green jigarjian llp fine street, 15th floorsecurities.stanford.edu/filings-documents/1029/...dec 11,...

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Robert S. Green (State Bar No. 136183) Robert A. Jigarjian (State Bar No. 171107) GREEN & JIGARJIAN LLP 235 Fine Street, 15th Floor San Francisco, CA 94104 Telephone: (415) 477-6700 Facsimile: (415) 477-6710

Mark C. Gardy Nancy Kaboolian ABBEY GARDY, LLP 212 East 39th Street New York, New York 10016 Telephone: (212) 889-3700 Facsimile: (212) 684-5191

Attorneys for Plaintiff Gerald Korman

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA_

GERALD KORMAN, individually and on behalf ) Ci ii Action No. of all others similarly situated, )

) CLASS ACTION COMPLAINT Plaintiff, ) FOR VIOLATIONS OF

) SECURITIES LAWS VS. )

)

DAVID LEE, STEVE TIRADO, ROBERT ) GARGUS, and SILICON IMAGE, INC. )

) JURY TRIAL DEMANDED Defendants. )

INTRODUCTION

Plaintiff, Gerald Korman, by and through his attorneys, alleges the following upon

information and belief, except as to those allegations concerning Plaintiff, which are alleged

upon personal knowledge. Plaintiffs information and belief are based upon, among other things,

his counsel's investigation, which includes without limitation: (a) review and analysis of filings

made by Silicon Image, Inc. ("Silicon Image" or the "Company") with the United States

Securities and Exchange Commission ("SEC"); (b) review and analysis of securities analysts'

CLASS ACTION COMPLAINT FOR VIOLATIONS OF SECURITIES LAWS

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1 reports concerning Silicon Image (c) review and analysis of press releases and other publications

2 disseminated by Defendants; and (d) review of other publicly available information concerning

3 Silicon Image.

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1. This is a class action against Silicon Image and certain of its officers and

5 for violation of the federal securities laws. Plaintiff brings this action on behalf of himself and

6 all other persons or entities, except fix Defendants and certain of their related parties as

7 described below, who purchased Silicon Image securities (the "Class") during the period April

8 15, 2002 through and including November 14, 2003 (the "Class Period").

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2 On November 14, 2003 Silicon Image announced that its Form 10-Q for the

10 quarter ended September 30, 2003, which was due to be filed with the Securities and Exchange

11 Commission on November 14, 2003, would not be timely filed because an examination was

12 being conducted regarding the Company's recognition of revenue associated with certain

13 licensing transactions in 2003 and 2002.

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3. Throughout the Class Period defendants' statements were each materially false

15 and misleading when made because they failed to disclose and/or misrepresented the following

16 adverse facts: (1) that during the Class Period defendants had materially overstated its license

17 revenue by improperly recognizing revenue that did not satisfy revenue recognition criteria; (2)

18 that the Company's financial statements were not prepared in accordance with Generally

19 Accepted Accounting Principles ("GAAP"); (3) that the Company lacked adequate internal

20 controls and was therefore unable to ascertain the true financial condition of the Company; and

21 (4) that as a result, the value of the Company's net income and financial results were materially

22 overstated at all relevant times.

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JURISDICTION AND VENUE

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4. This Court has jurisdiction over the subject matter of this action pursuant to 28

25 U.S.C. §§ 1331, and 1367, and Section 27 of the Securities Exchange Act of 1934 (the

26 "Exchange Act") (15 U.S.C. § 78aa).

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5. This action arises under Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C. I

28 §§ 78j(b) and 78t(a)) and Rule lOb-S promulgated under Section 10(b) (17 C.F.R. § 240.10b-5). 2


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6. Venue is proper in this District pursuant to Section 27 of the Exchange Act (15

2 U.S.C. § 78aa) and 28 U.S.C. § 1391(b) and (c). Substantial acts in furtherance of the alleged

3 fraud and/or its effects have occurred within this District, and the Company maintains its

4 I principal executive offices in this District.

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7. In connection with the acts and omissions alleged in this Complaint, Defendants,

6 directly or indirectly, used the means and instrumentalities of interstate corilmeice, iiieludiug, bi

7 not limited to, the mails, interstate telephone communications, and the facilities of the national

8 securities markets.

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PARTIES

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8. Plaintiff purchased Silicon Image common stock during the Class Period, as set

11 forth in the certification attached hereto.

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9. Silicon Image headquartered Sunnyvale, California, designs, develops and

13 markets multi-gigabit semiconductor and system solutions for a variety of communications

14 applications demanding high-bandwidth capability. Until Novcmbcr 17, 2003, Silicon Image's

15 common stock was traded in an efficient market on the NASDAQ under the symbol "SIMG".

16 Silicon Images headquarters are located at 1060 East Argues Avenue Sunnyvale, CA 94086

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10. Defendant David Lee ("Lee") has been at all relevant times Silicon Image's

18 Chairman of the Board.

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11. Defendant Steve Tirado ("Tirado") has been at all relevant times Silicon Image's

20 President, Chief Operating Officer.

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12. Defendant Robert Gargus ("Gargus") has been at all relevant times Silicon

22 Image's Vice President of Finance and Chief Financial Officer.

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13. Defendants Lee, Tirado and Gargus are sometimes referred to as the "Indivi

24 Defendants."

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14. The Individual Defendants, who were the Company's principal officers,

26 controlled Silicon Image and its public disclosures. Each of them made false and misleading

27 statements and/or failed to disclose material adverse information concerning the Company's

28 business and operations during the Class Period, as detailed herein. Because of the Individual 3

LASS ACTION COMPLAINT FOR VIOLATIONS OF SECURITIES LAWS

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Defendants' positions with the Company, they had access to the adverse undisclosed information

2 about its business, operations, products, operational trends, financial statements, markets, and

3 present and future business prospects via access to internal corporate documents (including the

4 Company's operating plans, budgets, and forecasts and reports of actual operations compared

5 thereto), conversations and connections with other corporate officers and employees, attendance

6 at management and/or Board of Directors meetings and committees thereof, and via reports and

7 other information provided to them in connection therewith.

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15. It is appropriate to treat the Individual Defendants as a group for pleading

9 purposes and to presume that the false, misleading and incomplete information conveyed in the

10 Company's public filings, press releases and other publications, as alleged herein, were the

11 collective actions of the narrowly defined group of Defendants identified above. Each of the

12 above officers and/or directors of Silicon Image, by virtue of their high level positions with the

13 Company, directly participated in the management of the Company, was directly involved in the

14 day-to-day operations of the Company at the highest levels, and was privy to confidential

15 proprietary information concerning the Company and its business, operations, products, growth,

16 financial statements, and financial condition, as alleged herein. Said Defendants were involved

17 in drafting, producing, reviewing and/or disseminating the false and misleading statements and

18 information alleged herein, were aware or deliberately disregarded that the false and misleading

19 statements were being issued regarding the Company, and approved or ratified these statements

20 in violation of the federal securities laws.

