Full opinion text
MEMORANDUM OPINION AND ORDER CUMMINGS, District Judge. On this date, the Court considered: (1) Defendants’ Motion to Dismiss and Supporting Brief along with the Appendix in Support, filed July 26, 2004; (2) Plaintiffs’ Opposition to Defendants’ Motion to Dismiss, filed September 9, 2004 (“Response”); (3) Defendants’ Reply to Plaintiffs’ Response, filed September 29, 2004; and (4) Plaintiffs’ Consolidated Class Action Complaint for Violations of the Federal Securities Laws (“Complaint”), filed May 18, 2004. I. PROCEDURAL HISTORY On November 19, 2003, the first of several complaints were filed against Defendants Alamosa Holdings, Inc. (“Alamosa”), Kendal W. Cowan (“Cowan”), David E. Sharbutt (“Sharbutt”), and Steven C. and Michael V. Roberts (“Roberts Brothers”). After several lawsuits were filed by different Plaintiffs, motions to consolidate the cases and appoint a lead plaintiff were filed. The Court entered an order nunc 'pro tunc requiring that all motions to consolidate be filed by February 12, 2004. On February 27, 2004, the Court ordered the consolidation of five pending suits into Civil Action No. 5:03-CV-00289-C. The Court appointed Massachusetts State Guaranteed Annuity Fund as Lead Plaintiff and approved its selection of Lead Counsel on March 4, 2004. Plaintiffs filed their Consolidated Complaint on May 18, 2004. On July 14, 2004, the Court granted leave to exceed the page limitations for briefs. Defendants filed their Motion to Dismiss and Appendix in Support on July 26, 2004. Plaintiffs filed their Response on September 9, 2004. Defendants’ Reply was filed on September 29, 2004. The Court denied a request for oral arguments by Order dated October 19, 2004. On December 7, 2004, the Court granted in part and denied in part Plaintiffs’ Motion to Strike certain exhibits contained in Defendants’ Appendix to their Motion to Dismiss. II. OVERVIEW This action arises out of Plaintiffs’ purchase of Alamosa’s publicly traded securities in an alleged class period from January 9, 2001 to June 13, 2002. Lead Plaintiff, Massachusetts State Guaranteed Annuity Fund, as well as the other Plaintiffs in the consolidated action, allegedly purchased Alamosa’s securities during the alleged class period. Plaintiffs base their claims on alleged misstatements and/or omissions regarding Alamosa’s subscriber numbers and the effect of those subscriber numbers on uncollectible accounts receivable and revenues. Plaintiffs assert claims of strict liability and negligence under §§ 11 and 15 of the Securities Exchange Act of 1933 (“1933 Act”). Plaintiffs also assert claims of securities fraud for violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (“1934 Act”) and Securities and Exchange Commission (“SEC”) Rule 10 — b(5) promulgated under the 1934 Act at 17 C.F.R. § 240.10b-5. Plaintiffs bring their claims against Alamosa, its Chief Executive Officer (Defendant Sharbutt), its Chief Financial Officer (Defendant Cowan), and two of Alamosa’s outside directors (Defendants Roberts Brothers). Alamosa, one of the largest Sprint PCS Network affiliates, sells wireless communications services. Alamosa provides wireless services under the Sprint brand name in a exclusive territory located primarily in Texas, New Mexico, Arizona, Colorado, Wisconsin, Illinois, Oklahoma, Kansas, Missouri, Washington, and Oregon. Ala-mosa owns and is responsible for building and managing the portion of Sprint’s PCS network located in its territory, as well as for marketing and distributing Sprint PCS products and services throughout its territories. Alamosa’s stock began trading on the NASDAQ exchange in February of 2000 and on the NYSE in the fall of 2001. On January 12, 2001, Alamosa registered certain additional shares of its common stock pursuant to a stock registration statement (the “Registration Statement”) that Defendants assert was for issuance as consideration to the former owners of two other Sprint PCS affiliates that Alamosa had contracted to purchase. In February of 2001, Alamosa acquired Roberts Wireless from the Roberts Brothers, and a portion of the common stock issued under the Registration Statement was exchanged to the Roberts Brothers as consideration for the sale of their company. In connection with the acquisition, the Roberts Brothers became members of Alamosa’s board of directors. Following the expiration of a lock-up period, the Roberts Brothers began selling a portion of their shares in October of 2001. The Roberts Brothers sold approximately one-third of their Alamosa shares given to them in exchange for their company. It is not alleged, nor have any SEC filings supported, that Defendants Cowan or Shar-butt sold any of their shares during the putative class period. Sprint develops service plans for its affiliates, including Alamosa, to market Sprint’s products and services to subscribers. At the time of the January 12, 2001 Registration Statement and continuing until May 2001, the Sprint plans required certain customers who did not satisfy specified credit criteria to make a deposit upon the initiation of services, which could be credited against future billings. In May of 2001, Sprint made a change to its service plans by implementing a plan called “No Deposit Account Spending Limit” (“NDASL”). Sprint’s NDASL plan eliminated the earlier deposit feature but maintained a spending limit on the account. This plan lasted until November of 2001, after which Sprint refined its plan to reimpose a deposit requirement for limited classes of subscribers. The refined November 2001 plan was called “Clear Pay.” Alamosa added a majority of its new subscribers from May 2001 to early the following year under the NDASL and Clear Pay plans. Alamosa suspended the credit deposit requirement in May of 2001 and did not reinstate it until February of 2002. In February of 2002, Alamosa announced that it was reinstating its deposit requirements for high-risk credit customers. Each quarter Alamosa disclosed its financial performance for the quarter and the subscriber additions it had received. Alamosa also recorded the revenues associated with the subscribers and estimated on its balance sheet an amount representing the portion of total accounts receivable that may not be collected. On its income statement, Alamosa recorded as an expense the amount it assessed for bad debt associated with the current revenues. On May 1, 2002, Alamosa projected that it would add 30,000 to 35,000 net new subscribers for that current quarter (second quarter of 2002); however, on June 13, 2002, still within that quarter, Alamosa made a public announcement lowering its projected subscriber growth to a revised range of 15,000 to 25,000. Following the announcement, Alamosa’s stock price dropped from $1.47 per share on June 13, 2002 to $1.31 per share on June 14, 2002 (approximately an 11 percent drop in share price). The stock price had already de-dined significantly from its highs before the June 13, 2001 revision. Plaintiffs allege that Defendants made a series of false and misleading statements of fact and/or omissions about subscriber additions. Plaintiffs further allege that Defendants “caused Alamosa to report false financial results via the use of improper revenue and expense recognition, thereby materially [understating] its