That is, of awarding an option where you’ve set the strike price — that is, the price at which the option is exercised at a date prior to the date it was actually awarded.Meaning you build in an instant profit to the option. It’s effectively betting on a horse race after the horse race is over.The current Mc Afee scandal evokes an earlier, darker chapter in the company’s history.In January, Mc Afee, formerly known as Network Associates, agreed to pay a million fine as part of an SEC investigation into allegations that executives inflated revenues and pumped up the company’s stock price from early 1998 through 2000.A similar review at online media company CNet Networks in San Francisco led Wednesday to the resignation of co-founder and Chief Executive Shelby Bonnie.The three executives are the latest casualties in a scandal that has ensnared more than 120 U. companies, about one-fourth of them in Silicon Valley.“There’s going to be a stigma for a while,” said Warren Pritchard, an analyst at Cowen and Co.“It’s like anything — memories need to fade, but there hasn’t been a chance.” Pritchard and others on Wall Street saw Wednesday’s changes not as another black eye for Mc Afee, but as the company’s first step out from under the options scandal cloud.
Secondly, I think in Silicon Valley, because these were young, entrepreneurial companies, I think a lot of people felt less than diligent in their adherence to modern corporate governance standard and other forms of corporate formalities.
RYSSDAL: Is there something about high-tech companies that make them more vulnerable to this sort of thing?
It has been so far largely tech companies that have gotten in trouble. ELSON: Well, I think that tech companies, more than a lot of companies, made extensive use of options back in the ’90s.
“The important thing, at least from an investment perspective, is the fundamentals of Mc Afee are pretty sound, the company’s product strategy is heading in the right direction.” Analysts also expect the new executive team to consider major strategic changes for Mc Afee, from positioning the company as an acquisition target to becoming a serial acquirer itself.
“There’s a feeling that Dale (Fuller) and the board may take a fresh look at everything,” said Frederick Ziegel, an analyst at Soleil Securities.
Many companies under investigation have warned they will need to restate past financial reports because option abuses led them to overstate their profits.