Full opinion text
RULING ON MOTION FOR SUMMARY JUDGMENT ALVIN W. THOMPSON, District Judge. The plaintiffs bring this class action on behalf of all persons who purchased common stock from Xerox Corporation (“Xerox”) during the period from October 22, 1998 through October 7; 1999, alleging violations of the Securities Exchange Act of 1934 (the “Exchange Act”). The plaintiffs bring their claims under Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a) respectively, and Rule 10b-5,17 C.F.R. § 240.10b-5, promulgated by the Securities and Exchange Commission pursuant to Section 10(b). The defendants, Xerox Corporation (“Xerox”) and Xerox executive officers Barry Romeril, Paul A. Allaire and Richard Thoman, move for summary judgment on all claims in the plaintiffs’ Amended Consolidated Class Action Complaint (the “Complaint”). For the reasons set forth beloW; the defendants’ motion for summary judgment is being granted. - I. FACTUAL BACKGROUND A. The Worldwide Restructuring On April 7, 1998, Xerox announced a company-wide restructuring (the “Worldwide Restructuring”). The Wqrldwide Restructuring consisted of 150 initiatives in Europe, Africa, Latin America, Asia and the United States. Xerox announced: As a result of a six-month planning process involving more than 50 teams, Xerox will implement some 150. specific projects. Among them: • Streamline and rationalize worldwide manufacturing, logistics,' distribution and service operations. For example, Xerox will centralize and consolidate U.S. parts depots and outsource storage and distribution. • Move' from country-centric operations in Europe to a more “pan-European” structure to provide more efficient customer support. The company will rationalize and consolidate functions and locations to reduce duplication and to increase speed of response to, the marketplace. • Overhaul administrative processes and associated resources to achieve significantly greater productivity and speed of implementation. For example, Xerox will close one of four geographically-organized U.S. customer administrative centers with the remaining three re-focused by customer segment, enabling improved customer support at lower cost. When fully implemented the ongoing pre-tax savings from the initiatives will be approximately $1 billion annually. Initially, more than half of the savings will be reinvested to implement process and systems changes in order to enable the restructuring, and in ongoing efforts to broaden and strengthen marketing programs and distribution channels to enhance revenue growth. Paybacks will be spread over three of four years, particularly in Europe where the process of implementation is more complex. Press Release, Xerox Corp., Xerox Announces Worldwide Restructuring To Enhance Competitiveness in the Digital World: Company Will Eliminate 9,000 Jobs and Take $1 Billion After-Tax Charge IRX-PROD-0033970-71 (Apr. 7, 1998) (Levine Decl. Ex. 3). B. The 1998 Customer Business Organization Reorganization Xerox’s July 1998 reorganization of its Customer Business Organization (“the CBO Reorganization”) was one of the Worldwide Restructuring initiatives. The Customer Business Organization provided administrative support to Xerox’s U.S. sales force, also known as the North American Solutions Group (“NASG”). There were two major components of the CBO Reorganization. First, Xerox closed one of its four Customer Administration Centers and redistributed business among the remaining three centers, which it renamed Customer Business Centers (“CBCs”). CBC employees entered customer orders, recorded revenue, sent out bills, and answered customer questions. Second, Xerox removed Customer Business Representatives (“CBRs”) from its 36 regional sales offices (the Customer Business Units or “CBUs”) and transferred their duties, including order entry and processing and scheduling and delivery of equipment, to employees at the three remaining CBCs. CBRs were redeployed into other assignments at the CBUs. New employees were hired at the CBCs to perform the CBRs’ former duties. As Senior Vice President of Xerox’s Customer Business Operations, Kenneth Baugher, observed in September 1999 that service level problems arose following the CBO Reorganization: Background In mid 1998, the Customer Business Centers (CBCs) were restructured to reduce General & Administrative costs consistent with Corporate priorities. Specifically, all order processing was centralized from the Customer Business Units (CBUs) into the Business Centers and equipment management was transferred from the CBUs to the Integrated Supply Chain (ISC). The number of Centers was reduced from 4 to 3 and the customers handled by each Center were realigned by customer type rather than by Sales District. As part of this restructure, roughly 500 heads were captured. The Problem Service level problems started to materialize immediately after the [CBO Reorganization] (especially in Chicago — our largest Center — which had undergone the largest degree of change). Order processing errors were frequent, order times stretched out to unacceptable levels, and Sales Reps could not get to the right people in the CBCs to resolve issues. Days Sales Outstanding (DSO) and Aged Receivables started to climb, billing errors increased, and customers could not reach anyone to answer their questions. As a result, Sales Reps were drawn into the gulf to try to get orders processed, equipment delivered, and invoices corrected. Additionally, CBC workload, overtime, and pressure increased to intolerable levels and turnover increased, which exacerbated the problem. Root Causes Root causes for the problem are lack of resources, loss of skills, and disruption. Specifically, we lacked the systems and process improvements to support the resource reduction. Additionally, we lost hundreds of man-years of experience when we redeployed the highly experienced Customer Business Representatives into other assignments in their local CBUs and hired many completely new people in the Centers. CBC Background Summary IRX-PROD-0110462 (Levine Decl. Ex. 87). Compounding these problems, Xerox assigned billing and collection personnel to order entry, so that there were fewer employees available to fix the bills and collect on them. By December 1998, A/R aged more than 120 days had increased 450% from $50 million in December 1997 to $225 million. DSO increased 17% from the second quarter of 1998, the quarter immediately preceding the implementation of the CBO Reorganization, to the third quarter of 1998, the first quarter following its implementation. C. The 1999 Sales Force Realignment On January 6,1999, Xerox “announced a series of initiatives designed to allow the company to better capitalize on growing digital market opportunities and create greater value for customers and shareholders” (the “1999 Sales Force Realignment”). Press Release, Xerox Corp., Xerox Realigns Operations to Better Capitalize on New Growth Opportunities in the Digital Marketplace (Jan. 6, 1999) (Levine Decl. Ex. 22). Xerox planned to realign its sales force territories from geography-based selling to industry-based selling and realign its document processing business under four operations: Industry Solutions, General Markets, Developing Markets and Business Group Operations. The process would evolve over the course of a “couple of years,” with “no significant changes to sales force territories or compensation” planned in 1999. Id. Xerox began the planning and