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16. As officers and/or directors and controlling persons of a publicly held company

22 whose common stock was, and is, registered with the SEC pursuant to the Exchange Act, traded

on the New York Stock Exchange, and governed by the provisions of the federal securities laws,

24 the Individual Defendants each had a duty to disseminate promptly accurate and truthful

25 information with respect to the Company's financial condition and performance, growth,

26 operations, financial statements, business, products, markets, management, earnings, and present

27 and futwe business prospects, and to correct any previously issued statements that had become

28 materially misleading or untrue, so that the market price of the Company's common stock would 4


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1 be based upon truthful and accurate information. The Individual Defendants misrepresentations

2 and omissions during the Class Period violated these specific requirements and obligations.

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17. The Individual Defendants paiticipated in the drafting, preparation and/or

4 approval of the various public, shareholder and investor reports and other communications

5 complained of herein, and were aware of, or deliberately disregarded, the misstatements

6 contained therein and omissions therefrom, and were aware of their materially false and

7 misleading nature. Because of their Board membership and/or executive and managerial

8 positions with Silicon Image, each of the Individual Defendants had access to the adverse,

9 undisclosed information about the Company's operations, the financial condition and

10 performance of the Company as particularized herein and knew (or deliberately disregarded) that

11 these adverse facts rendered the positive representations made by or about Silicon Image and its

12 business issued or adopted by the Company materially false and misleading.

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18. The Individual Defendants, because of their positions of control and authority as

14 officers and/or directors of the Company, were able to and did control the content of the various

15 SEC filings, press releases and other public statements pertaining to the Company during the

16 Class Period. Each Individual Defendant was provided with copies of the documents alleged

17 herein to be misleading prior to or shortly after their issuance and/or had the ability and/or

18 opportunity to prevent their issuance or cause them to be corrected. Accordingly, each of the

19 Individual Defendants is responsible for the accuracy of the public reports and releases detailed

20 herein and are therefore primarily liable for the representations contained therein.

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19. Each of the Defendants is liable as a participant in a wrongful scheme and course

22 of business that operated as a fraud or deceit on those who purchased or otherwise acquired

23 Silicon Image common stock during the Class Period by disseminating materially false and

24 misleading statements and/or concealing material adverse facts. The scheme deceived the

25 investing public regarding Silicon Image's business, operations, and the intrinsic value of the

26 Company's common stock, and caused plaintiff and other members of the Class to purchase

27 Silicon Image common stock at artificially inflated prices

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CLASS ACTION ALLEGATIONS

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20. Plaintiff brings this as a class action pursuant to Federal Rule of Civil Procedure

3 23(a) and (b)(3) on behalf of all persons who purchased Silicon Iuiagc securities during the Clas

4 Period. Excluded from the Class are Defendants, officers and directors of the Company,

5 members of the immediate families of the Individual Defendants and each of their legal

6 representatives, heirs, successors or assigns and any entity in which any Defendant has or has

7 had a controlling interest.

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21. This action is properly maintainable as a class action because:

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a. The members of the proposed Class in this action are dispersed throughout

10 the United States and are so numerous that joinder of all Class members is impracticable. While

11 the exact number of Class members is unknown to Plaintiff at this time and can only be

12 ascertained through appropriate discovery, Plaintiff believes that Class members number in the

13 thousands. Millions of Silicon Image shares were traded publicly on the Nasdaq under the

14 symbol "S1IvIG" and later under the symbol "SIJYIGE". The Company reported that 70,589,476

15 million shares of common stock were outstanding as of. July 31, 2003;

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b. Plaintiff's claims are typical of those of all members of the Class because

17 all have been similarly affected by Defendants' actionable conduct in violation of federal

18 securities laws as alleged herein;

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C. Plaintiff will fairly and adequately protect the interests of the Class and

20 has retained counsel competent and experienced in class action litigation. Plaintiff has no

21 interests antagonistic to, or in conflict with, the Class that Plaintiff seeks to represent;

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d. A class action is superior to other available methods for the fair and

23 efficient adjudication of the claims asserted herein because joinder of all members is

24 impracticable. Furthermore, because the damages suffered by individual members of the Class

25 may be relatively small, the expense and burden of individual litigation make it virtually

26 impossible for Class members to redress the wrongs done to them. The likelihood of individual

27 Class members prosecuting separate claims is remote;

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e. Plaintiff anticipates no unusual difficulties in the management of this

2 action as a class action; and

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f. the questions of law and fact common to the members of the Class

4 predominates over any questions affecting individual members of the Class.

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Among the questions of law and fact common to the Class are:

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i. whether Defendants' acts and/or omissions as alleged herein

7 violated the federal securities laws;

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ii. whether the Company's Class Period public statements and filings

9 misrepresented and/or omitted material facts;

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iii. whether Defendants acted with knowledge or with reckless

11 disregard for the truth in misrepresenting and/or omitting material facts;

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iv. whether Defendants participated in and pursued the common

13 course of conduct complained of herein;

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V. whether the market price of Silicon Image securities was inflated

15 artificially as a result of Defendants' material misrepresentations and/or omissions during the

16 Class Period; and

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vi. to what extent the members of the Class have sustained damages

18 and the proper measure of damages.

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SUBSTANTIVE ALLEGATIONS COMMON TO ALL COUNTS

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22. On April 15, 2002, Silicon Image issued a press release announcing record results

21 of operations for the first quarter of fiscal 2002 ended March 31, 2002. The press release

22 reported, in relevant part, as follows:

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Record revenues of $17.1 million were achieved for the first quarter. This is a 10.5 percent increase over the $15.5 million

24 achieved in the fourth quarter of 2001 and is a 63.5 percent

25 increase over the $10.5 million for the first quarter of 2001.

26 The net loss calculated under Generally Accepted Accounting

Principles (GAAP), which includes amortization and impairment

27 of goodwill and intangible assets, stock compensation and warrant

28 expense, patent defense costs, restructuring costs and acquisition

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integration costs, for the quarter ending March 31, 2002, was $17.7 million, or $0.28 per basic and diluted share. This compares to a GAAP net loss of $28.7 million, or $0.46 per basic and diluted share, foi the previous quarter, and a GAAP net loss of $6.5 million, or $0.13 per basic and diluted share, for the first quarter of 2001. The GAAP net loss in the fourth quarter of 2001 included $16.0 million for impairment of goodwill and intangible assets.

Pro-forma net loss for the first quarter of 2002 was $3.4 million, or $0.05 per basic and diluted share. This compares to a pro-forma net loss of $4.4 million, or $0.07 per basic and diluted share, for the previous quarter, and a pro-forma net loss of $1.6 million, or $0.03 per basic and diluted share, for the first quarter of 2001.

