Novell is investigating stock option awards at the
company, in the latest move by a US IT supplier to tackle possible
stock option irregularities.
Former directors at both Brocade and Comverse are already facing
stock option fraud charges brought by regulators and enforcement
agencies, and other companies are conducting internal
investigations into possible problems at their firms.
The Novell investigation has already impacted on Novell’s third
quarter results posted this week.
The company said that “These financial results are preliminary
because Novell, during this quarter, began a self-initiated,
voluntary review of the company's historical stock-based
compensation practices and related potential accounting impact. The
financial results reported today do not take into account any
adjustments that may be required in connection with the completion
of the stock-based compensation review and should be considered
preliminary.”
Federal investigators are looking at the stock option awards at
dozens of US IT companies, and are focusing on whether awards could
have been incorrectly backdated to give the recipients cheaper
prices on their share options.
Backdating isn’t necessarily illegal, but it is if such awards
are not correctly accounted for.
The Novell investigation came as the company posted another poor
set of results.
For the third quarter Novell reported sales of $241m (£133m),
compared to the $252m for the same quarter last year.
Novell also made an operating loss of $3m, compared to a
$400,000 profit last time.
The company said Linux sales grew 30% year-over-year, and that
identity and access management sales jumped 46%.
These are the two market areas Novell is now focusing on to help
replace its shrinking Netware network management software
business.