implementation of some aspects of the Sales Force Realignment in the first quarter of 1999. By the middle of 1999, there was unrest in the sales force as a result of the sales reorganization. D. Internal Communications Problems arising out of the CBO Reorganization were discussed or alluded to in various Xerox internal documents relied upon by the plaintiffs. On September 25, 1998, Margaret Tytheley, a 26-year Xerox employee emailed Paul Alaire and Richard Thoman, stating that “It appears very [l]ittle planning, if any, went into this transition. Segment centers were not prepared for the magnitude of customer calls and inquiries.” Email to Paul Allaire IRX-PROD-0036150 (Sept. 25, 1998) (Levine Decl. Ex. 9)’ The plaintiffs have proffered a conclusion of their accounting expert, Charles R. Drott, that Xerox had established an accounts receivable reserve of only $16.6 million for the third quarter of 1998, which resulted in an understatement of reserves for uncollectible accounts that quarter of $20 million; Drott is critical of the fact that the reserve had only been increased by $3 million. See Charles R. Drott, Expert Report of Charles R. Drott ¶ 3.3, at 8 (Oct. 15, 2007) (Levine Decl. Ex. 111). Drott relies on an October 14, 1998 memorandum from Gary Kabureck, Vice President, Financial Services, to Daniel S. Marchibroda, the subject of which is “Third Quarter 1998 Reserve Reviews.” In that memorandum, Kabureck observes that there has been “a significant reduction in the volume of write-off activity,” with'respect to both notes receivable and trade receivables, “due directly to the disruption resulting from the recent re-organization of the USCO Customer Administration Organization.” Memorandum from Gary Kabureck to Daniel S. Marchibroda KPMGGIA002637B (Oct. 14, 1998) (Levine Decl. Ex. 10). However, Kaburek also notes that the third quarter trade receivable write-offs had also declined fairly significantly and concludes: “While we do hot believe we have additional risk to the 6 + 6 provision outlook of $3.0M greater than Plan, we will continue to closely monitor balance of the year write-offs, recoveries and file aging to ensure the reserve balance is adequate.” Id. On October 26 and 27, 1998, accounting firm KPMG visited the Xerox North Texas customer administration center. Under the heading “CBC Transition Issues,” an internal memo documenting that visit states: Sales representatives are very unhappy with the lack of face to face interaction with the CBRs____ Bill believes the CBC transition has directly impacted the CBU’s performance. Since the transition their best sold revenue day is approximately $600K. Prior to the transition $1 million sold revenue days were common .... Customér service has been impacted significantly by the restructuring. All the CBC’s have high call response times. In addition, there is a large percentage of abandoned calls. None of the CBC’s are close to the KB & CA metrics established for this area. The lack of tenured personnel is evident in the length of time it takes to complete each call. Memorandum -from .KPMG on Xerox North Texas CBU Summary Memo KPMGGIA 008857-58 (Nov. 6, 1998) (Levine Decl. Ex. 116). A November 6, 1998 internal memorandum prepared by Philip D. Fishbach and sent to the Operations Committee, which was received by defendants Allaire, Tho-man and Romeril, states: Accounts receivable funds usage was $390 million through September 30, 1998, which is $224 million worse than prior year and $77 million worse than plan. Accounts receivable as a percent of revenue is currently at 12.3%, which is (0.4) pis. worse than plan. USCO and XBS both show significant deterioration in DSO since Q2. USCO and XBS’s DSO at September 30, 1998 is 51.5 days and 48.9 days, respectively, which is 8.2 days and 7.4 days worse than plan and 7.7 and 5.4 days worse than Q2, respectively. The deterioration is largely driven by the .reorganization of the customer administration centers in the U.S. Memorandum from Philip D. Fishbach on Document Processing Non-financing Funds September YTD and Q4 Assessment to Operations Committee IRX-PROD-0142783 (Nov. 6, 1998) (Levine Decl. Ex. 117). The memorandum showed “Restruetüre savings” of $55 million. Id. at IRX-PROD-0142782. On November 23, 1998, Tim White, Tim Egan and W.P. Tehan of KPMG visited the Xerox Chicago customer administration center. Ah internal memorandum to file, authored by Tehan, states that after the realignment the Chicago CBC handled 60% of Xerox’s customer volume. However, 51% of the employees in Chicago had “less than one year of Xerox experience” which was a “significant challenge because it [took] at least 18 months for an individual to become familiar with Xerox’[s] systems and OTI procedures,” and that “several customer care metrics were noticeably below plan and the prior year. For instance, average call response time, percentage of calls abandoned and overall customer satisfaction had declined significantly from June 1998.” Pi’s. 56(A)(2) Statement ¶ 23 (quoting Anthony Saunders, Expert Report of Professor Anthony Saunders 23 n.75 (Oct. 15, 2007) (Levine Decl. Ex. 113)) (alterations in original). On December 2, 1998, Tehan of KPMG drafted an internal, .memorandum documenting the KPMG field visit to the Chicago CBC. Under the heading “Customer Care,” Tehan states: During our visit to the North Texas CBU KPMG noted that several customer care metrics were noticeably below plan and the prior year. For instance, average call response time, percentage of calls abandoned and overall customer satisfaction declined significantly from June 1998. Although this process may not have an immediate financial statement impact, continued deterioration in overall Customer Care performance could present problems in the future. Memorandum from W.P. Tehan to File, KPMG Field Visit to the Chicago Customer Business Center (CBC) KPMGGIA009730 (Levine Deck Ex. 20). Under the heading, “Billing Quality,” Tehan identified “[p]rocess errors,” “[d]ata errors (i.e., human input),” “[d]elays in processing (market code or pricing table updated in Sale Range, but not updated in EBS),” and “[p]ricing (too complex)” as “[t]he top billing quality issues.” Id. at KPMGGIA009731. He also stated that Lindsey Bates, a Billing Quality Manager at Xerox “concurred with problems associated with invoices not mailed in a timely fashion (this has been a re-occuring theme during our confirmation routine).” Id. Under the heading “Accounts Receivable,” it states: “As of October 1998 Chicago’s trade DSO was 59 days (an increase of approximately 2 weeks over the prior year). At October 1998 $110 million of their trade A/R file was aged greater than 120 days.” Id. On December 9, 1998, A. Barry Rand, Xerox’s Executive Vice President, Customer Operations, sent an internal memo to Allaire, Buehler, Romeril and Thoman observing that he had discussed with them several times the need to minimize sales force disruption. See Memorandum from A. Barry Rand to Distribution IRX-PROD-0108847 (Dec. 9, 1998) (Levine Deck Ex. 18). He pointed out that in 1993 and 1995 when Xerox had “major ground plans and/or sales compensation changes,” sales force disruptions led to a decrease in revenues. Id. He stated that “change management is key to minimize disruption,” and pointed to a number of factors with respect to 1999: “Public Sector created; CBC Impacts; NAM organization realigned and verticalized; Centralization of house accounts; Hybrid marketing