23. In this same press release Defendant Lee-, was quoted as stating:

We continue to execute our business plan and achieve our targeted diversification. We saw record revenues in the first quarter and are entering the second quarter with over half of our second quarter revenue plan visible in backlog. The growth in our business was particularly strong in the storage IC and consurrier electronics product lines. Storage ICs grew 95% sequentially and the CE product line grew 74% sequentially. Our core DVI transmitter and receiver business also continued to grow and generated a combined growth of 16% sequentially. I am proud of the way we are executing and the focus of all our employees. I am looking forward to continued improvements during 2002 as we drive to profitability."

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In this same press release Defendant Tirado was quoted as stating:

"The first quarter was an excellent quarter and clearly moves us closer to our goal of achieving pro-forma profitability. In addition, the introduction of our SATALinkTM family of serial ATA storage solutions combined with the forrnaiioii of the HDMI working group represents the achievement of two major milestones in our business strategy and demonstrates our focus on execution. We remain optimistic given the strength of our revenue visibility, our design wins and market interest in our new products.

On May 12, 2002, Silicon Image filed with the SEC a Form 10-Q for the first

quarter ended March 31, 2002. The first quarter Form 10Q, which was signed by defendant

Gargus, reiterated the financial results previously announced on April 16, 2002,

26. The first quarter Form 10-Q reported that in April 2002, the Company

implemented workforce reduction eliminating 12 positions, or 5%, of its workforce. The 8


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reduction resulted primarily from the decision to transition to a licensing model for their storage

subsystem board products, whereby instead of developing, manufacturing and selling board

products to facilitate or accelerate the use of our storage semiconductor products the Company

decided to develop and license board designs in exchange for license fees, royalties and the use

of our semiconductor products.

27. On June 13, 2002, Silicon huiage announced that its revenue expectations for the

second quarter and remainder of the year continue to be in line with those announced during its

April 2002 quarterly conference call. At that time, Silicon Image stated that it expected revenue

for the second quarter to increase 10 to 12% over the first quarter. Defendant Lee was quoted as

stating that "[ijn these challenging times, we are pleased to see that our business is tracking to

plan in all three of our key market segments. Our strengths in high-definition digital displays

coupled with our expansion efforts into the storage IC and consumer electronics markets are

fulfilling our high-growth expectations. We see nothing in our pricing or booking trends or in

overall market conditions that causes us to alter our outlook for the remainder of the year.'

28. On July 23, 2003, Silicon Image reported financial results for its second quarter

ended June 30, 2002. The press release stated, in relevant part, as follows:

Record revenues of $19.3 million were achieved for the second quarter. This is a 12.8 percent increase over the $17.1 million achieved in the first quarter of 2002 and is a 60.6 percent increase over the $12.0 million recorded for the second quarter of 2001. Year-to-date revenues totaled $36.4 million, a 61.9 percent increase over the $22.5 million recorded in the first six months of 2001.

The net loss calculated under Generally Accepting Accounting Principles (GAAP), which includes amortization and impairment of goodwill and intangible assets, stock compensation and warrant expense, patent defense costs, restructuring costs and acquisition integration costs, for the quarter ending June 30, 2002, was $9.6 million, or $0.15 per basic and diluted share. This compares to a GAAP net loss of $17.7 million, or $0.28 per basic and diluted share, for the previous quarter, and a GAAP net loss of $10.0 million, or $0.18 per basic and diluted share, for the second quarter of 2001

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Year-to-date, the GAAP net loss for the first six months of 2002 was $27.3 million, or $0.43 per basic and diluted share. This compares to a GAAP net loss of $16.5 million, or $0.31 per basic and diluted share, for the first six months of 2001

Pro-forma net loss* for the second quarter of 2002, was $2.4 million or $0.04 per basic and diluted share. This compares to a pro-forma net loss of $3.4 million, or $0.05 per basic and diluted share, for the previous quarter, and a pro-forma net loss of $2.6 million, or $0.05 per basic and diluted share, for the second quarter of 2001. Year-to-date pro-forma net loss was $5.9 million, or $0.09 per basic and diluted share. This compares to a pro-forma net loss of $4.2 million, or $0.08 per basic and diluted share, for the first six months of 2001.

Commenting on the results, David Lee, president and chief executive officer, said, "The foresight and effort applied to diversifying our business is contributing to strong revenue growth. Second quarter revenues represent the third straight quarter of both record revenues and double-digit sequential revenue growth. Our diversification into the high-growth storage and consumer electronics markets is a clear differentiator that set us apart and helped to fuel our growth even in a slow PC market. We are particularly pleased by the announcement of the High Definition Multimedia Interface (HDMI) Working Group and the subsequent release of the v 0.9 HDMI specification for consumer electronics products. This is a significant milestone in our overall business strategy and is further evidence that Silicon Image is no longer just a display company."

Steve Tirado, chief operating officer, added, "The second quarter was an excellent quarter and clearly demonstrates our focus on execution. The growth in our business was particularly strong in the storage IC and consumer electronics product lines, which grew respectively 81 and 38 percent sequentially. In a difficult PC and flat panel market, we saw our combined DVI transmitter and receiver business grow modestly by 2 percent. Furthermore, our strong visibility continues as we again enter the third quarter with over half of our revenue plan for the quarter visible in backlog. Finally, our focus on restoring pro-forma profitability remains solidly on track and we continue to expect to achieve quarterly pro-forma profitability by year-end."

29. On July 30, 2002, Silicon Image filed with the SEC a Form 10-Q for the second

quarter ended June 30, 2002. The second quarter Form 10-Q was signed by defendant Gargus.

The Form 10-Q reported that revenue increased to $19.3 million for the three months ended

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June 30, 2002, from $12.0 million for the three months ended June 30, 2001, an increase of 61%.

Revenue was $36.4 million for the six months ended June 30, 2002, an increase of 62% from the

six months ended June 30, 2001. The $13.9 million inciease in revenue during the six month

periods is primarily due to $11.2 million of revenue from products in new markets-CE and

storage. An additional $1.5 million of the increase is due to license revenue.

30. On October 15, 2002, Silicon Image reported financial results for its third quarter

ended September 30, 2002. The press release stated in relevant part as follows:

Record revenues of $21.4 million were achieved for the third quarter. This is an 11.0 percent increase over the $19.3 million achieved in the second quarter of 2002 and is a 52.2 percent increase over the $14.1 million recorded for the third quarter of 2001. Year-to-date revenues totaled $57.7 million, a 58.2 percent increase over the $36.5 million recorded in the first nine months of 2001.

Our net loss calculated under Generally Accepted Accounting Principles (GAAP), which includes amortization and impairment of goodwill and intangible assets, stock compensation and warrant expense, patent defense costs, restructuring costs and acquisition integration costs, for the quarter ended September 30, 2002, was $4.6 million, or $0.07 per basic and diluted share. This compares to a GAAP net loss of $9.6 million, or $0.15 per basic and diluted share, for the previous quarter, and a GAAP net loss of $30.9 million, or $0.51 per basic and diluted share, for the third quarter of 2001.

