McAfee President Fired, CEO Quits
Playing out what could be considered the worst-case scenario for corporations caught in the midst of a multi-company SEC probe into corporate accounting for possibly backdated options grants, the executive ranks of security software provider McAfee are being purged in a massive company reboot.
Former Borland CEO Dale Fuller is the new interim CEO of McAfee today, after the resignation of six-year veteran chairman/CEO George Samenuk, and the outright termination of the company’s president, Kevin Weiss.
Last August, McAfee revealed that an internal review of its accounting practices -– ordered after the SEC launched its investigation -– showed the company may have to restate its earnings dating back to 2003. Today, the company admitted the correction will be far worse: The company may have to restate earnings for the past ten years, to account for what it now estimates as up to $150 million in unaccounted options grants, presumably as executive compensation.
Of course, corporate earnings are typically reflected in capital value, which accumulates and is compounded over time. So unaccounted-for backdated options dating back to 1996 could conceivably change the market capitalization of McAfee even more dramatically than this figure would indicate.
On the other hand, $150 million represents only a fraction of the company’s current quarterly revenue. In its second quarter report last July, McAfee reported net revenue of about $275 million. But the company warned then that these figures may change pending the outcome of the accounting review, and declined to provide some earnings estimates for that quarter as a result.
Investors, meanwhile, apparently interpreted the $150 million figure as better than it could have been. McAfee's stock value rose sharply in early trading after the news broke, before settling to a gain of just over 2% by 11:00 am, at $26.30 per share.
Samenuk held McAfee’s CEO post for the past six years, while Weiss has only been a McAfee veteran for the past three-and-a-half years, having been appointed President just last March. Weiss had served three years prior to his promotion as executive vice president of worldwide sales. The company isn’t commenting today on Weiss’ role in the scandal, although technically, it has never been made illegal for a company to grant backdated options to executives or board members, and Weiss hailed from the Sales department, not Finance.
Fuller is a recent inductee to the McAfee board, having joined just last January. The company’s replacement non-executive chairman -– veteran fund manager Charles J. Robel -– joined the board just last June, at the time the SEC investigation was just coming to light.
Samenuk’s resignation comes just days after the publication of an open letter urging Microsoft to reconsider its security architecture for Windows Vista, which includes a new feature that prevents unauthorized writes or changes to the system kernel.
“We won’t remain silent as Microsoft imposes unnecessary security risks,” he wrote. “Microsoft’s new approach is misguided in principle, bad for innovation and competition. Above all, it’s bad for users. We urge Microsoft to return to the historically collaborative approach it has taken in providing security companies with full access to system resources and allowing customers genuine freedom of choice in security.”
Although Fuller has had long service with companies that have gone head-to-head against Microsoft with positive results, including Borland and Apple, it isn’t clear yet whether he will continue McAfee’s pursuit against Microsoft’s alleged anti-competitive behavior, either in the open market or with the European Commission, where McAfee had just lent support to Symantec.