Capital Markets

Altera CFO Apologizes to Equity Analyst

The company backpedaled in its decision to cut ties with the Wells Fargo analyst, who argued that a share-repurchase program destroyed shareholder ...
Craig SchneiderJuly 29, 2005

Altera Corp. CFO Nathan Sarkisian has issued a public apology to an analyst who recently stopped covering the company after its management decided to no longer talk to him.

The Wells Fargo Securities analyst, Tad LaFountain, who followed technology stocks for 25 years, reportedly dropped coverage of the semiconductor maker on Tuesday, noting that the company was not communicating with him or letting him ask questions on conference calls announcing financial results. LaFountain noted that he would replace Altera with a company “that takes a more appropriate view of the role of independent investment research,” according to The New York Times.

Late Thursday, in a company press release, Sarkisian apologized for the company’s action against the analyst. “Regrettably, as a result of our action and the ensuing press coverage, some have concluded that our intention was to manipulate opinion,” he stated. “In retrospect, our decision to disengage was in error, and I apologize to Mr. LaFountain, our investors, and the investment community.”

LaFountain had a “sell” rating on Altera. But Sarkisian denied ever having stopped relations or challenged an analyst because of a rating. Rather, Sarkisian said, the decision to discontinue dialogue with LaFountain stemmed from disagreements over Altera’s nine-year-old share repurchase program, which LaFountain says destroyed shareholder value. The CFO reaffirmed management’s commitment to the program, noting that since 1996 it’s returned $1.5 billion in cash to shareholders.

Altera uses its share-buyback program to offset stock options issued to executives and employees, according to the Times. LaFountain contended that since the repurchases tend to be made at much higher rates than those at which options are issued, “the program is the equivalent of buying high and selling low,” in the newspaper’s words. In previous reports, the analyst argued that paying a dividend would be a better way for the company to deploy its cash.

LaFountain’s decision to drop coverage and announce the retaliatory measures of management was reportedly highly unusual because analysts are seen as not wanting to risk that other companies they follow will launch similar reprisals.

Sarkisian stated that Altera is committed to providing analysts who cover it with access to management and that Altera continually strives to operate its business and investor-relations program “on a best-practice basis.”

A Wells Fargo spokeswoman, commenting on Altera’s apology, said the firm was “very pleased to see this situation resolved this way,” according to the Times. LaFountain declined to comment.