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Security Vendor McAfee to Pay $50 Million Fine
goombah99 writes "RedHerring.com reports that Security Vendor McAfee has agreed to pay a fine of fifty million dollars stemming from false SEC filing. McAfee cooked its books, overstating its revenues one year by 131%, or half a billion dollars. The method employed was 'channel stuffing' in which compliant re-sellers are effectively paid to buy and hold inventory they may never sell. The shipped goods are booked as revenue and the payments disguised in the books. When it caught up with them, McAfee's stock price crashed, wiping out a billion dollars of shareholder capitalization. The story quotes an analyst saying this maybe the swan song for the once dominant vendor."
The death of McAfee is exaggerated. Look at the stock price over the last 24 hours: it's up 1 point...
Evil Overlord Rule #86. I will make sure that my doomsday device is up to code and properly grounded.
Mark to market isn't what Enron did.
Yes, Mark-to-market is what Enron did:
"As McLean pointed out, her Fortune article, "Is Enron Overpriced?" appeared in March 2001. Yet in 1993 an article in Forbes sharply questioned Enron's troubling mark-to-market accounting for assets, which claimed profits for investments long before it was clear that they would in fact evolve. A few years later, an article in Fortune again signaled concern."
The theory of relativity doesn't work right in Arkansas.
Apparently, I missed the analyst gloom/doom forecast. I did see this:
Analysts said the settlement would close a chapter in McAfee's history and let the company focus on its market, which is expected to heat up this year with the entry of Microsoft.
Here's their finance info on Yahoo. They seem to have a $4.73B market cap and are currently dead center of their year stock price range.
Doesn't seem that damaging to them, actually - though they are in for a tough scrap when MSFT gets in the act.
The little guy just ain't getting it, is he?
Me, cynically...
One shall speak only if what one has to say is more beautiful than silence
I think you mean Network Associates, who bought McAffee years ago. Just after they'd bought Dr Solomon's, in turn, as it happens.
Yea, I got that too. Made me homicidal. Another lovely was when it started losing its license number so it had to connect to Live Update every day or so and get the key reauthorized.
I got completely fed up. Ripped that bitch outta my system, and am using AVG now. No complaints. I'll never use Norton or McAfee again.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
The CEO of McAfee will get a slap on the wrist, if that?
Corporate execs are getting away with everything and not being held accountable for their actions. They are frauding stockholders, thats a crime, period. Yet someone with millions in assets can walk away from these issues without so much as reprimand.
From Nortel to WorldCom, Exxon, etc, these companies are being run by crooks aiming to get themselves richer at the expensive of stock holder just trying to invest in something to pay for their retirement.
In Canada, NO LEGAL ACTION has been taken against Nortel execs that drove the stock price over $100 and then allowed the stock to plunge to less then $5.00. The execs in charge simply walked away from Nortel with millions in compenstation while tens of thousands of people lost their jobs, pension, and stock holdings not to mention countless stock holders that lost their shirts investing in Nortel. Then, a few years after their stock price drop, Nortel was caught cooking the books AGAIN with no penalties!
This just proves the legal system and politics are corrupt, if you have enough money you can get away with anything, even murder, if you throw enough money into the system.
I haven't thought of anything clever to put here, but then again most of you haven't either.
This story is being spun into sensationalistic crap. The story is, the fine is being levied by the SEC for, and I qtfa, "securities fraud ... during the period between 1998 and 2000." I used to work for McAfee, and I want to educate the community.
All of what you know as McAfee used to be called Network Associates up until about 2004. It was formed in 1998 by a massive buy-up of various software firms, including Network General and McAfee Associates - hence the name, "Network Associates." During this reign, the CEO committed the fraudulent acts, including the channel stuffing as indicated, and was eventually fired in 2000 or 2001 for fraud. The new CEO, George Samenuk, took over and has since been credited with turning the company around, reestablishing the McAfee brand identity, focussing on the core products, cutting loose various deadwood (including, unfortunately, the research group that I worked for), and returning the company to legitimate profitability. At an all-hands (the one time Samenuk braved a visit to us research dweebs), he explained that the old regime consisted of "crooks," and that he vowed to be forthright with the SEC and do his personal best to fly straight. To my knowledge, he has done a good job of that ever since.