launched;1 Entity/CBU resizing;. Anxiety of changes to come.” , Id- at IRX-PROD-0109150-51. In a Xerox internal memo dated December 17, 1998, Xerox’s Director of Customer Satisfaction and Loyalty Peter Garcia states' that Xerox was “not meeting customer expectations for maintaining relationships with them, [were] not meeting customer expectations for Digital products, support and/or service and that [Xerox had] not done a good job in minimizing the customer impacts of [Xerox’s] operational process changes.” Pi’s. 56(A)(2) Statement ¶ 29 (quoting Anthony Saunders, Expert Report of Professor Anthony Saunders 24-25 (Oct. 15, 2007) (Levine Decl. Ex. 113)) (alterations in original). On January 6, 1999, defendant Thoman gave a presentation to Xerox executives. One part of the presentation is entitled “Much to be worried about.” Presentation IRX-PROD-0141480 (Jan. 6,1999) (Levine Decl. Ex. 21). In that section, he discussed digital players requiring high growth. He stated that “Restructuring is enabling us to deliver on earnings growth,” and also stated that “Revenue growth has hit a wall.” In addition, he stated “Our performance does not equal our promise.” Id. William Buehler sent a May 3, 1999 memorandum to Thomas Dolan, with copies to defendants Romeril and Thoman, reviewing issues related to the CBO Reorganization: Tom, thanks again for a very thoughtful 3+9 Review. Your analysis clearly demonstrates the top issues that we must address to get NASG back on a successful track — namely: • Customer Satisfaction • Top Line Growth • Sales Coverage/Productivity • Service Performance CBC and Receivable Performance. The submitted Full-Year profit assessments are nearly $500 million worse than plan (of which NASG is $200 million) and would deliver a year over year decline in profits in both Q2 and Full Year, which is obviously unacceptable. Memorandum from William F. Buehler to Thomas Dolan on 3 + 9 Direction IRX-PROD 0252096 (May 3, 1999) (Levine Decl. Ex. 52). In an internal memo dated May 21, 1999, William Buehler stated that “ ‘Sales people spend 25-35% of each day on the administrative duties (equivalent to 1800 full time people).’ ” Pi’s. 56(A)(2) Statement ¶ 30 (quoting Anthony Saunders, Expert Report of Professor Anthony Saunders 29 (Oct. 15, 2007) (Levine Decl. Ex. 113)). Buehler also stated that “Customers [are] refusing to pay bills that are 4-6 months late.... [It is] difficult to collect on an inaccurate, late bill.” Id. ¶ 31 (quoting Anthony Saunders, Expert Report of Professor Anthony Saunders 26 (Oct. 15, 2007) (Levine Decl. Ex. 113)). Buehler further stated that “[t]he overriding issue in North America is the terrible condition of our administrative processes — CBC and ISC.” Id. (quoting Memorandum from William Buehler on Roundtable Meetings to A1 Dugan IRX-PROD-0015597 (May 21, 1999) (Levine Decl. Ex. 114)). An internal Xerox document prepared in May 1999 states “CBR’s in Chicago are a problem. — Don’t know what they are doing — Don’t return phone calls — Don’t know where to get help.” Pi’s. 56(A)(2) Statement ¶ 32 (quoting Anthony Saunders, Expert Report of Professor Anthony Saunders 25 (Oct. 15, 2007) (Levine Decl. Ex. 113)). In a July 1, 1999 internal memorandum from Patrick Fulford to Baugher, Ciaschi and others not including any of the individual defendants, with the subject line “NASG State of Emergency,” Fulford stated: I have just spent the last two days reviewing a preliminary 6 + 6 NASG Outlook. This outlook was developed by the finance staffs working with members of your organizations. I apologize if you haven’t seen any of this yet, but I thought it was important to get it out as quickly as possible. Although we will be spending time on this matter in early July, I felt compelled to give you a ‘heads-up’ to a very serious situation. I’ve summarized the key problems included in the 6 + 6 Outlook.... In short, this outlook indicates approximately a $310 profit risk to the 3 + 9 Outlook taking our full year plan miss to $507M. Our year-over-year profit decline would be 8% (yes, it takes my breath away too). Clearly, we will work together in early July to scrub the numbers but the risks are real unless we intervene immediately. In my view, this is a crisis and represents a state of emergency.... We need to review every investment area. The review should include investments under way and those planned for second half start-up. A state of emergency mind-set would dramatically reduce the investment profile with maybe 1 or 3 initiatives surviving. We also need to consider a full hiring freeze in all areas including Selling (probably excluding the CBC’s). Memorandum from Patrick Fulford on NASG State of Emergency IRX-PROD-0254292 (July 1, 1999) (Levine Deck Ex. 67). An internal Xerox presentation document dated July 22, 1999 discusses problems related to the CBO Reorganization. The first line addresses headcount. The three bullet points at the bottom read: • “Too far too fast” ahead of enablers • 6 + 6 adds back 275 of 420 heads removed in 1998 + outsourcing • Still may not be enough — massive backlog (aged receivables, customer inquiries, billing errors) — less experienced workforce — more complex business (CPC/Pooling, etc.) Strategy Contract Slides IRX-PROD-0222989 (July 22, 1999) (Levine Deck Ex. 70). The next slide discusses the “Current State.” One portion of it reads: “We have a five alarm fire — major impact on customers and sales productivity.” Id. at IRX-PROD-0222990. The slide discusses “Characteristics” and “Results” of those characteristics, with four bullet points under the Results: • LOS at all time low: — Order Processing — Fulfillment — Billing Timeliness/Accuracy — Customer & Field Inquiries • Excessive cash (Receivables & Inventory) usage • Sales Productivity impacted as reps backstop process failures and respond to customers • Employees under severe duress — Crisis on multiple fronts — causing unstable priorities — Workload/Pressure — Do not feel successful Id. A subsequent slide, captioned “CBO Performance Gap Root Causes,” identified four categories, “Reduced resources without major enablers,” “Loss of experience/skill,” “Disruption,” and “Loss of alignment with Sales.” Id. at IRX-PROD-0222991. The presentation then set forth a “90 Day Recovery Plan,” which included adding headcount as had been reflected in the [6 + 6 projection]. Id. at IRX-PROD-0222993. On July 26, 1999, Kenny R. Baugher, who had joined CBO as a senior vice president in the NASG Customer Business Operations the prior month, sent a memorandum to Customer Business Operations Employees on the subject of “CBO Recovery.” Memorandum from Kenny R. Baugher on CBO Recovery to Customer Business Operations Employees IRX-PROD-0250787 (July 26, 1999) (Levine Decl. Ex. 73). Among other things, he stated: First, we obviously have gone through a massive change in the last 12 months. We took a significant reduction in resources and lost substantial experience and tenure. There were few process or technology improvements to enable this reduction, and we did not test or pilot the strategy. Senior management has acknowledged we went “too far, too fast”, [sic] That now leaves us with serious issues. Our customers are unhappy because we cannot issue invoices on a timely and accurate basis, and we cannot respond to their calls and/or written questions promptly. The CBU’s are unhappy because they are not getting the level of support they received previously and are now spending