losses during the Class Period.” Compl. at ¶ 3. Plaintiffs allege that “Alamosa’s financial statements were false and misleading for all four quarters of fiscal 2001 and the first quarter of fiscal 2002, [and] were not fair presentations of its results and were presented in violation of Generally Accepted Accounting Principles (“GAAP”) and SEC rules.” Id. Specifically, Plaintiffs allege, “Alamosa’s false financial results were included in Alamosa’s public press releases as well as quarterly Forms 10-Qs and the annual Form 10-K filed with the SEC.” Id. Plaintiffs allege that [t]hroughout the Class Period, defendants caused Alamosa to disseminate false financial statements and misrepresent the truth about its subscriber growth in order to allow defendants to: (i) raise $481 million by selling of Alamo-sa securities to unsuspecting investors so that Alamosa could pay down its debt and obtain waivers from its lenders given that it was operating in violation of covenants associated with its outstanding credit facility; (ii) keep the price of Alamosa stock inflated so that Alamosa could attempt to use its stock to acquire additional subscribers in order to meet defendants’ promised subscriber growth; and (in) allow director defendants Michael V. Roberts and Steven C. Roberts to cash out over $60 million worth of their own shares, or more than 32% of their Alamosa shareholdings. Compl. at ¶ 5. Plaintiffs’ Complaint rests primarily upon the subscriber numbers. See PI. Resp. at 1 (“Alamosa’s operational success and corresponding stock price were, during the [putative class period], wholly dependent on attracting and retaining wireless subscribers”). In essence, Plaintiffs allege that Defendants’ representations about Alamosa’s growth were false because the subscriber growth was allegedly due, in large part, to Alamosa’s entering into contracts with non-creditworthy subscribers and misrepresenting Alamosa’s subscriber base by signing up non-existent subscribers. Plaintiffs allege that Defendants, by including the credit-risk subscribers and non-existent subscribers, caused Alamosa to falsify its reported financial results through its improper accounting for revenues, accounts receivable, and bad debt expense, thus resulting in materially and artificially inflated sales, income, assets, and shareholder equity. Plaintiffs allege that Defendants were motivated to show strong subscriber growth in order to complete several debt offerings and a common stock offering, to show the market that Alamosa was meeting the terms of its affiliate agreement with Sprint, and to privately show Alamosa’s lenders that it was meeting its financial and statistical credit covenants. Plaintiffs further allege that “[Defendants knew that these same subscribers would later cause massive subscriber defaults and service disconnections.” Compl. at ¶ 9. Defendants counter that this lawsuit is based entirely upon projections that did not come to pass and the resulting decline in stock price. Defendants contend that Alamosa’s net subscriber growth exceeded its forecasts for all four quarters of fiscal year 2001 and for the first quarter of 2002, and in fact, Alamosa increased its projected subscriber growth several times during the year. Defendants further contend that Alamosa reached its forecast of 500,000 subscribers at year end 2001. Defendants assert that the only time they lowered estimated subscriber projections was for the second quarter of 2002 when they made the June 13, 2002 revision statement. Defendants assert that Plaintiffs have no cause of action because the Complaint’s primary allegations relate to Alamosa’s May 1, 2002 estimate of net subscriber additions for the second quarter of 2002 and Alamosa’s June 13, 2002 announcement revising that forecast. Defendants reason that such statements as the May 1, 2002 projection are forward-looking, identified as forward-looking, and accompanied by meaningful cautionary language; thus, the statements, including the May 1, 2002 statement, fall within the safe harbor of the Private Securities Litigation Reform Act of 1995, 15 U.S.C. §§ 78u-4 and 78u-5 (“PSLRA”). Defendants further counter that Plaintiffs have recognized the weakness of a case based on forward-looking statements and have added allegations of misrepresentations of historical fact-that Defendants misstated revenues and bad debt. Defendants asserts that Plaintiffs’ allegations that Alamosa should have disregarded any revenue from the new subscribers or increased allowances for doubtful accounts are without any factual basis to support such a conclusory assertion. Defendants also argue that Plaintiffs have failed to sufficiently allege facts that would give rise to a strong inference of scienter. Finally, Defendants contrast Plaintiffs’ lawsuit to a majority of securities lawsuits challenging accounting practices, in that Alamosa has never been required to restate its financial statements. III. STANDARDS A. Standard for Motion to Dismiss Motions to dismiss for failure to state a claim are appropriate when a defendant attacks the complaint because it fails to state a legally cognizable claim. Fed. R. Crv. P. 12(b)(6). The test for determining the sufficiency of a complaint under Rule 12(b)(6) was set out by the United States Supreme Court as follows: “[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). See also Grisham v. United States, 103 F.3d 24, 25-26 (5th Cir.1997). Subsumed within the rigorous standard of the Conley test is the requirement that the plaintiffs complaint be stated with enough clarity to enable a court or an opposing party to determine whether a claim is sufficiently alleged. Elliott v. Foufas, 867 F.2d 877, 880 (5th Cir.1989). Further, “the plaintiffs complaint is to be construed in a light most favorable to the plaintiff, and the allegations contained therein are to be taken as true.” Oppenheimer v. Prudential Sec., Inc., 94 F.3d 189, 194 (5th Cir.1996). However, the Court will not accept conclusory allegations in the complaint as true. Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982); Robertson v. Strassner, 32 F.Supp.2d 443, 445 (S.D.Tex.1998); Zuckerman v. Foxmeyer Health Corp., 4 F.Supp.2d 618, 621 (N.D.Tex.1998). In ruling on a motion to dismiss a securities fraud cause of action, the court may consider (1) documents attached to the complaint or incorporated into it, (2) the contents of relevant public disclosure documents required to be filed and actually filed with the SEC, or (3) documents referenced in the complaint. See Lovelace v. Software Spectrum, 78 F.3d 1015, 1017-18 (5th Cir.1996). B. Standard for Pleading Securities Fraud Section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j, makes it unlawful for a person, either directly or indirectly [t]o use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 783(b) (2000). In relevant part, Rule 10b-5, promulgated by the SEC under section 10(b), makes it unlawful for any person [t]o make any untrue statement of material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading ... in connection with the purchase or sale of any security. 