GAAP net loss for the first nine months of 2002 was $32.0 million, or $0.50 per basic and diluted share. This compares to a GAAP net loss of $47.4 million, or $0.85 per basic and diluted share, for the first ninc months of 2001.

Pro-forma net loss for the third quarter of 2002, was $0.8 million, or $0.01 per basic and diluted share. This compares to a pro-forma net loss of $2.4 million, or $0.04 per basic and diluted share, for the previous quarter, and a pro-forma net loss of $6.3 million, or $0.10 per basic and diluted share, for the third quarter of 2001. Year to date pro-forma net loss was $6.7 million, or $0.10 per basic and diluted share. This compares to a pro-forma net loss of $10.5 million, or $0.19 per share for the first nine months of 2001.

Commenting on the results, David Lee, president and chief executive officer, said, "Silicon Image continues to differentiate

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itself by executing despite difficult market conditions. Our third quarter revenues represent the fourth straight quarter of both record revenues and double-digit sequential revenue growth. Furthermore, this is the third straight quarter we have seen gross margins improve as a percentage of revenue. Our diversification strategy and digital media expertise continue to help us excel in the high-growth consumer electronics and storage markets. Our backlog visibility remains good with over half of our fourth quarter revenue plan visible in backlog. Given the projected fourth quarter revenue growth, we are on track 10 achieve quarterly pro-forma profitability in the fourth quarter."

Steve Tirado, chief operating officer, added, "The third quarter was an excellent quarter and clearly demonstrates our focus on execution. We are especially pleased with the revenue growth experienced from our DVI and consumer electronics IC product lines and from our licensing business. In a challenging PC and flat panel market, we saw our combined DVI transmitter and receiver business grow 9 percent sequentially. We achieved this strength in our DVI business despite some weakness in our display product line. Expense control and profitability remain on target."

31. On November 8, 2002, Silicon Image filed with the SEC a Form 10-Q for the

third quarter ended September 30, 2002. The third quarter Form 10-Q was signed by defendant

Gargus.

32. On January 15, 2003, Silicon Image issued a press release announcing its

financial results for its year ended December 31, 2002. The press release reported in relevant

part as follows:

Record revenue of $23.8 million was achieved for the fourth quarter. This is an 11.3 percent increase over the $21.4 million achieved in the third quarter of 2002 and is a 53.9 percent increase over the $15.5 million recorded for the fourth quarter of 2001. Revenue for the year 2002 totaled $81.5 million, a 56.9 percent increase over the $52.0 million for the year 2001.

Our net loss calculated under Generally Accepted Accounting Principles (GAAP), which includes amortization and impairment of goodwill and intangible assets, in process research and development, stock compensation and warrant expense, patent litigation costs, restructuring costs and acquisition integration costs, for the quarter eiiUed December 31, 2002 was $8.1 million, or $0.12 per basic and diluted share. This compares to a GAAP net

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S • loss of $4.6 million, or $0.07 per basic and diluted share, for the previous quarter, and a GAAP net loss of $28.7 million, or $0.46 per basic and diluted share, for the fourth quarter of 2001.

GAAP net loss for the year 2002 was $40.1 million, or $0.62 per basic and diluted share. This compares to a GAAP net loss of $76.1 million, or $1.32 per basic and diluted share, for the year 2001.

The fourth quarter loss, calculated excluding (lie iioii-cash charges of stock compensation ($3.5 million), restructuring ($1.5 million) and amortization of goodwill and intangible assets ($0.8 million), results in an adjusted net loss of $2.3 million. In addition we incurred $2.9 million of cash legal expenses associated with a patent litigation lawsuit during the fourth quarter. Excluding these non-cash charges and the patent litigation costs the company did generate a $0.6 million pro forma profit. This compares to a pro forma net loss* of $0.8 million for the third quarter of 2002 and a pro forma net loss of $4.4 million for the fourth quarter of 2001.

Commenting on the results, David Lee, chairman and chief executive officer, said, "2002 was a great year for Silicon Image. We achieved double-digit revenue growth and improved our gross margin percentage in each quarter. We continue to execute our diversification strategy and leverage our digital media expertise in the high-growth storage and consumer electronics markets. Our backlog visibility remains solid with about 40% of our first quarter revenue plan visible in backlog. I would also like to announce the promotion of Steve Tirado from chief operating officer to president effective immediately. Steve has successfully led the senior management team of the company over the past two years and under his leadership we have achieved strong growth, predictability, and have returned to pro forma profitability."

Steve Tirado, president, added, 'The fourth quarter was another quarter of solid growth fueled by strong growth in our Storage IC and Licensing revenues. The quarter was the seventh straight quarter that we have delivered double-digit sequential revenue growth and our fifth straight quarter of record revenues.'

The company will host a conference call at 2:00 p.m. PSI today to discuss its fourth quarter 2002 results and business outlook. The call will be broadcast over the Internet and can be accessed on the investor relations' site located at www.siliconimage.com . A replay of the conference call will be available on this site until 12:00 p.m. PST on January 24, 2003.

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33. On March 27, 2003, Silicon Image filed its Form 10-K for its fiscal year ended

December 31, 2002. The Company's 2002 Form 10-K, which was signed and certified by

defendants Lee and Gargus reiterated the financial results announced on January 15, 2003.

34. On April 15, 2003, Silicon Image announced its financial results for its first

quarter ended March 31, 2003. Silicon Image reported in relevant part as follows:

Record revenue of $24.7 million was achieved for the first quarter. This is a 3.7 percent increase over the $23.8 million achieved in the fourth quarter of 2002 and is a 44.4 percent increase over the $17.1 million recorded for the first quarter of 2002.

Net income calculated under Generally Accepted Accounting Principles (GAAP), which includes amortization of goodwill and intangible assets, stock compensation expense, restructuring costs, patent defense costs, acquisition integration costs and a gain on escrow settlement, for the quarter ended March 31, 2003 was $3.2 million, or $0.05 per basic share and $0.04 per diluted share. This compares to a GAAP net loss of $8.1 million, or $0.12 per basic and diluted share, for the previous quarter, and a GAAP net loss of $17.7 million, or $0.28 per basic and diluted share, for the first quarter of 2002.

The first quarter net income, calculated excluding a non-cash benefit for stock compensation ($0.3 iiiilliori), a non-cash charge for restructuring ($0.6 million) and a non-cash gain from settlement of acquisition escrow claims ($4.6 million), resulted in an adjusted net loss of $1.1 million. In addition, $1.2 million of cash legal expenses associated with a patent litigation lawsuit and $0.4 million of cash severance costs associated with restructuring were incurred during the first quarter. Excluding the non-cash charges and gains, and cash costs for patent litigation and severance, the company generated $0.5 million of pro-forma net income. This compares to pro-forma net income of $0.6 million for the fourth quarter of 2002 and pro-forma net loss of $3.4 million for the first quarter of 2002.