substantial amounts of time on administrative issues. Our stockholders are unhappy that our cash usage has gotten much worse with increasing DSO. And our employees are generally frustrated with the workload and pressure trying to keep the “ship” afloat. It is a tough picture. But an honest assessment is the first step to recovery. (Id. at IRX-PROD-0250787.) He then summarized the steps that had been taken in three areas: improving “support to the CBU’s and their effort to drive revenue growth,” improvement with respect to DSO, which had reached an all time high in the second quarter of 1999, and improvements in the area of billing accuracy and timeliness. Id. at IRX-PROD-0250788. On August 10, 1999, Romeril sent an internal memorandum to Thoman and Buehler, which had in the subject line “$165 mn Restructuring Reserve/XE/2000 Annual Plan.” Romeril wrote: Puzzling as to why our financial performance appeared to inadequately reflect the huge restructuring we took in 1998, the following is of general note and analysis lends credence to the expectation that Europe should be in a period of very substantial profit growth. (ii) The reserve charge for NASG was $116 mn, which is very small compared to that for ESG/XE at $644 mn (numbers are 6 + 6 outlook rather than originals). The current estimate of savings are similarly proportioned with NASG at $103 (net of $30 mn reinvestment in CBCs) and ESG/XE at $534 mn with the NASG savings much more front-loaded and XE much more back-loaded. (iv) Overall for Xerox Corporation, the estimated total savings by year 2001 will be $1,018 mn p.a. By end Q2 1999 we had only reached $363 mn so most savings are yet to come. This adds further need/ability to achieve H2 1999 and 2000 earnings direction assuming, of course, a reasonable level of revenue growth. Memorandum from B.D. Romeril on $165 mn Restructuring Reserve/XE/2000 Annual to G.R. Thoman & W.F. Buehler IRX-PROD-0124662 (Aug. 10, 1999) (Levine Decl. Ex. 77). On September 17, 1999, a “CBC Background Summary,” which had been reviewed by Baugher was distributed to certain NASG personnel in connection with internal presentations to be made by Buehler. The background summary included a summary of the background of the reorganization of the CBCs, the problems as of that date, and the root causes of those problems, as quoted above. See supra Section I.B. After a discussion of the root cause, the summary discussed the priorities: “The restoration of CBC service has been established as a major Corporate priority. Bill Buehler is deeply involved, as is Tom Dolan. The organization has new leadership with Ken Baugher now reporting directly to Tom Dolan. An intensive recovery effort is now underway.” CBC Background Summary IRX-PROD-0110462 (Levine Decl. Ex. 87). The summary also contained an assessment of the current status of efforts to address the problems: Current Status Sales feedback indicates that order processing responsiveness is now improving. Recently issued response time commitments have been very well received. Continued improvement is expected over the balance of the year. Billing timeliness (number of customers invoiced as a percent of those who should have been invoiced) has improved from 80% in March to 87% in August. (Reasons for not billing center on missing meter reads, and suspended invoicing due to XBS conversions, P.O. renewals, disputes, etc.) Billing errors are still a concern, and a team is' working aggressively to deal with underlying issues, such as cost/copy pooling and XBS conversions. The ability to respond to customer calls has improved dramatically in July and August and will continue to improve. DSO growth has been contained and reductions are expected for 4Q99, although the rate is behind targeted levels. Therefore, DSO is currently the area with the highest level of operational focus. Net Conclusion The CBC problems are well understood and aggressive actions are underway to fix this issue on a priority basis. While there are still many problems, we have “turned the corner”- and started to show improvement on 'essentially all fronts. Input from the Sales Advisory Council and CBU Roundtables have confirmed this conclusion. Id. at IRX-PROD-0110463. On September 27, 1999, Thoman sent a memorandum to the Operations Committee, the subject of which was “Headcount Approval.” He stated: During August, we had over 1200 gross hires, including 950 non-XBS production heads. I am extremely disappointed in your manpower management, especially in light of the hiring restrictions put in place and the Company’s current financial situation. As a result of our failure to strictly control resources, we have, in essence,' spent much of the benefit of the restructuring action. While we can argue that we have filled sales territories and upgraded skills shortages, we must not lose sight of the fact that we now have a cost base that is unaffordable given our current revenue growth in the low single digits. Memorandum from G. Richard Thoman on Headcount Approval to Operations Committee Members IRX-PROD-0241963 (Sept. 27, 1999) (Levin Decl. Ex. 89). He then informed the recipients that, with certain exceptions, all hires must be approved in advance by a member of the strategy committee. He concluded: “We must regain control of manpower and I expect each of you to lead the way.” Id. On October 6, 1999, Romeril sent an internal memorandum to Thoman sharing some thoughts and questions in preparation for the phone-in on the following day of preliminary third quarter results, which would be followed by a meeting later in the day at which Romeril did not have good news. One of the questions he asked, with the expectation that it would help frame the discussion at the meeting, was: “What happened to restructuring benefits? If they were real, they must have been spent, delayed or offset by deterioration elsewhere.” Memorandum from B.D. Romeril to G.R. Thoman IRX-PROD-0020863 (Oct. 6,1999) (Levine Decl. Ex. 90). In an October 18, 1999 internal Xerox memo, Thoman stated “Sales reps tell me that up to 40 percent of their time is spent dealing with admin-type problems — at [a] time when they should be freed up to be out selling.” Pi’s. 56(A)(2) Statement ¶ 39 (quoting Anthony Saunders, Expert Report of Professor Anthony Saunders 29 (Oct. 15, 2007) (Levine Decl. Ex. 113)). An internal Xerox presentation- document dated October 20, 1999 estimated that “ ‘Sales Disruption’ resulted in “3%-5% lower field sales for 1999.” Pi’s. 56(A)(2) Statement ¶ 40 quoting Anthony Saunders, Expert Report of Professor Anthony Saunders 29 (Oct. 15, 2007) (Levine Decl. Ex. 113)). E. External Communications During the relevant time period there were numerous statements made by the defendants, in the form of press releases, public filings, statements during investor conferences or teleconferences and interviews with analysts, as well as reports that were issued by analysts who followed Xerox and newspaper articles. In an April 17, 1998 press release concerning the Worldwide Restructuring, Xerox predicted that “[w]hen fully implemented the ongoing pre-tax savings from the initiatives will be approximately $1 billion annually.” Press Release, Xerox Corp., Xerox Announces Worldwide Restructuring To Enhance Competitiveness in the Digital World: Company Will Eliminate 9,000 Jobs and Take $1 Billion After-Tax Charge IRX-PROD-003971 (Apr. 7,1998) (Levine Decl. Ex. 3). On October 22, 1998, Xerox issued a press release that