17 C.F.R. § 240.10b-5 (2001). Thus, in order to state a claim for securities fraud in violation of section 10(b) and Rule 10b-5, a plaintiff must allege (1) a misstatement or omission; (2) of a material fact; (3) made with scienter; (4) on which the plaintiff relied; and (5) that proximately caused the plaintiffs injury. Williams v. WMX Technologies, Inc., 112 F.3d 175, 177 (5th Cir.1997); Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1067 (5th Cir.1994). C. Rule 9(b) Requirements and Particularity Requirements of the PSLRA Because section 10(b) claims sound in fraud, a plaintiff must also satisfy the pleading requirements imposed by Federal Rule of Civil Procedure 9(b). Melder v. Morris, 27 F.3d 1097, 1100 (5th Cir.1994); Tuchman, 14 F.3d at 1067. Rule 9(b) requires certain minimum allegations in a securities fraud case, namely, the specific time, place, and contents of the false representations, along with the identity of the person making the false representation and what the person obtained thereby. Melder, 27 F.3d at 1100; Shushany v. Allwaste, Inc., 992 F.2d 517, 521 (5th Cir.1993). This application of the heightened-pleading standard of Rule 9(b) provides defendants with fair notice of a plaintiffs claims, protects them from harm to their reputation and goodwill, reduces the number of strike suits, and prevents plaintiffs from filing baseless claims and then attempting to discover unknown wrongs. Melder, 27 F.3d at 1100; Tuchman, 14 F.3d at 1067. The PSLRA imposes procedural pleading requirements on plaintiffs pursuing private securities fraud actions. See Goldstein v. MCI WorldCom, 340 F.3d 238, 244-45 (5th Cir.2003). In relevant part, the PSLRA, 15 U.S.C. § 78u-4(b)(l), provides that [i]n any private action arising under this chapter in which the plaintiff alleges that the defendant— (A) made an untrue statement of a material fact; or (B) omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances in which they were made, not misleading, the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed. 15 U.S.C. § 78u-4(b)(l). A plaintiff must plead facts and avoid reliance on eoneluso-ry allegations. Tuchman, 14 F.3d at 1067; Coates v. Heartland Wireless Communications, Inc., 26 F.Supp.2d 910, 915 (N.D.Tex.1998). Stated more specifically, a plaintiff pleading a false or misleading statement or omission as the basis for a section 10(b) and Rule 10b-5 securities fraud claim must, to avoid dismissal pursuant to Rule 9(b) and 15 U.S.C. §§ 78u-4(b)(l): (1) specify each statement alleged to have been misleading, i.e., contended to be fraudulent; (2) identify the speaker; (3) state when and where the statement was made; (4) plead with particularity the contents of the false representations; (5) plead with particularity what the person making the misrepresentation obtained thereby; and (6) explain the reason or reasons why the statement is misleading, i.e., why the statement is fraudulent. See, e.g., Goldstein, 340 F.3d at 245 (quoting ABC Arbitrage Plaintiffs Group v. Tchuruk, 291 F.3d 336, 350 (5th Cir.2002)). “This is the ‘who, what, when, where, and how’ required under Rule 9(b) in our securities fraud jurisprudence and under the PSLRA.” Id. D. Scienter Requirement Plaintiffs asserting securities fraud claims must also allege facts demonstrating scienter. Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1018 (5th Cir.1996); Tuchman, 14 F.3d at 1068; Zuckerman, 4 F.Supp.2d at 622. Scienter is “a mental state embracing intent to deceive, manipulate, or defraud.” Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976); Lovelace, 78 F.3d at 1018. To adequately plead scienter, the plaintiff must set forth specific facts to support a strong inference of fraud. Goldstein, 340 F.3d at 245 (quoting Nathenson v. Zonagen, Inc., 267 F.3d 400, 406-07 (5th Cir.2001)); Tuchman, 14 F.3d at 1068. The PSLRA requires that “the complaint shall, with respect to each act or omission alleged to violate this chapter, state with paHicularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2) (emphasis added). When a complaint fails to plead scienter in conformity with the PSLRA, dismissal is required. 15 U.S.C. § 78u-4(b)(3)(A); Coates v. Heartland Wireless Communications, Inc., 55 F.Supp.2d 628, 634 (N.D.Tex.1999). A plaintiff may plead scienter by pleading facts which identify circumstances indicating a defendant’s conscious or severely reckless behavior. Goldstein, 340 F.3d at 245-46 (emphasis added). Severe recklessness is defined as being “limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the defendant or is so obvious that the defendant must have been aware.” Nathenson, 267 F.3d at 408 (quoting Broad v. Rockwell, 642 F.2d 929, 961 (5th Cir.1981) (en banc)) (emphasis added). A plaintiff may also allege facts to show that a defendant had both motive and opportunity to commit fraud in order to enhance the strength of the inference of scienter. Nathenson, 267 F.3d at 412. But allegations of motive and opportunity alone will not fulfill the pleading requirements. Id. A court may cumulatively consider the scienter evidence pleaded by a plaintiff, Goldstein, 340 F.3d at 247, so long as the totality of the allegations raises a strong inference of fraudulent intent. Zuckerman, 4 F.Supp.2d at 623; Robertson, 32 F.Supp.2d at 447. Properly pleaded circumstantial evidence will suffice to withstand dismissal if the circumstantial evidence justifies a strong inference of scienter. Nathenson, 267 F.3d at 424-25. “However, [a court] will not ‘strain to find inferences favorable to the plaintiffs’ ” when construing whether scienter allegations have been sufficiently pleaded. See Goldstein, 340 F.3d at 244 (quoting Westfall v. Miller, 77 F.3d 868, 870 (5th Cir.1996)) (brackets omitted). IV. DISCUSSION Plaintiffs allege that misstatements of fact and/or omissions were made by the Defendants when reporting and commenting on Alamosa’s subscriber numbers and the effect those numbers had on the amount of revenue and bad debt due to uncollectible subscriber accounts. Plaintiffs allege that financial statements and public statements reporting strong growth in subscriber numbers and revenues were made while Defendants knew, or were severely reckless in disregarding, that a material amount of subscriber accounts would be uncollectible and that financial results were positively skewed by failing to establish proper and timely reserves for accounts receivable. Defendants argue that the statements which Plaintiffs allege as false or misleading are nothing more than general expressions of optimism accompanied by cautionary warnings, thus making them non-actionable. Defendants further argue that Plaintiffs’ Complaint contains eonclu-sory allegations of fraud and therefore fails the stringent-pleading requirements for a securities fraud case. Defendants assert that the Complaint contains many general and non-specific allegations. Defendants move the Court for an order dismissing the Complaint, arguing that the Complaint is wholly inadequate as pleaded. Plaintiffs counter that the Court is to determine the sufficiency of the Complaint after considering the allegations in their entirety. 