In this same press release, defendant Lee was quoted as stating: "We continue to execute well on our business and product

strategies. Our Consumer Electronics and Storage businesses are now growing significantly from quarter-to-quarter. During the quarter, we achieved record licensing revenue largely on the strength of licenses for our storage-related intellectual property. We expect IP licensing to contribute 10-15% of our ongoing revenue for the year 2003, and will continue to use it as a means of complementing our product revenue. In addition, our acquisition of

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TransWarp brings valuable processor, switching and memory expertise and adds greatly to our innovation and integration plans. Bookings were strong, and as a result, visibility entering the second quarter has improved to 50 percent." [emphasis added]

35. On May 8, 2003, Silicon Image filed a Form 10-Q for its first quarter ended

March 31, 2003. The second quarter Form 10-Q, which was signed by defendants Gargus,

reiterated the financial results previously announced on April 15, 700 The Form 10-Q repo

that revenue was $24.7 million for the first quarter of 2003, an increase of 44% from the year

quarter at that $4.5 million can be attributed to licensing revenue.

36. On July 22, 2003, Silicon Image announced financial results for its second q

and six months ended June 30, 2003. The press release reported the following:

Revenue of $24.3 million was achieved for the second quarter. This was down 1.4 percent from the $24.7 million achieved in the first quarter of 2003 and is a 26.3 percent iiicieasc over the $19.3 million recorded for the second quarter of 2002. Year-to-date revenues totaled $49.0 million, a 34.8 percent increase over the $36.4 million recorded in the first six months of 2002.

Results calculated under Generally Accepted Accounting Principles (GAAP), which includes amortization and impairment of goodwill and intangible assets, stock compensation expense, restructuring costs, patent defense costs, acquisition integration costs, in-process research and development expense, and a gain on escrow settlement, for the quarter ended June 30, 2003 was a $8.7 million net loss, or $0.13 per basic and diluted share. This compares to a GAAP net income of $3.2 million, or $0.05 per basic share and $0.04 per diluted share, for the previous quarter, and a GAAP net loss of $9.6 million or $0.15 per basic and diluted share, for the second quarter of 2002.

Year-to-date, the GAAP net loss for the first six months of 2003 was $5.4 million, or $0.08 per basic and diluted share. This compares to a GAAP net loss of $27.3 million, or $0.43 per basic and diluted share, for the first six months of 2002.

Second quarter pro-forma net income, calculated excluding a non-cash charge for stock compensation ($2.2 million), non-cash charges for in-process research and development and amortization of intangible assets associated with the acquisition of TransWarp Network's assets ($5.9 million) and cash legal expenses associated with the patent litigation lawsuit against Genesis Microchip ($0.6

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million), was $25,000 or $0.00 per dilutive share. This compares to pro-forma net income of $0.5 million or $.01 per dilutive share for the first quarter of 2003 and a pro-forma net loss of $2.4 million or $.04 per dilutive share for the second quarter of 2002.

Commenting on the results, David Lee, Silicon Image's chairman and chief executive officer, said, "We continue to be well positioned for growth in each of our markets. Our consumer electronics business was particularly strong this quarter and our EP liceiisiiig pi-ograms continue to attract world-class partners. We are particularly gratified by the Federal District Court's ruling upholding our interpretation of the licensing agreement with Genesis Microchip that includes a lump sum payment as well as on-going royalties on all DVI and HDMI products sold by Genesis now and in the future."

"Our long-term outlook on the business sees continued growth especially as we approach the end of this year and into next," added Silicon Image's President Steve Tirado. "We believe that consumer electronics and storage products will do well going forward and look forward to stronger DVI adoption in the PC market as a result of our licensing programs and all-digital bundling initiatives underway with key PC OEM's. We were pro-forma positive in a challenging quarter and our goal is to grow pro-forma EPS more aggressively over the next several quarters."

37. On August 14, 2003, Silicon Image filed a Form 10-Q for its second quarter

ended June 30, 2003. The second quarter Form 10-Q, which was signed by defendant Gargus,

reiterated the financial results previously announced on July 22, 2003. The Form 10-Q reported

that revenue was $24.3 million for the three months ended June 30, 2003, compared to $19.3

million for the three months ended June 30, 2002, an increase of 26%. Revenue was

$49.0 million for the six months ended June 30, 2003, compared to $36.4 million for the six

months ended June 30, 2002, an increase of 35%. The $12.6 million increase in revenue during

the six month periods is primarily due to increased licensing activity, which contributed an

additional $8.0 million of revenue.

38. On September 30, 2003, Silicon Image announced the availability of its

comprehensive intellectual property (IP) licensing program comprising core integrated circuit

(IC) designs based on the Serial ATA (SATA), High-Definition Multimedia InterfaceTM

(HIDMITM) and Digital Visual Interface (DVI) industry standards. Silicon Image also announced 16


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that ATI Technologies has licensed its SATALinkTM core, joining the growing list of companies

licensing Silicon Image's high-speed, serial communications IP. The press release stated in

relevant part as follows:

Silicon Image has cemented a leadership position in its served markets and established a track record of being first to market with cost-effective, high-speed, serial communications products conforming to the SATA, HDMI and DVI industry standards. To accelerate the adoption of these standards and increase the market opportunity, Silicon Image is now licensing its proven IP cores to companies for integration in their system-on-a-chip (SOC) designs.

David Lee, chief executive officer of Silicon Image, noted that licensing is a critical component of the company's long-term growth strategy. "IP licensing is a part of our overall strategy to leverage our core technologies into market segments where we don't directly supply products. This should increase adoption of these standards and boost Silicon Image brand recognition." Lee added, "Our licensees specialize in integrating multiple functions into single-chip solutions for products like DVD players, cable and

satellite set-top boxes, SATA hard disk drives and flat panel displays. Successfully producing these complex designs requires a quality core that has been validated through high-volume production and verified compliant with industry standards. Silicon Image's SATA, HDMI and DVI cores meet these rigorous requirements."

39. On October 2, 2003, Silicon Image announced that it believes third quarter 2003

revenues will be flat to down one percent compared to the $24.3 million in revenue recorded for

the second quarter ended June 30, 2003. In addition, the Company stated that it expected to

record a pro-forma loss for the quarter that is believed to be in the range of $.5 million. The delta

between this and the Street consensus of a $.7 million pro-forma profit would apply equally to

the GAAP numbers.

40. Commenting on the announcement, defendant Tirado stated, "A license contract

which we expected to close before quarter-end slipped out of the quarter. The missed revenue

and profit from this contract accounts for the difference between our reported results and Street

estimates for the quarter. We have a relatively small number of large licensing deals, therefore

licensing revenue is likely to be lumpy during the year. None of the revenue for this quarter or

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backlog for next quarter reflects any proceeds from the settlement with Genesis. Despite the

disappointment in not meeting our licensing revenue target, we are pleased that our product

revenue grew 14 percent sequentially and that overall business conditions, as measured by oid

and backlog, were very strong during the quarter. We are entering Q4 with approximately $24

million of revenue in backlog, which represents approximately 90 percent of the current Street

revenue consensus.

