ollowing an announcement that it would restate most of its financial results for 2004, Phoenix-based point-of-sale terminal manufacturer Hypercom Corp. was named in several purported class action lawsuits.

On Feb. 4, 2005, Hypercom said it would restate financials for each of the first three quarters of 2004 because of errors the company made in reporting leases of its United Kingdom subsidiary Hypercom EMEA Inc.

The company incorrectly accounted for some of its 3,200 leases as sales-type leases rather than operating leases.

As a result of the errors, Hypercom said it overstated its net revenue by at least $4 million and its operating income by at least 65% - 75% for the nine months ending Sept. 30, 2004.

Following the announcement, Hypercom shares tumbled as much as 19% on Friday, Feb. 4. Within a few days, a number of law firms announced their representation of individuals who purchased Hypercom stock (NYSE: HYC) between April 30, 2004 and Feb. 3, 2005 in class action lawsuits filed in the U.S. District Court for the District of Arizona.

The complaints, which name Hypercom, its Chief Executive Officer Christopher Alexander and its Chief Financial Officer John W. Smolak as defendants, allege the company violated federal securities laws by issuing false or misleading statements.

Hypercom's auditing committee, Ernst & Young LLP, is working with outside legal counsel to help ensure that the company takes the appropriate steps to resolve any issues related to the restatement of its results.

Hypercom said it plans to "vigorously defend these lawsuits"; however, it can't guarantee that its insurance carrier will cover the cost of its defense and warned that "the cost of defending these suits will affect its net income and cash flows in future periods."

Hypercom anticipates that it will release its fourth quarter and 2004 financial results in late February 2005.