stated, among other things, financial results for the company’s third quarter 1998 ended September 30, 1998. See Press Release, Xerox Corp., Xerox Earnings Up 18 Percent in Third Quarter: Eight Consecutive Quarter of Double-Digit Operating Earnings Growth IRX-PROD-0161430-41 (Oct. 22, 1998) (Leviné Decl. Ex. 12). The October 22, 1998 press release stated, among other things, that “Xerox Corporation’s third quarter diluted earnings per share [“EPS”] increased 18 percent to $1.05 and income increased 19 percent to $381 million, primarily as a result of outstanding growth in digital product revenues and improved operating margins, including the initial benefits from the worldwide restructuring program,” and that “Operating profit margin improved by 1.7 percentage points in the quarter, reflecting the company’s continued focus on productivity and the initial benefits of the Restructuring program announced in April.” Id. at IRX-PROD-0161430. The press release also stated: Income from continuing operations increased 19 percent to $381 million in the 1998 third quarter from $320 million in the 1997 third quarter, primarily as a result of outstanding growth in digital product revenues and improved profit margins including the initial benefits from the worldwide Restructuring program. Diluted earnings per share from continuing operations increased 18% to $1.05 in the third quarter. Id. With respect to a decrease in the number of employees, the press release stated: “In connection with the restructuring program, 1,700 employees left the company during the third quarter, bringing the total to 3,200. Approximately 9,000 jobs will be eliminated ...” Id. at IRX-PROD-0161435. In its 1998 Third Quarter 10-Q, filed with the Securities and Exchange Commission on November 10, 1998, Xerox stated: (a) “Income from continuing operations increased 19 percent to $381 million in the 1998 third quarter from $320 million in the 1997 third quarter, primarily as a result of outstanding growth in digital product revenues and improved operating profit- margins, including the initial benefits from the worldwide restructuring program.” Xerox Corp., Form 10-Q 11 (Nov. 10, 1998) (Goldstein Decl. Ex. 20). (b) “Approximately 55 percent of 1998 third quarter equipment sales was due to products introduced since 1997.... Equipment sales in the first nine months of 1998 grew 14 percent primarily due to excellent growth in digital products.” Id. at 13. (c) SAG was 27.7 percent of revenue in the 1998 third quarter and 27.6 percent of revenue for the first nine months of 1998, 1.8 percentage points better than the 1997 third quarter and the first nine months of 1997 due to continuing productivity initiatives and expense controls, including the initial benefits from our worldwide restructuring program. Id. at 15. (d) When fully implemented, 'the ongoing pre-tax savings from the restructuring initiatives will be approximately $1 billion annually. Initially, more than half of the savings will be reinvested to implement process and systems changes in order to enable the restructuring, and in ongoing efforts to broaden and strengthen marketing programs and distribution channels to enhance revenue growth. Selling, administrative and general expenses as a percentage of revenue will move from the high 20’s to the low 20’s over time, driven primarily by large reductions in overhead costs. Id. at 16. In addition to the foregoing, Xerox disclosed that there had been some increase in DSO as a result of the CBO Reorganization: Cash usage was $1,115 million and $173 million during the first nine months of 1998 and 1997, respectively. Net income before depreciation and amortization, restructuring charges, and the change in deferred income taxes increased $154 million to $1,542 million for the first nine months of 1998. However, this was more than offset by cash expenditures against the 1998 restructuring reserve, increased inventory investment in support of accelerated digital product sales growth, higher accounts receivable due to stronger equipment sales growth and some increase in days sales outstanding due to the temporary effects from the reorganization and consolidation of U.S. customer administrative centers, and settlement in 1998 of compensation obligations. Id. at 22. On November 20, 1998,' Romeril, Xerox’s Chief Financial Officer, met with Dave Ravera of Putnam Securities. Romeril said that Xerox had not done well on inventory and receivables management but also “[said] it’s temp & we’re all over it.” Notes of Leslie F. Varón- IRX-PROD-0062963 (Nov. 20,1998) (Varón Aff. Ex. A). Romeril further indicated that the consolidation of the U.S. administrative centers, i.e. the CBO Reorganization, resulted in the loss of tenured employees and controls. According to Romeril, the problem would be temporary, and in 1999, Xerox would go back to the ratios it had in 1997 and go forward from there. The meeting notes also indicate that Romeril told Ravera: “Have sent Europeans to U.S. for lesson learned.” Id. On December 14, 1998, Romeril met with Kirk Mayer, a securities analyst at Wellington Management. Romeril indicated that there was a temporary disruption in receivables in the United States due to the administrative restructuring, which would be fixed by the end of 1999. Notes of Leslie F. Varón IRX-PROD-0062956-57 (Dec. 14, 1998) (Varón Aff. Ex. B). On December 16, 1998, Romeril met with Steven Milunovich of Merrill Lynch. Romeril told Milunovich that Xerox’s poor cash flow in 1998 was caused in part by a receivables problem stemming from the U.S. consolidation in customer administration and changes in collection processes. He also observed that DSO had temporarily increased, that it was not a “write-off’ issue and that Xerox would “claw back.” Notes of Leslie F. Varón IRX-PROD-0062944 (Dec. 16, 1998) (Varón Aff. Ex. C). According to Xerox’s December 31, 1998 Form 10-K, Key initiatives of the restructuring include[d]: 1. Consolidation of 56 European customer support centers into one facility and implementing a shared services organization for order entry, invoicing, and other back-office and sales operations. 2. Streamlining manufacturing logistics, distribution and service operations. This will include centralizing U.S. parts depots and outsourcing storage and distribution. 3. Overhauling our internal processes and associated resources, including closing one of four geographically-organized U.S. customer administrative centers with the remaining three refocused by customer segment, enabling improved customer support at lower cost. Xerox Corp., Annual Report (Form 10-K) 13 (Mar. 22, 1999) (Goldstein Decl. Ex. 40). On January 6, 1999, Xerox announced a new initiative to realign its sales force to provide industry-oriented global document solutions, i.e. the Sales Force Realignment. See Xerox Realigns Operations to Better Capitalize on New Growth Opportunities in the Digital Marketplace, Business Wire, Jan. 6, 1999 (Levine Decl. Ex. 22). Tho-man stated: “This migration to an industry global account and solutions focus will evolve over the next couple of years. In 1999, there will be no significant changes to sales force territories or compensation.” Id. On January 26, 1999, Xerox held its earning release conference for the fourth quarter of 1998. At that conference, Romeril made the following statements: (a) I’ll address some of the underlying trends in Xerox.... Our fourth quarter document processing earnings increased