41. On October 19, 2003, defendants issued a press release announcing financial

results for Silicon Image's third quarter and nine months ended September 30, 2003. The

Company reported the following:

Revenue of $24.2 million was achieved for the third quarter. This was down 0.6 percent from revenue of $24.3 million in the second quarter of 2003, and up 13.1 percent from revenue of $21.4 million in the third quarter of 2002. Year-to-date revenue totaled $73.2 million, an increase of 26.8 percent from revenue of $57.7 million in the first nine months of 2002.

Net loss under Generally Accepted Accounting Principles (GAAP), which includes stock compensation expense, amortization and impairment of goodwill and intangible assets, patent defense costs, acquisition integration costs, restructuring costs, in-process research and development expense, and a gain on escrow settlement, was $2.1 million, or $0.03 per basic and diluted share, for the quarter ended September 30, 2003. This compares to a net loss of $8.7 million, or $0.13 per basic and diluted share, for the previous quarter, and a net loss of $4.6 million, or $0.07 per basic and diluted share, for the third quarter of 2002.

On a year-to-date basis, the GAAP net loss was $7.5 million, or $0.11 per basic and diluted share, for the first nine months of 2003, compared to a net loss of $32.0 million, or $0.50 per basic and diluted share, for the first nine months of 2002.

Third quarter pro-forma net loss, calculated excluding a non-cash charge for stock compensation ($1.1 million), a non-cash expense for the amortization of intangible assets ($0.4 million) and cash legal expenses associated with the patent litigation lawsuit against Genesis Microchip ($0.2 million), was $05 million, or $0.01 per basic and diluted share. This compares to pro-forma net income of $25,000, or $0.00 per diluted share, for the second quarter of 2003, and a pro-forma net loss of $0.8 million, or $.01 per basic and diluted share, for the third quarter of 2002.

Commenting on the results, David Lee, Silicon Image's chairman and chief executive officer, said, "By providing innovative solutions and leveraging our

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IF portfolio through licensing our technology to world-class partners, we continue to drive standards adoption and to position Silicon Image for long-term growth. During the third quarter, we announced several products and strategic alliances with industry leaders like Sunplus. In addition, we saw leading CE manufacturers launch the world's first HDMI-enabled products-all incorporating our PanelLink CinemaTM technology-and our overall product orders grew over 40 percent sequentially. We are extremely pleased with the momentum of our business entering the fourth quarter and are excited about the growth opportunities for our markets."

"Even though our total revenue was slightly down this quarter, we did achieve record new orders and double-digit sequential growth in product revenue for the third quarter," added Silicon Image's president Steve Tirado. "Our strong backlog position entering the fourth quarter, combined with the continued strength of new orders through the first half of October, positions us for expected sequential revenue growth of 20+ percent in the fourth quarter. The creation, distribution, storage and display of digital content in a secure environment are at the forefront of issues facing content providers and electronics manufacturers today. Silicon Image has the vision, products and partnerships to lead the industry transition to secure digital content delivery systems.

42. On November 14, 2003, Silicon Image announced that its Form 10-Q for the

quarter ended September 30, 2003, which was due to be filed with the Securities and Exchange

Commission on November 14, 2003, would not be timely filed because an ongoing examination

regarding the Company's recognition of revenue associated with certain licensing transactions in

2003 and 2002. On this news the price of Silicon Image common stock dropped 27.7% or $2.45

from $8.85 to $6.40. Silicon Image has not filed its Form 10-Q and is therefore now subject to

elisting. Silicon Image has requested a hearing which automatically suspends the delisting

)ending the NASDAQ panel's review and determination. Pending the NASDAQ panel's final

letermination, Silicon Image's common stock will continue to be traded on the NASDAQ

ational Market. However, beginning on November 26, 2003, Silicon Image's trading symbol

vas amended from "SIMG' to "S[MGE" to reflect the NASDAQ convention for companies who

iave delayed SEC filings.

43. The defendants' statements contained in paragraphs 22 to 43 were each materially

alse and misleading when made because they failed to disclose and/or misrepresented the

ollowing adverse facts: (1) that during the Class Period defendants had materially overstated its

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1 license revenue by improperly recognizing revenue that did not satisfy revenue recognition

2 criteria; (2) that the Company's financial statements were not prepared in accordance with

3 Generally Accepted Accounting Principles ("GAAP"); (3) that the Company lacked adequate

4 internal controls and was therefore unable to ascertain the true financial condition of the

5 I Company; and (4) that as a result, the value of the Company's net income and financial results

were materially overstated at all ielevant times.

7

44. The market for Silicon Image's common stock was open, well-developed and

8 I efficient at all relevant times. As a result of these materially false and misleading statements and

9 failures to disclose, Silicon Image's common stock traded at artificially inflated prices during the

10 Class Period. Plaintiff and other members of the Class purchased or otherwise acquired Silicon

11 Image common stock relying upon the integrity of the market price of Silicon Image's common

12 stock and market information relating to Silicon Image, and have been damaged thereby.

13

45. During the Class Period, defendants materially misled the investing public,

14 thereby inflating the price of Silicon Image's common stock, by publicly issuing false and

15 misleading statements and omitting to disclose material facts necessary to make defendants'

16 statements, as set forth herein, not false and misleading. Said statements and omissions were

17 materially false and misleading in that they failed to disclose material adverse information and

18 misrepresented the truth about the Company, its business and operations, as alleged herein.

19

46. At all relevant times, the material misrepresentations and omissions particularized I 20 in this Complaint directly or proximately caused or were a substantial contributing cause of the

21 damages sustained by plaintiff and other members of the Class. As described herein, during the

22 Class Period, defendants made or caused to be made a series of materially false or misleading

23 statements about Silicon Image's business, prospects and operations. These material

24 misstatements and omissions had the cause and effect of creating in the market an unrealistically

25 ositive assessment of Silicon Image and its business, prospects and operations, thus causing the

26 ompany's common stock to be overvalued and artificially inflated at all relevant times.

27 )efendants' materially false and misleading statenients during the Class Period resulted in

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$169,676

$61,520

$15,180

$33,852

$15,000

$P01,500

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25.000 $193,736

50,000 $387,776

0 $75,089

$149,400

$75,714

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plaintiff and other members of the Class purchasing the Company's common stock at artificially

inflated prices, thus causing the damages complained of herein.

47. As alleged herein, defendants acted with scienter in that defendants knew that the

public documents and statements issued or disseminated in the name of the Company were

materially false and misleading; knew that such statements or documents would be issued or

disseminated to the investing public; and knowingly and substantially participated or acquiesced

in the issuance or dissemination of such statements or documents as primary violations of the

federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their

receipt of information reflecting the true facts regarding Silicon Image their control over, and/or

receipt and/or modification of Silicon Image allegedly materially misleading misstatements

and/or their associations with the Company which made them privy to confidential proprietary

information concerning Silicon Image, participated in the fraudulent scheme alleged herein.