This fine being reported today is a result of the SEC, acting in good government swiftness, merely enforcing a punishment for deeds done in the past, under different leadership. Take this news as no indication of the current state of the company or its leadership, but view it merely as a capstone to an unfortunate period in McAfee's history.
http://www.billparish.com/msftfraudfacts.html
Financial Pyramid Building Techniques Being Used by Microsoft:
"Stock option programs are an excellent benefit and many companies use them responsibly. At Microsoft, however, stock option accounting is only one of its many pyramid building techniques, what could be called a cash generating component. Additional pyramid building techniques include the following. It is important to note that the genius of the pyramid scheme is to leverage share growth from investors using a passive investment approach based upon indexing to the S&P 500. Most smaller and mid size technology firms are not in the S&P 500 and therefore are locked out of this key aspect of the pyramid from the beginning.
and there's more. This accountant outlines 12 things Microsoft did and then describes the effects on our economy of those 12 things.
Running with Linux for over 20 years!
After reading up on the whole thing, McAfee did the funky accounting in the period from 1998 to 2000, and had $50m laying around, "reserved" for when they'd need it to pay the fine. I don't think that McAfee is really going anywhere any time soon.
You need to restart your computer. Hold down the Power button for several seconds or press the Restart button.
I was an employee on the inside watching this happen.
It was hard to say that McAfee actually defrauded anybody. It was quite clear in their quarterly reports that they were stuffing the channel. The problem was the Internet bubble when everyone was disregarding such things. Indeed: everyone was doing it, and McAfee was under enormous pressure to do the same sorts of things to inflate their numbers simply so that they wouldn't appear to be falling behind everybody else.
It also helped that Bill Larson, the CEO, was a crook. The press release pointed to some lower-level flunkies (the CFO of the time), but the real direction came from Bill Larson. He basically fired or drove from the company anybody with ethics. That meant that such abuses continued even after Larson left, because that's the culture that he created.
In one case, we were working on a product that wasn't finished yet. It didn't work. Bill Larson told us to ship it anyway, which we did. He record millions of dollars from it because it was in the channel (unsold). He then acquired a company, and wrote off the product in the channel as a "one-time writeoff". This sort of stuff is visible in the SE fillings, and people should have treated been able to see how much McAfee was writing-off for each acquistion, but analysists refused to look at those sorts of numbers. They, too, were under tremendous pressure to give every stock a glowing recommendation. The bubble was fragile: outing companies like McAfee by correctly interpretting their fillings ran the risk of bringing the entire bubble crashing down -- and their enormous fees.
This settlement pertains to actions taken in 1998 to 2000. The summary makes it sound like McAffe just got caught with their hand in the cookie jar, when in fact this is the company trying to clean up after an administration long since gone.
The stock went up after the announcement, so the markets seem to think the settlement a good idea.
(Disclosure: I'm a McAffe stockholder, due to stock options from an old employer and a series of mergers (TISX -> NETA -> MFE).
Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood
...is that the company lied to get shareholders to buy stock. The evaluation of risk was based on financial information (among others) provided by - and falsified by - the company. The executives should be held accountable for the losses sustained, as, probably, should the auditing firm. It's individuals who did the lying, not the corporation.
Now, had the fall in stock price been for some exterior means. For example, all the virus writers in the world burst into flame and the viruses in the wild mysteriously disappear. Or, just as likely, MS produces a secure OS. Then the stock falls because there is no demad for the product. Then, I don't feel bad for the investors - they knew the they took a chance. Nobody lied to them about revenue numbers.
Is it just my observation, or are there way too many stupid people in the world?
Ok, this always comes up. Let's look at this question logically.
First of all, there are about 70,000 viruses/trojans/worms around. There aren't all that many software companies. So either they're working really hard or there are people outside the companies doing the virus writing. And as long as there are people out there writing viruses, why would they bother?
Second, suppose you're a major antivirus company considering writing viruses. You think, ok, who am I going to get to do it? You can't just tell a standard programmer to do something unethical without expecting whistleblowing, which would be catastrophic. Well, okay, I'll just hire some black hats. They're good hard workers and they would never turn around and blackmail the company!
The cost of getting caught writing viruses is huge. The benefit from writing viruses is negligible, unless there are no real virus writers out there--and we know for a fact that there are. A simple cost/benefit analysis shows that it's bad for business for a major antivirus company to write viruses. So there you are.
Now, it's entirely possible that the two-guys-in-a-garage style antivirus company would try this, or that an employee trained at an antivirus company might dabble in it, because there are evil and stupid people everywhere you go. But to imagine that someone like McAfee, Symantec, or Trend Micro would write viruses as a matter of corporate policy is simply inane.
They're not going anywhere. And oh, by the way, didn't see the words "swan song" anywhere in the article. Teaser's probably a bash.
-ZK