by 16 percent to $1.69 a share [a]nd income increased 17 percent to $615 million. This is primarily as a result of outstanding growth in digital product revenues, improved operating margins, and the ongoing benefits from our worldwide restructuring program. Barry Romeril, Xerox Corporation Fourth Quarter Earnings Release Teleconference 3:21-4:7 (Jan. 26, 1999) (Levine Decl. Ex. 30). (b) “Fourth quarter pre-currency ..., revenue growth, was 7 percent. That included .11 percent growth in the United States.... ” Id. at 4:20-23. (c) “Let’s move on to productivity. Operating profit margin improved by 160 basis points in the fourth quarter, reflecting our focus on productivity, and the ongoing benefits of our worldwide restructuring.” Id. at 10:5-10. (d) “Gross margin improved by 110 basis points in the quarter to 48.1 percent. As manufacturing and service productivity was only partially offset by reduced competitive price pressures. Our unit manufacturing cost productivity in 1998 was by far the best recorded in decades.” Id. at 10:10-17. (e) “We’ve also taken what we believe is an appropriate posture with bad debt reserves given the environment. And this impacted the fourth quarter SG & A to revenue ratio by about 60 basis points.” Id. at 11:16-20. (f) “[A]s we implement the worldwide restructuring, SG & A as a percent of revenue will move from the high 20s to the low 20s, driven primarily by large reductions in G & A overhead costs.” Id. at 11:21-25. Alex Henderson of Prudential Securities asked Romeril: “I was wondering if you could give us some input on where you are with respect to the restructuring.” Id. at 29:14-16. In response, Romeril stated: [I]n Europe ... we’re still in the relatively early phases of moving from the country centric to the Pan European basis. And we have had to put in a lot of costs to get the systems and the back offices up and running in the center as they were.... So I would say in the fourth quarter the evidence is that we reinvested most, if not. all of the savings. But in a calculated way, both that which we had to do for the front end loading in Europe, and that which was somewhat discretionary in advertising and marketing programs, which go well beyond advertising. Id. at 30:19-31:9. With respect to selling, general and administrative expense, Romeril stated as to DSO and other matters: In the fourth quarter, we were 40 basis points better on a ratio of SG & A to revenue. That would have been 100 basis points better, but for the bad debts. Now given the growth in the business, you would expect probably some increase in the bad debts. We felt it was appropriate looking around particularly in some of the more difficult economies. Brazil and Russia. Some of the restructuring that we did in the United States gave us a dislocation so that our day sales outstanding went out a bit. And on a mechanistic basis alone, that gives you a bit more in the bad debts. And we felt that that was appropriate. Id. at 31:14-32:3. In response to a question as to when costs would actually start to accrue, Romeril responded “Second, half of 1999 I would say.” Id. at 32:18-19. On January 26, 1999, Xerox issued a press release that, stated the benefits and impact of the Worldwide Restructuring on Xerox’s financial performance for its fourth quarter ended December 31, 1998 and year ended December 31, 1998. See Press Release, Xerox Corp., Xerox Earnings Up 16 Percent in Fourth Quarter: Board Approves 11 Percent Dividend Increase, 2-For-l Stock Split IRX-PROD-005100-02 (Jan. 26, 1999) (Levine Decl. Ex. 29). The press release contained, among others, the following statements regarding the Worldwide Restructuring: (a) “Xerox Corporation’s fourth quarter diluted earnings per share [“EPS”] increased 16 percent to $1.69 and income increased 17 percent to $615 million, primarily as a result of outstanding growth in digital product revenues, improved operating margins and ongoing benefits from the worldwide restructuring program.” Id. at IRX-PROD-0005100. (b) “The operating profit margin improved by 1.6 percentage points in the quarter, reflecting the company’s continued focus on productivity and the benefits of the restructuring program announced in April.” Id. In discussing the “Outlook for 1999 and Beyond,” the press release stated “ ‘While economic uncertainty could hinder our ability to ■ achieve double-digit revenue growth in the near term, the global growth opportunities for document processing products and solutions remain substantial.’ ” Id. at IRX-PROD-0005101 (quoting Rick Thoman, Xerox President and Chief Operating Officer). With respect to headcount, Xerox reported that 2,300 employees left the company during the fourth quarter, making a total of 5,500, and approximately 9,000 jobs would be eliminated as part of the Worldwide Restructuring. Id. Also on January 26, 1999, Romeril spoke with Rebecca Runkle of Morgan Stanley. He told her that Xerox had experienced a growth in receivables because of the restructuring in the United States. He stated: , “We were too optimistic believing [that the] DSO spike in [the] U.S. would be too temporary].” Notes of Leslie F. Varón IRX-PROD-0062940 (Jan. 26, 1999) (Varón Aff. Ex. D). He also stated that Xerox had been “too ambitious,” that it had “put some resources back,” and that “[he had] no doubt it’s temp[orary].” Id. On January 27, 1999, Runkle issued a report warning investors that Xerox was experiencing increased levels of receivables and DSO: In addition, we raise a cautionary eyebrow at Xerox’s working capital performance in 1998. While full details have yet to be disclosed, management stated that both inventory levels/turns and receivables/Days Sales Outstanding proved disappointments in 1998. We believe that DSO’s increased by about 5 days and that inventory turns fell to less than three times. This is both below Xerox’s historical performance and industry benchmarks, according to management. So, while unit manufacturing costs reached all time lows in the period, it seems XRX will have to “pay the piper” in the first-half o[f] 1999. Rebecca Runkle, Morgan Stanley Dean Witter, Xerox: Xerox Swaggers On — Reiterate Outperform IRX-PROD-0042746, IRX-PROD-0042748 (Jan. 27, 1999) (Gold-stein Deck 34). Under the heading “Restructuring Update- — -Benefits Continue to Show,” the report further stated: “Worldwide employment decreased by 200 in the quarter to 92,700 (down from 92,900 in 4Q98 and 91,400 in 4Q97).” (Id. at IRX-PROD-0042752.) She noted, however, that “[t]he decrease of 2,200 employees due to the restructuring program was partially offset by the net hiring of 2,000 employees....” Id. On February 16,1999, Runkle reiterated that “receivables/days’ sales outstanding proved disappointments in 1998.” Rebecca Runkle, Morgan Stanley Dean Witter, Xerox (XRX): Xerox Swaggers On — Reiterate Outperform; Raise Target MS00038, MS00039 (Feb. 16, 1999) (Goldstein Deck Ex. 35). Runkle issued another report on February 25,1999, which stated: Xerox’s A/R balance increased 25% year-over-year, to $2.7 billion. The receivables ballooned as Xerox attempted to restructure several operations in the US. The reorganization and reorientation of business units (from geographical to customer focused) led to the disruption in billing cycle productivity. Once again, management remains committed to reducing receivable levels back to those found in 1997 by year-end 1999. Rebecca Runkle, Morgan Stanley Dean Witter, Xerox (XRX): Preliminary