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Stock options scandal hits McAfee

Forced to restate ten years of financial results


A major, executive shake-up is under way at security software vendor McAfee, including the firing of the company's president in the wake of a stock-options investigation.

McAfee announced Wednesday that it has terminated the employment of its president, Kevin Weiss. The company's chief executive officer (CEO) and chairman George Samenuk is retiring from those roles and the board of directors has appointed Dale Fuller as interim CEO and president.

Samenuk leaves McAfee after almost six years. In a statement, he said that he's retiring because it's "in the best interests" of the company, its shareholders and its staff. "I regret that some of the stock option problems identified by the Special Committee occurred on my watch," he added in the statement.

McAfee set up a special committee of independent directors to look into the company's practices of stock-option granting. The committee was assisted by independent counsel and forensic accountants. Based on the committee's findings, McAfee now expects to have to restate financial results over a 10-year period to record pre-tax non-cash charges of between $100 million and 150 million for stock-based compensation

The software vendor is one of many high-tech companies having to grapple with the stock options issue. Others include Apple, Broadcom, Sycamore Networks and Rambus.

McAfee is actively engaged in looking for a permanent CEO and will consider both internal and external candidates.

In a conference call with analysts, Fuller said it was too early to know if he was a leading candidate for the CEO job.

Instead, he plans to spend Wednesday reassuring McAfee's customers that the company will continue to follow its current strategies in providing security and risk management software. The board does not expect to make any further changes in senior management.

"My job is to stay out of their way and clear any part of the deck that might cause friction or struggles for them," Fuller said. "I don't believe we'll have any disruption of business."

In the meantime, both the US Securities and Exchange Commission (SEC) and McAfee's own special committee will continue their investigations. McAfee's committee presented its summary report to the board on Tuesday, and will share those details in a pending SEC filing. That report may include an explanation of why the board accepted Samenuk's resignation but moved to terminate Weiss.

McAfee has also cooperated with an SEC subpoena for stock options data from January 1 1995 to the present day, said Eric Brown, the company's chief operating officer and chief financial officer. The SEC is continuing that investigation, although it is unknown whether it will lead to criminal charges, as it did in July at Brocade Communications Systems.

McAfee executives may share additional details in the company's next quarterly earnings conference call scheduled for October 26.


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