Novell starts stock option awards probe, makes third quarter loss

Novell is investigating stock option awards at the company, in the latest move by a US IT supplier to tackle possible stock option irregularities.

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.



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