48. During the Class Period the Individual Defendants sold thousands of shares of the

personally held Silicon Image common stock to the unsuspecting public at artificially inflated

prices and while in possession of material non-public information about the Company. The

following chart sets forth sales by the Individual Defendants:

11-Nov-03 LEE, DAVID D.

1 0-Nov-03 TIRADO, STEVE

10-Nov-03 GARGUS, ROBERT G.



10-Nov-03 LEE, DAVID D & JOANNE W. TRUST


5-Nov-03 LEE, DAVID D & JOANNE W. TRUST

5-Nov-OS LEE, DAVID & JOANNE W TR

4-Nov-03 LEE, DAVID & JOANNE W TR


4-Nov-03 TIRADO, STEVE


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4-Nov-03 GARGUS, ROBERT G. 10,000 $11,399

4-Nov-03 LEE, DAVID D. 50,000 $381,805

3-Nov-03 TIRADO, STEVE 4,000 $27,960

3-Nov-03 LEE, DAVID D. 25,000 $176,500

3-Nov-03 LEE, DAVID D & 25,000 $174,998 JOANNE W. TRUST

30-Oct-03 LEE, DAVID D. 4,634 $31,742

29-Oct-03 LEE, DAVID D. 20,366 $138,692

27-Oct-03 TIRADO, STEVE 4,000 $25,800

20-Oct-03 TIRADO, STEVE 4,000 $25,840

17-Oct-03 LEE, DAVID D. & 50,000 $330,000 JOANNA W. TRUST

17-Oct-03 LEE, DAVID D. 50,000 $329,985

13-Oct-03 LEE, DAVID D. 25,000 $151,500

13-Oct-03 LEE, DAVID D & 25,000 $151,500 JOANNE W. TRUST

13-Oct-03 TIRADO, STEVE 4,000 $23,120

6-Oct-03 TIRADO, STEVE 4,000 $22,655

24-Jul-03 TIRADO, STEVE 660,350 $3,321,560

16-Jul-03 LEE, DAVID & 100,000 $614,000' JOANNE W TR

16-Jul-03 LEE, DAVID D. 100,000 $615, 0002

14-Jul-03 LEE, DAVID D. 67,400 $400,0002

14-Jul-03 LEE, DAVID & 67,400 $400 , 0001 JOANNE W TA

27-Jun-03 LEE, DAVID & 18,000 $103,971' JOANNE W TR

27-Jun-03 LEE, DAVID D. 18,000 $105,0002

19-Jun-03 LEE, DAVID & 4,500 $25 ,600 1 JOANNE JTIC

19-Jun-03 LEE, DAVID D. 4,500 $25,892

18-Jun-03 LEE, DAVID D. 10,100 $58,076

29-May-03 LEE, DAVID D. 60,000 $346,620

29-May-03 LEE, DAVID & 60,000 $346,650 JOANNE W TR

27-May-03 LEE, DAVID F) & 100.000 $552540 JOANNE W. TRUST

27-May-03 GARGUS, ROBERT G. 30,000 $168,000

27-May-03 LEE, DAVID D. 100,000 $552,500

27-May-03 GARGUS, ROBERT G. 30,000 $168,030

28 Apr-03 GARGUS, ROBERT G 22,600 $135,000

28-Apr-03 GARGUS, ROBERT G. 22,600 $134,922

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I 24-Apr-03 GARGUS, ROBERT G.

2 24-Apr-03 GARGUS, ROBERT G.

15-Jan-03 LEE, DAVID D. 3 9-Jan-03 LEE, DAVID D.

4 27-Nov-02 LEE, DAVID D.

25-Nov-02 LEE, DAVID ft 5 21-Oct-023 TIRADO, STEVE

18-Oct-02 TIRADO, STEVE

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FN

8 49. The financial statements and related press releases by the Company identified

above were materially false and misleading when made. The Company has been forced to

10 restate its financial results during the Class Period because, contrary to its earlier statements,

those results did not comply with GAAP.

12 50. The SEC requires that publicly-traded companies present their financial

13 statements in accordance with GAAP. 17 C.F.R. § 210.4-01(a)(1). Financial statements filed

14 with the SEC that are not prepared in accordance with GAAP "will be presumed to be

15 misleading or inaccurate, despite footnote or other disclosures, unless the Commission has

16 otherwise provided." 17 C.F.R. § 210.4-(a)(1).

17 51. Defendants' failure violated, inter alia, the following GAAP principles:

18 (a) the principle that a conservative approach be taken providing early

19 recognition of unfavorable events and minimizing the amount of income reported. (S ee

20 Statement No. 4 of the Accounting Principles Board ("APB Nos") at 4 1128, 35, 171);

21 (b) the principle that the financial information presented should be complete.

22 (S. APB No. 4, 112 8, 35, 88, 171);

23 (c) the principle of fair presentation ("presents fairly"). (S AFB No. 4, ¶9[

24 109, 138, 189);

25 (d)

the principle of adequacy and fairness disclosure. (5ee APB No. 4118 1,

26 106, 189, 199);

27 (e) the principle nf mHteria]ity concerning information that is significant

28 enough to affect evaluations or decisions. APB No. 4, ¶91 25, 128);

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(f) the principle that the substance of transactions rather than form should be

2 reflected. (See AFB No. 4, ¶91 25, 35, 127);

3

(g) the principle that the financial statements contain and disclose relevant,

4 understandable, and timely information for the economic decisions of the user. ($ee AFB No. 4

5 ¶91 23, 88, 89, 92);

6

(h) the principle that financial statements provided reliable financial

7 information about the enterprise for the economic decisions of the user. (age APB No. 4, 1177,

8 78, 107,108); and

9 : (i) the principle that a restatement of a previously issued financial statement

10 is allowed only when there was a material error, oversight or misuse of facts that existed at the

11 time the financial statements were prepared. AFB No. 20, ¶91 13, 74; FASB Statement of

12 I Concepts No. 16).

13

Applicability Of Presumption Of Reliance: Fraud-On-The-Market Doctrine

14

15 52. At all relevant times, the market for Silicon Image's securities was an efficient

16 market for the following reasons, among others:

17 (a) Silicon Image's stock met the requirements for listing, and was listed and

18 actively traded on the Nasdaq, a highly efficient and automated market;

19 (b) As a regulated issuer, Silicon Image filed periodic public reports with the

20 SEC and the NASD;

21 (c) Silicon Image regularly communicated with public investors via

22 established market communication mechanisms, including through regular disseminations of

23 press releases on the national circuits of major newswire services and through other wide-

24 ranging public disclosures, such as communications with the financial press and other similar

25 reporting services; and

26 (d) Silicon Image was followed by several securities analysts employed by

27 major brokerage firms who wrote reports, which were distributed to the sales force and certain

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customers of their respective brokerage firms. Each of these reports was publicly available and

I entered the public marketplace.