Update on Year-End Balance Sheet and Cash Flow Items IRX-PROC-0000222, 0000223 (Feb. 25, 1999) (Goldstein Decl. Ex. 36). On March 1, 1999, Romeril met Philip Rueppel, a securities analyst with BT Alex. Brown. Notes from the meeting indicate that Romeril discussed the “[r]eceiv[ables] issue in [the] U.S. associated] w[ith] restructuring].” Notes of Leslie F. Varón IRX-PROD-0062471 (Mar. 1,1999) (Varón Aff. Ex. E). Romeril stated that the issue “[would] reverse in '99.” Id. On March 2, 1999, Rueppel issued a report stating: One area of concern has been the poor cash flow results in 1998, driven especially by working capital issues — receivables and inventory turns. Management was refreshingly frank about the core issue — internal execution, rather than citing external factors. Management attention to both areas has been elevated significantly, with compensation tied to improvement, and we would be surprised not to see consistently better DSO and inventory turns metrics throughout 1999. We remain comfortable with our assessment that the balance sheet deterioration does not point to any competitive or product issues. Philip C. Rueppel, Alex Brown, XRX: Meeting With CFO Confirms Positive Business Tone — Brazil Remai[n] — Strong Buy, IRX-PROD-0011038, IRX-PROD-0011039 (Mar. 2,1999) (Goldstein Decl. Ex. 37) . Also on March 2, 1999, Henderson of Prudential Securities issued a report, which stated: Xerox experienced a substantial spike in inventories during 1998, DSOs were up and turns down. We believe this is a function of overzealous ordering in a couple of critical lines as well as the disruption caused by earlier and deeper than expected G & A cuts. Management believes the disruptions to operations in Brazil and the U.S. as a result of the G & A cuts cost six to seven days of DSOs. It expects a rapid snap back on this line. B. Alex Henderson, Prudential Securities, XRX: Xerox Accelerating Cost Cutting Beyond Restructuring — Reiterating Strong IRX-PROD-0000264, IRX-PROD-0000268 (Mar. 2,1999) (Goldstein Decl. Ex. 38) . On March 15, 1999, Runkle issued a report stating: Xerox’s A/R balance increased 25% year-over-year, to $2.7 billion. The receivables ballooned as Xerox attempted to restructure several operations in the U.S. The reorganization and reorientation of business units (from geographical to customer-focused) led to the disruption in billing cycle productivity. Once again, management remains committed to reducing receivable levels back to those found in 1997 by year-end 1999. Rebecca Runkle, Morgan Stanley Dean Witter, Xerox (XRX): Preliminary Update on Year-End Balance Sheet and Cash Flow Items MS00054, MS00055 (Mar. 15, 1999) (Goldstein Decl. Ex. 39). In its Form 10-K for 1998, dated March 22, 1999, Xerox disclosed: “Accounts receivable growth reflects strong equipment sales in 1998 and some increase in days sales outstanding due to temporary effects from the reorganization and consolidation of U.S. customer administrative centers.” Xerox Corp., Annual Report (Form 10-K) 53 (Mar. 22, 1999) (Goldstein Decl. Ex. 40). On April 19, 1999, the Center for Financial Research and Analysis (“CFRA”) issued a report stating that Xerox was experiencing “Rapid Receivables Growth.” Ctr. for Financial Research & Analysis, Inc., CFRA Company Report: Xerox Corporation IRX-PROD-0060214 (Apr. 19, 1999) (Goldstein Decl. Ex. 41). The CFRA report identified “[s]igns of possible operational deterioration for XRX during 1998 including] a surge in receivables and inventory relative to revenue and a growing operating cash flow shortfall.” Id. It also reported that Xerox “attributed the December-to-December DSO increase to temporary effects from the reorganization and consolidation of U.S. customer administrative centers.” Id. In a press release dated April 22, 1999, Thoman stated “Although we are pleased that we achieved earnings growth of 14 percent, our revenue performance in the quarter was clearly disappointing but not indicative of our expectations for the full year.” Press Release, Xerox Corp., Xerox Earnings Up 14 Percent in First Quarter: Tenth Consecutive Quarter of Double-Digit Operating Earnings Growth IRX-PROD-0060120 (Apr. 22, 1999) (Levine Decl. Ex. 45). He stated “ ‘The turmoil in Brazil and the economic slowdown in other Latin American countries, combined with several operational factors in the U.S. and Europe, depressed our first quarter revenues.’ ” Id. (quoting Rick Thoman, Xerox President and Chief Executive Officer). He further stated: “The initiatives we announced in January to provide industry-oriented global document solutions for major customers required substantial one-time investments, including enhanced sales training and development, and some changes in customer relationships, which impacted first quarter sales productivity more than anticipated” ... “We are very confident that revenue growth will improve as the year progresses.” Id. (quoting Rick Thoman). In discussing Xerox’s operating profit margin, the press release stated that “The operating profit margin of 12.8 percent in the quarter represented a 1.1 percentage point improvement.” Id. at IRX-PROD-0060121. Tho-man further stated that “The operating margin improvement reflects the benefits of our restructuring program ...” Id. When discussing headcount in connection with the Worldwide Restructuring, the press release stated that “1,000 employees left the company in the first quarter, bringing the total to 6,400.” Id. During an April 22, 1999 earnings release teleconference for the first quarter of 1999 Romeril stated: “I would encourage you to focus on the total growth of service, outsourcing and rental, rather than the constituent parts, as looking at the total, avoids the possibility of misinterpretation about any constituent part where substitution may have been an important driver in any year-over-year comparison.” Barry Romeril, Xerox Corporation First Quarter Earnings Release Teleconference 7:15-21 (Apr. 22, 1999) (Levine Decl. Ex. 46). He further stated: Overall, for the shortfall in revenues, versus expectations was very much a known goal. If we didn’t quite shoot ourselves in the foot, we certainly hit several toes. Activity rather than price was therefore the real culprit. And we are confident that there will be a significant rebound in the coming months. Id. at 10:12-19. In discussing headcount changes associated with the Worldwide Restructuring, Romeril stated: “In connection with the restructuring program, 1,000 employees left the company during the first quarter, bringing the total to 6,400 since the program was announced.” Id. at 11:24-12:3. During the teleconference, Henderson asked, “So you’re really characterizing the miss here in the revenues in the first quarter as a one-time event. And you are going to snap back fully in the second quarter.” Id. at 19:6-10. Romeril responded: “We’re going to come back Alex, significantly. And we’re going to see the sort of number — you gave us a nice range. I’m not sure that I want to get into forecasting precise numbers. But it will be a significant rebound.” Id. at 19:11-16. Later, Runkle asked: “Is it fair to expect that the DSO’s in the inventory balances net net still going to take another I would say two quarters or so to really normalize back down to levels that you’re happy with?” Id. at 21:19-23. Romeril answered “Yes” and stated that “The run rate we should be significantly better as we exit the year than we were last year. And