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McAfee Shakeup: Poor Timing

Stock-options scandal claims two top McAfee execs as vendor tries to gain momentum with new business initiatives

There's never an ideal time to fire your top executive, but the timing couldn't be worse for McAfee, which today fired its president, Kevin Weiss, and announced chairman and CEO George Samenuk's retirement in the wake of a stock option scandal.

An independent investigation into McAfee's stock-option grant practices uncovered irregularities that will force McAfee to restate earnings over a 10-year period. According to McAfee, that restatement will be in the $100- to $150 million range, and it will follow guidelines from the Office of the Chief Accountant of the U.S. Securities and Exchange Commission (SEC) the exact figure of the charges and the impact on taxes and accounting.

This bad news comes at the same time that McAfee kicks off its compliance and control strategy with its Citadel Software acquisition, and as it looks to integrate Preventsys into the fold. Compliance management has become a hot topic among enterprises juggling compliance with multiple regulations. (See Compliance: A Multi-Front War.)

Will McAfee's stock scandal make it tough to sell itself as a viable compliance vendor? Andrew Jaquith, program manager for security research at the Yankee Group, says probably not. "The technical compliance products will be just fine," he says.

"George [Samenuk] seemed like he was really trying to get McAfee focused on the core business of threat protection," Jaquith says. But even with the unfortunate timing of the management shakeup, Jaquith says it probably won't change much. As a matter of fact, McAfee's stock had risen as of presstime, he pointed out -- up almost 3 percent to 26.55.

McAfee is the latest tech company to face SEC scrutiny over possible back-dating of stock options and improper disclosure to shareholders. Apple and Brocade have been under SEC scrutiny, and executives at Mercury Interactive and Comverse Technology also have reportedly stepped down due to back-dating scandals. CNET Networks' CEO Shelby Bonnie today also resigned in the wake of an investigation there.

Back-dating basically lets recipients get stock options at a higher value than the company's stock price.

"This type of option backdating seems to have been a universal practice among tech companies. No one is safe from persecution," says Richard Stiennon, IT-Harvest. "The ultimate travesty will be when Steve Jobs is forced to resign from Apple over this. No Apple stock holder will ever be convinced that Jobs could act against their best interests. It calls into question the wisdom of the SEC in continuing this witch hunt."

McAfee named Dale Fuller as interim CEO and president, and Charles J. Robel, who joined McAfee's board in June, was appointed chairman. Fuller joined McAfee's board in January and was previously CEO and president of Borland Software.

McAfee's Board named a search committee to fill the CEO position and will look at internal and outside candidates for the job.

— Kelly Jackson Higgins, Senior Editor, Dark Reading

  • Apple Inc. (Nasdaq: AAPL)
  • Borland Software Corp.
  • Brocade Communications Systems Inc. (Nasdaq: BRCD)
  • Comverse Technology Inc. (Nasdaq: CMVT)
  • McAfee Inc. (NYSE: MFE)
  • Mercury Interactive Corp.

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