1934 ACT A. SUBSCRIBER PROJECTIONS AND THE MAY 1, 2002 PRESS RELEASE Defendants argue that the impetus for this lawsuit was Alamosa’s June 13, 2002 downward revision of its second quarter 2002 subscriber projection numbers. Defendants further argue that no claim exists based upon Alamosa’s initial guidance projecting that second quarter 2002 subscriber additions would be between 30,000 to 35,000. Defendants contend that (1) the projection falls within the “safe harbor” provisions of the PSLRA, (2) the projection was reasonable when made and the Complaint fails to plead facts that demonstrate otherwise, and (3) the Complaint merely shows that the projection was revised and ultimately proved to be inaccurate. Defendants argue that this is a classic example of a claimed “fraud by hindsight.” Plaintiffs appear to abandon their claims based on the May 1, 2002 subscriber projection numbers. See Resp. at 32. However, Plaintiffs do argue that the May 1, 2002 projection was not protected by the safe harbor provisions. PSLRA Safe Harbor The PSLRA protects forward-looking statements under the “safe harbor” provisions relating to projections and future performance. See 15 U.S.C. § 78u-5(c)(l). The safe harbor provisions were enacted to allow public companies to disclose their projections and plans without the threat of abusive litigation. See H.R. Conf. Rep. No. 104-369, 42-43 (Nov. 28, 1995). Defendants argue that a court must dismiss a complaint that attempts to impose liability (a) when the statement is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause the actual results to materially differ from the projected results, (b) when the statement is immaterial, or (c) even when the statement is not accompanied by the cautionary language and is material but the complaint fails to plead facts sufficient to show that the statement was made with “actual knowledge” of its falsity. See Def. Mot. Dismiss at 11 (citing 15 U.S.C. § 78u-5(c)(1)(A) and (B)). Thus, the Court will analyze each of these three contentions of protection under the safe harbor provision. 1. Forward-looking and accompanied by meaningful cautionary language First, Defendants argue that the May 1, 2002 press release statement is explicitly identified as forward-looking. Statements contained in this news release that are forward-looking statements, such as statements containing terms such as can, may, will, expect, plan and similar terms, are subject to various risks and uncertainties. Such forward-looking statements are made pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 and are made based on management’s current expectations or beliefs as well as assumptions made by, and information currently available to, management. See Def. Ex. 28 at Def.App.1946. Defendants further argue that meaningful cautionary language brought to investors’ attention a number of important factors, any of which could cause the actual results to differ materially from the projected results. The May 1, 2002 press release explicitly warned that “[a] variety of factors could cause actual results to differ materially from those anticipated in Alamosa’s forward-looking statements,” and specifically included a reference to “changes in Sprint’s national service plans or fee structure^].” Id. Defendants argue that the changes to Sprint’s service plans and fees are the basis of Plaintiffs’ claims in that Plaintiffs allege that Defendants failed to properly require credit deposits on high-risk customers. The warning went on to specifically list “adverse changes in financial position, condition or results of operations.” Id. Moreover, Defendants argue that the May 1, 2002 press release expressly pointed the reader to the “risk factors” section of Ala-mosa’s 10-K for the fiscal year ending December 31, 2001. See id. Alamosa’s 2001 10-K was filed on March 29, 2002, prior to the May 1, 2002 statement. See DefiApp. at 1701. The “risk factors” section of the 10-K cautioned of risks such as weakening economy and recession, competition, and customer turnover. See Def. App. at 1639-48. Moreover, the 2001 10-K expressly addressed the very risk that Plaintiffs allege was not disclosed — the risk that if a deposit requirement was reinstated, subscriber growth could decrease. Id. at 1611. Sprint has the right to end or materially change the terms of the ASL [ (account spending limit) ], NDASL/Clear Pay program or any other program in its sole discretion. If Sprint chooses to do away with the ASL or NDASL/Clear Pay program or reintroduce the deposit requirement nationwide, the growth rate we have experienced could decrease and the decrease may be significant. See Def.App. at 1611. Defendants further argue that investors were put on notice time and time again that changes to programs could cause significant decline in Alamosa’s attraction of new subscribers. See Def. Ex. 8 (10/18/01 Form S-l) at App. 954-55; Ex. 9 (10/25/01 Form S-l/A) at App. 1157-58; Ex. 10 (10/30/01 Prospectus Supplement) App. at 1317; Ex. 11 (11/6/01 Form S-l/A) App. at 1367-68. The crux of Defendants’ safe harbor argument is that Plaintiffs do not have a claim for misrepresentation or omission because actual disclosures warn investors of the very risks that Plaintiffs allege were not disclosed. Melder v. Morris, 27 F.3d 1097, 1100-01 (5th Cir.1994); Capstead, 258 F.Supp.2d at 555-56; Rosenzweig v. Azurix, 332 F.3d 854, 869 (5th Cir.2003); Blockbuster, 2004 WL 884308 at *4-6. Moreover, as discussed above, Defendants argue that the May 1, 2002 projection was identified as forward-looking. Although Plaintiffs concede that they are not challenging the forward-looking projection numbers, see Resp. at 32, Plaintiffs counter that the Court should not accept at this stage whether the items mentioned in express cautionary language were those items thought at the time to be the, or any of the, important sources of variance. See Resp. at 32. Plaintiffs also argue, with regard to the forward-looking projections, that whether a forward-looking statement includes meaningful cautionary language cannot be decided at the pleading stage because the statutory requirement that meaningful cautionary language be included is not itself meaningful or clear. The Court cannot agree because the plain meaning of the statute is clear. See 15 U.S.C. § 78u-5(c)(l). Next, Plaintiffs argue that Defendants’ cited warnings were inadequate, meaningless, and mere boilerplate. See Resp. at 33-34 (citing Asher v. Baxter Int’l Inc., 377 F.3d 727, 734 (7th Cir.2004)). Plaintiffs further rely upon Asher to argue that Defendants’ cautionary language remained fixed while the risks changed. Id. at 734. Plaintiffs fail to explain how Asher is relevant in this instance because the very risks Plaintiffs are complaining of were expressly contained in the “static” cautionary language. The Court finds that the language in this instance was forward-looking and sufficient to clearly warn investors of the risks — in fact, the very risk at issue here. See Reply at 6 (citing sufficient sources for allowing determination of sufficiency of cautionary language on a motion to dismiss). 2. Immateriality Defendants’ second safe harbor argument is that the May 1, 2002 projection of subscriber growth is immaterial because it was not worded as a guarantee and is thus inactionable. Rosenzweig, 332 F.3d at 869; ABC Arbitrage Plaintiffs Group v. Tchuruk, 291 F.3d 336, 359 (5th Cir.2002) (same); Krim v. BancTexas Group, Inc., 989 F.2d 1435, 1446 (5th Cir.1993) (same). Plaintiffs counter that “[mjateriality is a mixed question of fact and law” and the Complaint should not be dismissed “unless the alleged misstatements and omissions are ‘so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance.’ ” See Resp. at 11 (citing Kurtzman v. Compaq Computer Corp., No. H-99-779, 2000 WL 34292632, at *39, 2000 U.S. Dist. LEXIS 22476, at *134 (S.D.Tex. Dec. 12, 2000)). Plaintiffs argue that contested factual allegations should not be adjudicated at this stage. Id. at 12. Plaintiffs further argue that “inferences drawn in plaintiffs’ favor result in the inescapable conclusion that Alamosa’s errors go far beyond plaintiffs’ specific examples” and “[ijndeed, allegations of materiality should not be considered in isolation.” Id. However, materiality is a mixed question of fact and law that may be reviewed by a court in ruling on a motion to dismiss to determine if representations are immaterial as a matter of law. See, e.g., In re Enron Corp. Sec., Derivative & ERISA Litig., 235 F.Supp.2d 549, 573 (S.D.Tex.2002) (citing ABC Arbitrage, 291 F.3d at 359). Thus, the Court finds that, as a matter of law, the projection for subscriber numbers was clearly identified as just that, a projection, and not a guarantee — it was immaterial. S. Actual knowledge that May 1, 2001 statement not true The safe harbor provision does not apply where the defendants knew at the time that they were issuing statements that the statements contained false or misleading information and thus lacked any reasonable basis for making them. In re Enron Corp. Sec., Deriv. & “ERISA" Litig., 235 F.Supp.2d 549, 576 (S.D.Tex.2002). The Fifth Circuit has held that projections do not constitute misrepresentations where the complaint fails to plead specific facts demonstrating that there was no reasonable basis for the forecast at the time it was made or there were specific undisclosed facts known to the speaker at the time the projection was made which tended to seriously undermine the accuracy of the forecast. See Rosenzweig v. Azurix, 332 F.3d 854, 868 (5th Cir.2003). Conclusions will not suffice. Id. Thus, the Court must analyze the parties’ arguments and the allegations of the Complaint regarding whether the Defendants knew of undisclosed facts making the subscriber projection numbers unreasonable, thus allowing those projections to be actionable even though identified as forward-looking projections accompanied by meaningful cautionary language. Defendants argue that even if the cautionary language was somehow deficient, the Complaint fails to allege facts establishing that the May 1, 2002 subscriber projections were made by or with approval of any Defendant who had actual knowledge that the projection was not true. See 15 U.S.C. § 78u-5(c)(l)(B). Defendants contend that the Complaint is bare of specific facts that show actual knowledge of falsity on the part of any Defendant for the May 1, 2002 projection. Defendants assert that Plaintiffs merely make eonelu-sory allegations that Defendants “knew” of the “truth” because of the alleged access to unspecified reports and their alleged participation in unspecified meetings and conversations. See Compl. at ¶¶ 22-23, 26-27, 29-30, 154. Defendants further argue that because Alamosa had actually realized 48,000 net new subscribers in the first quarter of 2002, a projection of 30,000 to 35,000 in the second quarter was not unreasonable. Finally, Defendants argue that the Complaint is completely absent of facts showing what information was known to the Defendants, how such information would have rendered the May 1, 2002 projection unreasonable when made, and that the Defendants failed to consider any such information when making the projection. Defendants summarize that they are not required to be clairvoyant and any allegations that they should have anticipated future events or made certain disclosures earlier than they actually did do not suffice to make out a claim for securities fraud. See Eizenga v. Stewart Enterprises, Inc., 124 F.Supp.2d 967, 985 (E.D.La.2000). Plaintiffs argue that “[a]s discussed herein, plaintiffs have established defendants’ knowledge that their May 1, 2002 statement was false when made.” See Resp. at 33 (citing Compl. at ¶¶ 3-15, 21-34, 45-76, 130-150). Plaintiffs provide no other argument to rebut Defendants’ contention that the Complaint is conclusory and absent of specific facts to support the allegations. Nor do Plaintiffs rebut the argument that the Complaint relies upon unspecified meetings and conversations. The Court finds that under the PSLRA and Rule 9(b), Plaintiffs’ allegations cannot rest on the cited paragraphs of the Complaint — more is required. The Complaint does not sufficiently plead, beyond a conclusory fashion void of specific factual allegations, that Defendants had actual knowledge undermining the subscriber projection numbers in the May 1, 2002 statement or that such projections were unreasonable when made. Based upon the above three arguments pertaining to the PSLRA, Defendants argue that the PSLRA is an absolute bar to Plaintiffs’ claims based on Alamosa’s failure to achieve its May 1, 2002 subscriber number projection and, as such, the claims should be dismissed. The Court agrees and finds that the PSLRA bars Plaintiffs’ claims based upon the May 1, 2002 subscriber projection numbers. As such, any claims based upon the May 1, 2002 subscriber projection numbers are DISMISSED with prejudice. Duty to Revise the May 1, 2002 Subscriber Projections Earlier Defendants assert that the Complaint improperly alleges that Alamosa should have revised its guidance for the second quarter subscriber projections before June 13, 2002. Defendants argue that a Company is under no duty to update forward-looking projections because the voluntary disclosure of an earnings forecast or forward-looking statement does not trigger any duty to update. Defendants contend that Alamosa was free to disclose or not disclose whether its forecast had changed. Once Alamosa made the decision to disclose a change in forecast, Defendants argue, the timing of said decision is a matter of business judgment that is left up to the corporate officers. See R2 Investments v. Phillips, 2003 WL 22862762, at *6 (N.D.Tex. Dec. 3, 2003) (“There is no Rule 10b-5 omission just because the Individual Defendants took longer to disclose than the Plaintiff would have liked.”); Berger v. Beletic, 248 F.Supp.2d 597, 603 (N.D.Tex.2003) (taking longer to report information than plaintiff would have liked is no omission because information was actually reported — just not as soon as plaintiff would have preferred — and the timing is a matter of business judgment as long as defendants abide by the affirmative disclosure requirements of the SEC). Defendants further argue that the Complaint alleges that another of Sprint’s affiliates announced just days earlier that it, too, was lowering its own subscriber forecasts for the second quarter. Defendants state that no specific allegations appear as to why a week’s difference between the revisions of the two affiliates creates a fraud. Defendants argue that, in any event, Plaintiffs could not have been misled during the seven-day difference because Plaintiffs themselves allege that the market already suspected that Alamosa might have to lower its own subscriber numbers in the future because Alamosa’s stock price