I mean significantly. It’s the path there that you know, is not a necessarily a smooth one everywhere around the world.” Id. at 21:24-22:4. On April 23, 1999, Lehman Brothers reported: Xerox does not expect to have any significant share repurchases in 1999, given what it would take to have a meaningful impact on EPS. The company instead will focus on cash flow generation, which was weak in 1998. The company did not provide preliminary balance sheet data, but acknowledged that there' was little improvement in receivables and inventories in the quarter. Working capital remains a priority for the company, although it may be another quarter or two before there is meaningful improvement in DSOs and inventories. Lehman Bros., Xerox: Renewed Focus on Top Line; We Regard IQ Slip As Temporary IRX-PROD-0000454 (Apr. 23, 1999) (Goldstein Decl. Ex. 42). On April 23; 1999, Milunovich of Merrill Lynch issued a report stating: Xerox’s revenue growth was hurt by sales force and restructuring initiatives, a self-inflected [sic] wound. Xerox is moving to an industry solutions approach similar to IBM’s, so spent time on sales force training, which reduced their time spent with customers. Some sales people spent almost half their time away from customers. In Europe, management spent time complying with pan — European regulations while in-country facility consolidations also hurt customer focus. The company estimates that it can reduce inventories by $300-400 million (no write-offs) and improve DSOs through faster collections. The company expects DSOs to improve by year-end. Steven Milunovich, Merrill Lynch, Xerox Corporation: Revenue Challenged 2 (Apr. 23,1999) (Goldstein Decl. Ex. 75). On April 27, 1999, Investor’s Business Daily reported that Rick Thoman, Xerox’s chief executive said “ We had salespeople away from customers more than we should have.... But we should see benefits going forward.’ ” Michael Lyster, Digital Copiers: Xerox Ticket to Networking Service Plans, Investor’s Bus. Daily, Apr. 27, 1999, at A6, IRX-PROD-0050433 (quoting Rick Thoman) (Goldstein Decl. Ex. 43). The article also states: “Thoman blames the [revenue] drop on Xerox’s ongoing restructuring and ;the realignment of its sales force. Financial trouble in Brazil, a key market, didn’t help either.” Id. On April 27, 1999, The Wall Street Journal reported that “Xerox has reorganized its 14,000-person sales force away from geographical coverage toward coverage of specific industries.... Xerox said last week that sales retraining was part of the reason its first-quarter earnings were disappointing.” Alec Klein, Xerox Reorganizes Sales Force in Push to Bundle Services to Corporate Clients, Wall St. J., Apr. 27,1999, at B15, IRX-PROD-0050431 (Levine Decl. Ex. 49). On May 6, 1999, Stephen Weber, a securities analyst with SG Cowen Securities Inc., issued a report stating that Xerox’s “revenues grew just 3% ... in Ql, owing to extra sales training (i.e., time not on the street) and organizational dislocations, both in the U.S. and Europe.” Steven Weber, SG Cowen, Xerox Corporation: The Tenets of This Growth Story Very Much Intact IRX-PROD-0012720 (May 6, 1999) (Goldstein Deck Ex. 44). The report also states that “[a]s Ql’s disrupting factors abate, we think revenue growth will accelerate markedly.” Id. On May 14,1999, Xerox hosted its annual Investors Conference which was attended by Henderson of Prudential Securities, Ben Reitzes of PaineWebber, Weber of SG Cowen, Jerry Hersch from MTD, Steven Raphael from RBC Dominion Securities, Jack Kelly from Goldman Sachs, Milunovich from Merrill Lynch, Flay Lewis from' Compton Capital, John Rosenthal from Salomon Smith Barney, Pete Enderlin from FAC Equities, Ted Kuntz from Needham, Runkle from Morgan Stanley, Peter Boy-son from Lazard Asset Management and Fred Weiss from Pell Rudman. See Barry Romeril, Xerox Corporation Investor Conference 134:18-19, 140:22-23, 147:16-17, 152:22-23, 154:25-155:1, 156:8-9, 159:3-4, 161:6-7,164:5-6, 175:19-20,180:18, 186:22-23, 196:16-17, 200:5-6 (May 14, 1999) (Goldstein Deck Ex. 45). Romeril stated the following: But 1998 cash generation was clearly unsatisfactory. And it was principally caused by a deterioration in receivables, in day sales outstanding and our inventory performance. The growth in accounts receivable was primarily the result of the reorganization and restructuring in our U.S. administrative support activities. We closed one customer admin center and we reorganized the remaining three admin centers from a geographic to a customer segment basis. Much along the lines that we’re doing for the business as a whole. And frankly, we reduced the headcount as we did that at too fast a rate. And it was too much change, too fast, but the problem is being addressed, and you will certainly see improvements as we go through 1999. Id. at 122:23-123:15. At the same conference, Thoman stated: [T]here was no question that we had, as we rolled out our G & A program, individual areas where we caused some lack of focus on our sales force because of our G & A activities. For example, we talked about our Chicago center. Unquestionably that had some impact on our sales force. They had to worry about the billing being done correctly. In Paris for example, we literally moved everybody, everybody moved their office. And that takes as you know when you do that it takes about a month to settle down those of you who’ve done that. I suspect a lot of you in this room have. And then the last thing is sales productivity. Part of which was affected by the G & A activity, but most of it really was the fact that we let people plan their own training programs, and other things. And we didn’t get enough feet on the street focused in front of customers. Id. at 136:24-137:19. The plaintiffs highlight that Romeril edited one portion of his notes for the conference. That portion of his notes originally read: There were actually two similar problems that impacted the sales force: —Too much time in training —Too much time fixing customer problems because of our consolidation of admin centers That translated into a 5 percent sales productivity hit in the first quarter, we wouldn’t be having this conversation. So the real question is: Can we get that back on track and the answer is yes. Remarks for Rick Thoman IRX-PROD-0056273 (May 14, 1999) (Levine Decl. Ex. 57). After the edits that portion of his notes read: There were actually problem that impacted the sales force. The key was too little sales time in front of customers, e.g. —Too much time in training That translated into a 5 Percent sales productivity hit. If we hadn’t had a 5 percent sales productivity hit in the first quarter, we wouldn’t be having this conversation. So the real question is: Can we get that back on track and we think the answer is yes. Id. In its Form 10-Q for the first quarter of 1999, filed with the SEC on May 14, 1999, Xerox stated: (a) First quarter revenue growth in both the U.S. and Europe was disappointing, slowing significantly from prior quarters due to substantial one-time investments, including enhanced sales training and development, and some changes in customer relationships, associated with the initiatives announced in January 1999 to provide industry-oriented global document solutions for major customers. These initiatives temporarily reduced sales time with customers and impacted sales productivity more than anticipated. Xerox Corp., Form 10-Q: Quarterly Report 13 (May 14,199