material drop in European orders and significant sales losses to Microsoft and 17 Cognos. 18 7. On April 29, 2004, after the market closed, Business Objects shocked investors when 19 it released its first-quarter 2004 earnings result of $0.10 per diluted share, which was not only at the 20 bottom of the range previously forecast by defendants, but also significantly lower than analysts’ 21 consensus estimates of $0.15. Moreover, the Company reported disappointing revenues of 22 $217 million and provided second-quarter 2004 guidance of $220 - $225 million in revenues and 23 $0.16-$0.19 per share earnings, which were well below analysts’ consensus estimates of $232 24 million and $0.24 per share, respectively. In reaction to this news, the price of the Company’s 25 American Depository Shares (“ADS”) dropped sharply, by $6.66 or 23.3%, from their closing price 26 on April 29, 2004, to close on April 30, 2004 at $21.92 on unusually high volume. 27 8. The analyst community reported that Business Objects’ disappointing first-quarter 28 results were attributable to various factors. According to analysts at ThinkEquity Partners, Business CONSOLIDATED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - C-04-2401-MJJ - 2 - Case 3:04-cv-02401-MJJ Document 25-1 Filed 01/07/2005 Page 4 of 42 1 Objects’ Enterprise 6 software was experiencing “product stability issues,” and consumers were 2 unaware of Enterprise 6’s incompatibility with the Company’s Business Objects–Crystal Decisions 3 combined product line. Other analysts explained that the Company’s disappointing first-quarter 4 2004 results were attributable to its failure to integrate Crystal Decisions’ product lines and sales 5 force, and to implement a common sales methodology. On April 30, 2004, RBC Capital Markets 6 issued a report pointing to signs of the Company’s integration problems, including “limited financial 7 guidance including the decision to not disclose segmented Crystal Decisions revenues, management 8 departures including the recent departure of the VP-Americas [John Temple], and a slowly evolving 9 product integration strategy.” On the same day, TD Newcrest issued a report stating, “[i]n our 10 opinion, the forward growth implied in the guidance may indicate that [Business Objects] is losing 11 share to [its competitor] Cognos.” Also on that day, Wedbush Morgan issued a report stating: “We 12 remain concerned about the downward revisions to earnings estimates, the lack of visibility into 13 2004 results ... and the prospects of insider sales.” 14 9. On May 4, 2004, Business Objects disclosed in its first-quarter 2004 report, filed with 15 the SEC on a Form 10-Q, that the SEC had commenced an informal inquiry into the Company’s 16 “practices with respect to backlog,” on “customer contracts that have not yet been recognized on a 17 company’s balance sheet or income statement.” Analysts explained that (1) the SEC inquiry related 18 to the Company’s deferred revenue balance, which increased from $136 million in the fourth-quarter 19 of 2003 to $165 million in the first quarter of 2004 following its acquisition of Crystal Decisions; 20 and that (2) the “risk is that [Business Objects] is improperly recognizing revenue from its order 21 backlog rather than simply failing to disclose the value of the backlog.”. 22 10. During the Class Period, while defendants disseminated materially false and 23 misleading information in order to artificially inflate the price of Business Objects’ securities, 24 defendant Bernard Liautaud sold approximately 220,000 shares of his personally-held shares for 25 proceeds in excess of $6 million, causing injury to plaintiff and the other class members. 26 THE PARTIES 27 11. Lead Plaintiff City of Pontiac Policemen’s and Firemen’s Retirement System 28 purchased Business Objects publicly traded securities and was damaged thereby. CONSOLIDATED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - C-04-2401-MJJ - 3 - Case 3:04-cv-02401-MJJ Document 25-1 Filed 01/07/2005 Page 5 of 42 1 12. Defendant Business Objects is a worldwide provider of BI solutions. The Company 2 offers a suite of BI software that includes data integration, query, reporting, online analytical 3 processing, information broadcasting, business alerts for end users, analytic application frameworks 4 and pre-packaged analytic applications. Its software also includes administration tools that enable 5 information technology professionals to set up and deploy the Company’s products across an 6 enterprise. The Company’s software can be deployed in Web, Windows or mobile environments. 7 The Business Objects product line is divided into three families of products: data integration, BI 8 platform and enterprise analytic applications. 9 13. Defendant Bernard Liautaud (“Liautaud”) was at all times relevant hereto, the 10 Chairman and Chief Executive Officer and a director of Business Objects. Defendant Liautaud sold 11 in excess of $6.5 million worth of shares during the Class Period.

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