Network Assoc to pay $70 m to shareholders

By : |September 30, 2003 0

SEATTLE: Computer security software and services provider Network Associates Inc. said that it has agreed to pay shareholders $70 million to settle a class-action lawsuit charging that it had inflated its stock price.

The settlement is subject to approval by the federal court in San Francisco.

Network Associates shares barely moved in after-hours trade, where they stood at $13.90, after closing 13 cents lower at $13.88 on the New York Stock Exchange.

Shareholders had sued Network Associates and some of its former executives in late 2000 and early 2001, charging that an effort was made to inflate the Santa Clara, California-based company’s stock price by improperly booking revenue.

The lawsuit claimed that Network Associates had misled investors by recognizing software revenue when it was shipped to distributors, rather than when end-user paid for its products, a practice called “channel stuffing.”

Network Associates had revealed in late 2000, after an audit by PricewaterhouseCoopers, that it would change its accounting practices after posting declining sales and losses.

Former Chairman and Chief Executive Bill Larson, former President Peter Watkins and former Chief Financial Officer Prabhat Goyal, who were named in the class-action suit, resigned as a result of the accounting fiasco.

“This settlement represents a significant milestone in Network Associates’ move from past issues to future opportunities,” George Samenuk, chairman and chief executive officer of Network Associates, said in a statement.

Samenuk was brought in after the top executives resigned to restore the security software maker’s credibility.

Network Associates remains under scrutiny from authorities, however, with the Justice Department and the Securities and Exchange Commission conducting ongoing probes into the company.

At issue in the SEC investigation is the way Network Associates booked revenue from partners that distributed its products.

Network Associates, which had delayed filing its 2002 annual financial statement in March when the Department of Justice probe was revealed, also said that it would file its 2002 annual statement with the SEC as well as its quarterly reports for the first half of 2003 on Oct. 31.

© Reuters

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