Human Capital & Careers

Option-grant Timing Eyed at Comverse

Telecom equipment maker will look into ''the accuracy of the stated dates of option grants.''
Stephen TaubMarch 14, 2006

Is Comverse Technology Inc. the latest company to run into timing problems with its options awards?

On Tuesday, the maker of equipment for telecommunications networks announced that it may need to restate its financials, although the company has not determined the years that would be affected. In a press release, the company explained that a special committee of its board of directors will review matters including “the accuracy of the stated dates of option grants and whether all proper corporate procedures were followed.”

Comverse did not provide further details in its otherwise oblique announcement. It seems, however, to be one more company in a small but growing group that may have awarded and priced options shortly before announcing good news.

Indeed, later the same day, Merrill Lynch downgraded Comverse over a concern “that the company deflated the value of options by using incorrect dates, boosting GAAP profits, and that this may impact reported 2005 GAAP numbers and our 2006/2007 estimates.”

In November, we reported that Securities and Exchange Commission was investigating the fortuitous timing of some options grants — specifically, whether companies had improperly backdated the grants to help the option holders capitalize on a lower initial market value.

SEC officials are reportedly looking at about a dozen companies. One is Mercury Interactive Corp., which in November announced that three top executives had resigned after an internal investigation found a long history of stock-option-grant manipulation.

And earlier this month, Affiliated Computer Services Inc. announced that the SEC has launched an informal investigation into stock-option grants made by the company from October 1998 through March 2005.