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Mercury CEO, CFO Resign
Mercury CEO, CFO Resign
In Wake of Options Probe
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
November 2, 2005 11:14 a.m.
Mercury Interactive Corp. shares plunged Wednesday after the software company disclosed irregularities in the granting of stock options and said three top executives had resigned.
The Mountain View, Calif., provider of business technology optimization software said an internal investigation, prompted by a Securities and Exchange Commission probe, turned up evidence of misdated stock-option grants.
Mercury said Chief Executive Amnon Landan, Chief Financial Officer Douglas Smith and General Counsel Susan Skaer were aware, and to varying degrees, participated in the stock-option practices, and have resigned. Each of them also benefited personally from the practices.
The company said it is not "in the position" to report financial results for the third quarter because of the investigation. Shares were down 32% in morning trading on the Nasdaq Stock Market.
Mercury said its special committee, formed in June, found 49 instances in which the stated date of a Mercury stock-option grant was different from the date on which the option appears to have been granted, between 1995 to the present. In almost every instance, the price on the actual date was higher than the price on the stated grant date. Mercury said the misdating occurred on grants to employees at "all levels," and said the "overwhelming majority" of grants between January 1996 and April 2002 were misdated. The company said it believes the improper dating ended in April 2002.
In addition, Mercury said it discovered that a $1 million loan to Mr. Landan made in 1999 did not have advance approval by the board of directors and wasn't properly disclosed. The loan has since been repaid.
While Mercury said it doesn't believe changes to its historical revenue, cash position or non-stock option-related operating expenses will be required, the company said its ability to make amended 10-K and 10-Q filings with the SEC by Nov. 30 is "in serious jeopardy." As a result, Mercury Interactive's shares face delisting by Nasdaq.
The company said it hopes to file by Nov. 15 a revised plan of compliance so as to avoid a delisting. The company previously acknowledged that may be delisted in the event it doesn't complete restatements and submit required filings to the SEC by Nov. 30.
The company said that it anticipates reporting third-quarter revenue of $205 million to $210 million but that the fourth quarter will be "challenging" as it offered no forecast for the final three months of the year. Analysts, on average, are looking for Mercury Interactive to post revenue of $203 million for the third quarter, according to estimates compiled by Thomson First Call.
In a conference call Wednesday, the company pleaded with analysts and investors to be patient as it seeks to recover from the scandal.
"We ask you to bear with us while we dig into this," newly-appointed Chief Executive Anthony Zingale said. "We know it's a challenging time."
Mr. Zingale, who was previously the software maker's president and chief operating officer, said it will take "several quarters" to get the company back on track, but he said the company is still "very bullish" on its market opportunity.
Life should NOT be a trip to the grave with the intention of arriving safely in an cool and well preserved body, but rather to skid in, chocolate in one hand, beer in the other, body wrecked, totally worn out and screaming WOO HOO what a ride!
Re: Mercury CEO, CFO Resign
The stock market does weird things to people...
The CEO at a company I worked at was talking about the latest initiative at an all-employee meeting. He said, "I'm tired of worrying about the stock market..."
Then he shouldn't have. I suppose those millions of shares in his pocket were hard to ignore, but for some reason nobody could seem to figure out that if the company produced a good product, share price would follow. Not chasing one failed initiative after another. Not blaming poor quarters on industry consolidation, 9/11, etc. Just execute. Number two of Deming's Seven Deadly Diseases...