53. As a result of the foregoing, the market for Silicon Image's securities promptly

digested current information regarding Silicon Image from all publicly available sources and

reflected such information in Silicon Image's stock price. Under these circumstances, all

puiJiasers of Silicon Image's securities during the Class Period suffered similar injury through

their purchase of Silicon Image's securities at artificially inflated prices and a presumption of

reliance applies.

COUNT I For Violations Of Sections 10(B) Of

The Exchange Act And Sec Rule 10b-5 Promulgated Thereunder

54. Plaintiff repeats and realleges paragraphs 1 through 53, as if set forth fully herein.

55. In connection with the sale of Silicon Image securities throughout the Class

Period, Defendants participated, directly or by acquiescence, despite a duty to act, in the

preparation and/or issuance of materially false and misleading statements and omissions.

56. Defendants knew, or were reckless in not knowing, that the statements contained

in Silicon Image public filings were materially false and misleading. Plaintiff and the Class

relied, directly or indirectly by reliance on the integrity of the market, on Defendants'

misstatements and/or omissions and were damaged as a result. But for Defendants'

misrepresentations and/or omissions, Plaintiff and the Class would not have purchased Silicon

Image securities or would have purchased them at non-artificially inflated prices.

COUNT II

For Violation Of Section 20(A) Of The Exchange Act (Against The Section 20(A) Defendants, As Defined Below)

57. Plaintiff repeats and realleges each of the preceding paragraphs 1 through 56 as if I gully set forth herein.

58. This claim is brought against the Individual Defendants except for Defendant

Strong (collectively, the "Section 20(a) Defendants").

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'-LASS ACTION COMPLAINT FOR VIOLATIONS OF SECURITIES LAWS

1

59

The Section 20(a) Defendants were control persons within the meaning of the

2 Exchange Act.

3

60. As set forth above, Defendants violated Section 10(b) of the Exchange Act, and

4 Rule lOb-S promulgated thereunder, by their acts and omissions as alleged in this complaint. B:

5 virtue of their positions as control persons, the Section 20(a) Defendants, each of whom violatec

6 Section 10(b) and Rule lOb-5, are liable pursuant to Section 20(a) of the EAclialige Act.

7

61. As a direct and proximate result of the Section 20(a) Defendants' wrongful

8 conduct, Plaintiff and the Class suffered damages in connection with their purchases of the

9 Company's securities during the Class Period.

10

NO SAFE HARBOR

11

62. The statutory safe harbor provided for forward-looking statements under certain

12 circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.

13 The statements alleged to be false and misleading herein all relate to then-existing facts and

14 conditions. In addition, to the extent certain of the statements alleged to be false may be

15 characterized as forward looking, they were not identified as "forward-looking statements" when

16 made, there was no statement made with respect to any of those representations forming the basi

17 of this Complaint that actual results "could differ materially from those projected," and there

18 were no meaningful cautionary statements identifying important factors that could cause actual

19 results to differ materially from those in the purportedly forward-looking statements. In the

20 alternative, to the extent that the statutory safe harbor is intended to apply to any forward-lookin

21 statements pleaded herein, Defendants are liable for those false forward-looking statements

22 because at the time each of those forward-looking statements was made, the speaker had actual

23 knowledge that the forward-looking statement was materially false or misleading, and/or the

24 forward-looking statement was authorized or approved by an executive officer of Silicon Image

25 who knew that the statement was false when made.

26 (II

27

'1/

28

TT ASS ACTION COMPLAINT FOR VIOLATIONS OF SECURITIES LAWS

I

PRAYER FOR RELIEF

2

WHEREFORE, Plaintiff, on behalf of himself and all other Class members, prays for

3 judgment as follows:

4 A. A determination that this action is a proper class action and a certification of the

5 Class under Rule 23 of the Federal Rules of Civil Procedure;

6 B. An award of compensatory damages in favor of Plaintiff and the other Class

7 members against all Defendants for damages sustained as a result of Defendants' wrongdoing,

8 including interest thereon;

9 C. An award to Plaintiff and the Class of their reasonable costs and expenses

10 incurred in this action, including counsel fees, expert fees and other disbursements; and

11 D. A grant of such other relief as the Court may deem just and proper.

12 JURY DEMAND

13 Plaintiff demands a trial by jury.

14 Dated: December , 2003 GREEN & JIGARJIAN LLP

Robert A. Jigarjian

Robert S. Green 235 Pine Street, 15th Floor San Francisco, California 94104 Telephone: (415) 477-6700 Facsimile: (415) 477-6710

ABBEY GARDY, LLP Mark C. Gardy, Esq. Nancy Kaboolian, Esq. 212 East 39th Street New York, New York 10016 Telephone: (212) 889-3700 Facsimile: (212) 674-5191

Attorneys for Plaintiff

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1 CERTIFICATION OF INTERESTED ENTITIES OR PERSONS

2 Pursuant to Civil L.R. 3-16, the undersigned certifies that as of this date, other than the

:::: parties, there

interest to re

Attorney Of Record

6 For Plaintiff Gerald KorYan

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12-05-'03 160 FROM-A GA1RDY, LLP l3 2129831455 T-47 F'kZ/W U-b

CERT11CTION OF GERALD KORMJAN IN SUFEQLOF CLASCTION COMPLAINT

Gerald Korman ("plaintiff') declares, as to the claims asserted under the federal

securities laws, that:

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Plaintiff has reviewed the complaint prepared by counsel and has

authorized its filing.

2. Plaintiff did not purchase the security That is the subject of the complaint at

the direction of plaintiffs' counsel or in order to participate in any private action arising under the

federal securities laws.

3. Plaintiff is willing to serve as a representative party on behalf ofa class,

including providing testimony at deposition and trial, if necessary.

4. During the proposed Class Period, plaintiff executed the following

trausactions relating to Silicon 1.magc

Purchase of 225 shares at $5 7/8 per share on 01/17/03

5. In the past three years, plaintiff has not sought to serve as areprescatative

party on behalf of a class in. an action fUed under the federal securities laws,

6. Plaintiff will not accept any payment for serving as a representative party

on behalf of a class beyond plaintiffs pro rata share of anyrecovery, except such reasonable costs

191 l9flfl4 iR1 111S fTX/RX NO 7OS1 1iOO2

I1/JD 06 1UJJ £ULJ 01.101.al 'JLUji £L I'_'

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and expenses (thciuding lost wages) directly relating to the representation of the Class as ordered

or approvcd by the Court.

The foregoing are, to the best of my knowledge and belief, true and correct statements.

December 4, 2003

12/05/2003 FRI 11:45 [TX/RX NO 78081 LI003

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