dropped considerably upon the other affiliate’s prior announcement. Plaintiffs do not specifically address Defendants’ argument regarding the timing of the second quarter 2002 subscriber number projection revision. See Reply (no specific argument regarding timing of revision). However, based on Defendants’ arguments and the fact that the Complaint failed to allege with any specificity on what basis Defendants were required to make an earlier revision, the Court finds that no claim exists on such allegations. B. MISSTATEMENTS OTHER THAN THE MAY 1, 2002 SUBSCRIBER PROJECTIONS Defendants argue that Plaintiffs’ claim based on the May 1, 2002 subscriber projection is obviously so flawed that Plaintiffs have stuffed the Complaint with a hodge-podge of other allegations, also based on the May 1, 2002 statement, which still do not state a claim. Moreover, Defendants argue that the entire basis of the Complaint is that the NDASL/Clear Pay plans were fraudulent and misleading; however, the plans were clearly and fully disclosed and are inactionable because of the disclosure. See Reply at 11 (citing Ex. 8 at App. 954-55; Ex. 11 at App. 1344; Ex. 13 at App. 1611). Plaintiffs counter “that most of the false and misleading statements identified with particularity in the Complaint are actionable.” See Resp. at 31 (emphasis added). Plaintiffs go on to argue that Defendants ignore that the majority of the Complaint is lined with statements (including the May 1, 2002 statement) of present and historical facts which are not sheltered from liability. In re Keithley Instruments, Inc. See. Litig., 268 F.Supp.2d 887, 904 (N.D.Ohio 2002). However, Plaintiffs do not specify which of the alleged “other statements” throughout the Complaint meets this description; rather, Plaintiffs only argue “[wjith respect to one statement — Alamosa's May 1, 2002 press release.” See Resp. at 31-35. Plaintiffs further argue that the May 1, 2002 statement was not forward-looking when referencing the prior quarter’s total subscribers, revenue, and revenue increases. See Resp. at 32; Compl. ¶ 120. Plaintiffs argue that the statement clearly contains some representations of past facts and is thus undeniably actionable. In re VIVENDI UNIVERSAL, S.A. Sec. Litig., No. 02 Civ. 5571(HB), 2003 WL 23724667, 2003 U.S. Dist. LEXIS 19431, at *65 (S.D.N.Y. Nov. 3, 2003). Plaintiffs draw the inference that because the Complaint alleges that all subscriber numbers during the proposed class period included less creditworthy customers, any statements based on those numbers must be false or misleading statements of past fact. The Complaint, however, does not contain facts, but rather only conclusory allegations, that could be interpreted as showing that these representations of past facts were indeed misrepresentations. Moreover, the Complaint fails to properly allege that Defendants knew at the time that the customers would not pay. No facts have been alleged to show that the statements were known to be false when made. Defendants next argue that Plaintiffs’ Complaint fails to plead factual particulars necessary to state a claim. Defendants correctly state that the PSLRA and Rule 9(b) require Plaintiffs’ allegations to specify each particular statement alleged as misleading, separately identify the speaker, allege when and where the statement was made, plead with particularity the contents of the false representation, what the person had to gain who made the statement, and explain why the statement is misleading. Goldstein, 340 F.3d at 246; ABC Arbitrage, 291 F.3d at 350; Blockbuster, 2004 WL 884308, at *11-12. Moreover, Defendants argue that where virtually all the allegations are based on information and belief, the PSLRA requires the Complaint to state with particularity all the facts on which that belief is based, 15 U.S.C. § 78u-4(b)(l), and if the Complaint fails on any one of the pleading requirements, it must be dismissed. Branca v. Paymentech, Inc., 2000 WL 145083, at *7 (N.D.Tex. Feb. 8, 2000). Plaintiffs counter that the Complaint contains a complete section dedicated to pleading particularized facts showing that Alamosa’s recorded revenues and allowances were false or without a reasonable basis. See Resp. at 12 n. 11 (citing Compl. at ¶¶ 134-144). Plaintiffs argue that the Complaint specifically pleads that Defendants violated GAAP requirements for recording allowances for uncollectible receivables and for recognizing revenues when cash is received. Id. at 12-13 (citing Compl. at ¶¶ 140-144). Plaintiffs also argue that the Complaint clearly pleads facts that Alamosa did not follow its own policy of taking into account historical collection experience, current trends, credit policy, and percentage of accounts receivables by aging category. Id. at 13 (citing Compl. at ¶¶ 134, 139, 141-144). Plaintiffs next argue that neither Rule 9(b) nor the PSLRA requires the pleading of evidence of the Defendants’ allegedly fraudulent conduct. ABC Arbitrage, 291 F.3d 336, 356 (5th Cir.2002). However, Plaintiffs do recognize that they are required to specify “the who, what, when, where, and how of [the] alleged securities fraud.” Rubinstein v. Collins, 20 F.3d 160, 163 (5th Cir.1994). Plaintiffs state that the Complaint does exactly that. See Resp. at 6 (citing Compl. at ¶¶ 77-85, 87-96, 99-110, 115-118, 120-122) (what the misstatements were); ¶¶ 22-23, 30, 33, 77-85, 87-96, 99-110, 115-118, 120-122 (who made statements); ¶¶ 86, 97, 111, 119, 123 (why false when made); ¶¶ 10-14, 54-76, 135-38, 143 (how Defendants knew false when made); ¶¶ 5-6, 9, 14, 21-25, 30 (what they obtained thereby). In support of Plaintiffs’ argument that the Complaint adequately alleges Defendants’ misstatements and why they were false when made, Plaintiffs argue that Defendants repeatedly stressed Alamosa’s ever increasing number of subscribers, see Compl. at ¶¶ 7-8, and that Defendants represented that the number of subscribers grew as follows: (1) from 166,127 on January 9, 2001 (¶¶ 77, 81) to 261,345 by April 10, 2001 (¶ 83), then to 316,000 on July 30, 2001 (¶ 91) to 404,000 on October 25, 2001 (¶ 104), and from 503,000 on January 8, 2002 (¶ 116) to 551,000 on May 1, 2002 (¶ 120). Plaintiffs further allege that in order to convince the market that Alamosa was meeting its growth numbers and to facilitate Defendants’ planned sale of their Alamosa shares, Alamosa revised its guidance for the year ending December 31, 2001 upward from 425,000 — 465,000 to 500,-000-525,000. See Compl. at ¶ 105. Plaintiffs allege that despite knowing critical problems, Defendants consistently claimed that Alamosa’s growth strategies would produce significant value for the shareholders, see Compl. at ¶ 80, and that the network build-out was translating into excellent subscriber growth at a rate greater than that of the industry. See Compl. at ¶ 81. Plaintiffs base these allegations on the conclusory assertion that Defendants knew at the time the subscriber numbers were stated that the company was using improper accounting and fictitious subscriber numbers in order to achieve its forecast numbers. Resp. at 8. Defendants argue that, in this regard, the Complaint offers only “boilerplate assertions” of purported knowledge by the grouped “defendants,” but contains no alleged facts to show that Defendants Sharbutt and Cowan did not reasonably believe in their views or optimism at the time they expressed them or that either knew of any undisclosed facts that seriously undermined the accuracy of their views. See Compl. at ¶¶ 77, 80-81, 83, 89, 91, 104, 107, 114, 116-17, 120. Plaintiffs contend that [tjaking inferences in plaintiffs’ favor leads to the conclusion that Alamosa improperly set its allowances for uncol-lectible accounts receivable lower than reasonable estimates under the circumstances (in particular, the circumstances that Alamosa had signed up tens of thousands of sub-prime customers without deposits), or did not have the ability to estimate losses, in which case revenue recognition should not have occurred until Alamosa received cash as payment for its services. See Resp. at 13 (citing Compl. at ¶¶ 142-144). However, the Complaint fails to allege any particulars as to what method the Defendants used to make the estimate and why that was unreasonable. Simply alleging in a conclusory fashion is insufficient. The Court agrees with the Defendants. These statements are inactionable because the Complaint fails to plead facts demonstrating those statements were made with actual knowledge of their falsity. See Compl. at ¶¶ 80, 89, 90, 107, 114, 117. Plaintiffs have failed to plead particulars, as is required, to support their contention regarding knowledge. Conclusory allegations disguised as facts will not suffice to survive a motion to dismiss. Kaiser Aluminum, & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982); Robertson v. Strassner, 32 F.Supp.2d 443, 445 (S.D.Tex.1998); Zuckerman v. Foxmeyer Health Corp., 4 F.Supp.2d 618, 621 (N.D.Tex.1998). Plaintiffs have surmised that Defendants knew of critical problems because of the positions and access to unspecified reports and meetings. Plaintiffs failed to plead any factual particulars to support such a leap in logic. 1. Improperly Counting Subscribers Defendants contend that the Complaint fails to specify the identities, numbers, and descriptions of accounts labeled as “fictitious” or “fraudulent.” Defendants further argue that the Complaint lacks specific factual allegations to support a contention that Alamosa actually misrepresented a material number of subscribers obtained through the alleged conduct or that any Defendant was involved in such conduct or knew of any material misconduct. a. Confidential Witnesses The Complaint relies largely upon confidential witnesses for its allegations that fraudulent accounts were created by (1) issuing unnecessary phones to management level Alamosa personnel, (2) double counting cancelled accounts, (3) issuing unauthorized additional accounts to subscribers, and (4) creation of fictitious accounts. The Complaint also relies upon the confidential witnesses to support allegations of misleading investors about the churn-rate numbers and allegations that charges were waived for customers who allegedly wanted to cancel accounts. Defendants argue that the confidential witnesses’ statements are simply inadequate to support the broad allegations of the Complaint and that the Complaint does not show that the confidential witnesses were in positions where any possessed information relating to Alamosa’s public disclosures or financial accounting. Plaintiffs must allege sufficient particulars to show the probability that the confidential sources actually possess the information pleaded. See ABC Arbitrage, 291 F.3d at 350. Defendants argue that all of Plaintiffs’ confidential sources are alleged to be personnel who worked in sales and marketing out in the field — thus, no allegations are made that any of them worked at Alamosa’s corporate headquarters or had a role in drafting or preparing public disclosures and financial statements. Defendants further contend that no allegations are made that these confidential witnesses had any communications with anyone at the corporate headquarters regarding improper subscriber additions. Moreover, Defendants assert that the Complaint lacks any factual particulars that any of the sources has knowledge to demonstrate what information was before each of the Defendants, or what any of the Defendants may have authorized/directed as to any purportedly fraudulent scheme or practice. Defendants further argue that the Complaint merely alleges that unidentified Ala-mosa “senior executives” communicated that Alamosa’s goal for year-end 2001 subscribers was 500,000, a number readily available in public disclosures. Finally, Defendants argue that the setting of aggressive targets and creating pressure to meet those targets do not amount to a strong inference of scienter. See In re Bristol-Myers Squibb Sec. Litig., 312 F.Supp.2d 549, 568 (S.D.N.Y.2004); In re Enron Corp. Sec., Derivative & ERISA Litig., 235 F.Supp.2d 549, 580 (S.D.Tex.2002) (allegations that are consistent with normal business activity of a business, standing alone, are insufficient to state a claim of primary liability). Plaintiffs counter that the Complaint specifically pleads Defendants’ “scheme and wrongful course of business used to achieve the increased subscriber growth and [Defendants’ improper revenue and expense recognition regarding new subscribers.” See Resp. at 8 (citing Compl. at ¶¶ 54-76, 130-150). Plaintiffs further argue that four of the confidential witnesses “were at Alamosa’s management level during the Class Period” and “one of them was an Area/VP Director of Retail Sales, and all of the witnesses were involved in a sales reporting function.” Id. at 9 (citing Compl. at ¶¶ 46-53). Plaintiffs argue that every confidential witness was in a position to know what corporate sales initiatives, targets, and methods were planned, implemented, and changed. Id. (citing Compl. at ¶¶ 45-53). Thus, Plaintiffs contend, “the confidential witnesses sufficiently provide the factual particulars required to explain defendants’ schemes throughout the Class Period that are the core to plaintiffs’ claims.” Id. However, Plaintiffs do not rebut the argument that the Complaint lacks allegations of factual particulars that any of the sources had knowledge to demonstrate what information was before each of the Defendants. Moreover, Plaintiffs’ allegations that the setting of aggressive price targets created pressure for these sales and marketing employees to create these allegedly fictional accounts is inadequate to create a strong inference of scienter on Defendants’ part. The Complaint fails to properly allege particulars to show that Defendants had knowledge of these acts. b. Materiality of actual subscriber numbers In addition, Defendants contend that no specific facts demonstrate that a material number of improper subscribers was counted; rather, the only number alleged in the Complaint is that 1,000 subscribers were improperly added in the fourth quarter of 2001. See Compl. at ¶¶ 60, 137. Defendants argue that even had a factual basis for such a contention been pleaded, the number is immaterial because the number represents only one-tenth of one percent of Alamosa’s subscribers for 2001 and one percent for the fourth quarter. Defendants also argue that even if the 1,000 subscribers were removed from the quarterly and year-end numbers, Alamosa would have still met its projected subscriber numbers for each of those periods. In their Reply, Defendants state that “the Complaint’s allegations that Alamosa improperly counted subscribers are no longer at issue because the [Response] does not refute that (a) no specific facts are alleged in the Complaint to support any claim that a material number of improper subscribers were counted by Ma-mosa and (b) the only number of allegedly fictitious subscribers that the Complaint identifies (an allegation of 1000 subscribers) is immaterial as a matter of law.” See Reply at 9 (citing Mot. Dismiss at 22-23). The Court finds that, as argued by Defendants, Plaintiffs only alleged 1000 fictitious subscribers in their Complaint, and that number is immaterial as a matter of law when viewed in the context of the total number of subscribers added for the relevant quarter and year. If the entire alleged amount of 1000 were removed from the fourth-quarter 2001 amount and the entire year-end 2001 amount, Alamosa would have still reached its projected numbers. 2. False Financial Reporting Defendants argue that Plaintiffs “eonced[e] that the Complaint failed to quantify the allegedly fictitious subscribers and accounts, or to connect these issues to Alamosa’s financial statements[; thus,] Plaintiff retreats to the position that ‘more important than the exact number of nonpaying “customers” Alamosa counted as subscribers, Plaintiff alleges that overstated dollar value of pre-tax income and revenues for each quarter of the Class Period.’ ” See Reply at 12 (quoting Resp. at 12). Defendants assert that the Complaint, however, fails to plead a case of false financial reporting by stating in a conclusory manner that Alamosa had improper recognized revenues for subscribers whose payment was not “reasonably assured” or alternatively had not recorded sufficient allowances for uncollectible accounts. Defendants argue that the Complaint provides no factual basis for these allegations. Defendants contend that Alamosa has never been to restate its financial statements. Defendants further argue that even if Alamosa had failed to comply with GAAP standards as alleged in the Complaint, non-compliance with GAAP alone will not support a federal securities fraud claim. See Lovelace, 78 F.3d at 1020; Capstead, 258 F.Supp.2d at 551 (citations omitted). Moreover, as argued above, Defendants contend that the confidential witnesses relied upon by the Plaintiffs were not competent to opine on the alleged accounting fraud. a. Facts Showing Improper to Recognize Revenue The Complaint is not clear as to what amount of revenues Alamosa should have recognized from the NDASL/Clear Pay subscribers. Defendants argue that determining which accounts have a reasonable assurance of collectibility is a matter of judgment and estimate that depends on the particular facts, and the bare proposition that collectibility of revenues is not reasonably assured, without more, cannot support a claim for securities fraud. See In re Galileo Corp, Shareholders Litig., 127 F.Supp.2d 251, 265 (D.Mass.2001). Defendants argue that the Complaint fails to identify any of the “less creditworthy” customers or explain why any of them would be less likely to pay that particular bill. As such, Defendants argue, no factual allegations have been pleaded to support the theory that revenue could not be recognized for subscribers under the NDASL/ Clear Pay plans. See Stack v. Lobo, 903 F.Supp. 1361, 1368 (N.D.Cal.1995). Allegations must identify specific transactions in which there was improper revenue recognition and the materiality of such transactions and must identify any resulting restatements. See Zishka v. American Pad & Paper Co., 2001 WL 1748741, at *2 (N.D.Tex. Sept. 28, 2001). Defendants further argue that the Plaintiffs again attempt to rely on information and belief of confidential witnesses yet provide none of the required detail for such sources. Defendants state that the confidential witness statements, and thus the Complaint, do not support the sweeping conclusions Plaintiffs ask this Court to infer. See Reply at 12. The Court agrees with Defendants’ arguments and finds that the Complaint fails to allege adequate detail as to the qualifications of the confidential witnesses and their positions in making the sweeping allegations charged in the Complaint. b. Failure to Plead Facts That Alamo-sa Misstated Alloivance for Doubtful Accounts Defendants argue that Plaintiffs’ alternative allegation that Alamosa should have set aside a greater allowance for uncollectible doubtful accounts fails to plead facts demonstrating that Alamosa falsely set the amounts or that it misrepresented the approach it used to estimate the allowances. Defendants argue that each quarter’s allowance was a forecast based on the exercise of business judgment and only reasonable predictions are required rather than perfect predictions. Defendants contend that the Complaint fails to plead facts, as opposed to conclusions, showing that Ala-mosa did not follow its own policy by taking into consideration the historical collection experiences, current trends, credit policy, and a percentage of its accounts receivable by aging category. Defendants argue that just the opposite is evident-Alamosa disclosed its estimating method and the factors it considered in making the assessment. See Def. Ex. 13 at App. 1632, 1676. Defendants contend that Alamosa also reported that it had recorded increases to its allowances for doubtful accounts beginning in the third quarter of 2001 as compared to the first quarter of 2001. See Def. Ex. 12 at App. 1585; Ex. 2 at App. 296; Ex. 3 at App. 326; Ex. 13 at App. 1679. Defendants argue that Plaintiffs have failed to plead with particularity that the amount kept in reserves was so low as to be fraudulent, especially in light of the fact that Alamosa had increased its reserve. See Druskin v. Answerthink, Inc., 299 F.Supp.2d 1307, 1328 (S.D.Fla.2004). Defendants state that it is not enough to allege that an allowance for doubtful accounts was inadequate; rather, the Complaint must plead with specificity why the figures were the result of fraud and not merely business judgment. See Seigel v. Lyons, 1996 WL 634206, at *2 (N.D.Cal. Sept. 16, 1996). A company is not required to set its reserve at any predetermined percentage of receivables. See Stack, 903 F.Supp. at 1369. Defendants urge the dismissal of Plaintiffs’ “fraud by hindsight” claims. Plaintiffs assert that the increased bad debt expense over time supports its allegations that Alamosa’s allowances for doubtful accounts and bad debt were without basis. See Resp. at 11-13 (“It is axiomatic that periods of improperly recorded revenue are followed by periods of elevated bad debt expense.”). Plaintiffs wish to infer that Alamosa under-reported bad debt because bad debt expense increased during and after the alleged class period. Plaintiffs do not allege facts showing that the estimates for bad debt and allowances for doubtful accounts were unreasonable when made; nor do the confidential witness statements address these issues. Finally, Plaintiffs have failed to allege facts to show that the increased reported bad debt, most of which is alleged to have been reported in quarters following the alleged class period, is directly related to actions by Defendants that