I was away for a family wedding in Portland, Ore., and just returned to my desk. It’s still as messy as I left it.
I also came back to find Broadcom Corp. has been busy turning up bigger charges for its option grants.
And how.
The Irvine-based maker of chips for everything from iPods to networking gear has doubled the expected bill for options grants accounting to at least $1.5 billion.
The company made its first estimate back in July.
Broadcom went a step further and said the options grant bill “could be substantially more depending upon the resolution of certain accounting issues.”
The latest questionable grants were made from 1998 to 2003.
As a result, the company said it plans to restate results for two more years, 1998 and 1999.
Earlier, Broadcom said it was looking to restate results for 2000 through part of 2006.
You’d think that kind of news would send the stock into a tailspin.
Instead, on Sept. 8, the day the news broke, shares of Broadcom slipped all of 1%. The following trading day, the company’s shares had made up the loss and then some.
Then, on Sept. 12, investors turned their attention to fundamentals with an upgrade by Satya Chillara at Pacific Growth Equities LLC in San Francisco.
Chillara, who raised the stock to “buy” from “neutral,” said the company is seeing strength in its Bluetooth-chip shipments to Motorola Inc. and Samsung Corp.
Bluetooth was a big reason some analysts put their support behind the company before the stock started to stumble in the spring. Bluetooth is a short-range wireless technology often used to connect mobile phones to wireless earpieces.
The analyst also said Broadcom is seeing brisk business in chips that run local wireless networks.
Broadcom’s stock rose about 7% the day of the upgrade, getting the shares to more than $27 with a market value of about $15 billion.
“While we are disappointed with stock option irregularities amounting to $1.5 billion and still lingering, we believe this is not affecting the fundamental nature of the business and these issues are non-cash in nature,” Chillara wrote. “We believe they should resolve these issues by the end of the 2006.”
In June, the Securities and Exchange Commission asked Broadcom for documents relating to the granting of options.
The company’s review has delayed news on second-quarter net income as Broadcom put off its quarterly report with the SEC.
Broadcom’s name is constantly mentioned in stories focused on stock options timing. The latest news on the $1.5 billion charge put its name at the forefront of the controversy.
Broadcom is one of several companies to come under scrutiny for the timing of options grants.
At issue is whether companies picked low points for their stocks to award options, giving an immediate gain on them.
Most of Broadcom’s grants in question never were exercised because the company’s shares fell below the grant price during the tech downturn, the company said.
For its part, Broadcom said “the magnitude of the total additional non-cash stock-based compensation expense … reflects the high volatility experienced by technology stocks, including Broadcom’s, during the affected period.”
Gateway’s New Guy
Gateway Inc. finally hired a full-time chief executive.
It’s taken more than six months, but the troubled Irvine computer maker has found a new leader in J. Edward Coleman, 54.
Coleman joins Gateway from Melville, N.Y.-based electronics distributor Arrow Electronics Inc., where he was a senior vice president.
At Arrow, Coleman headed the company’s operation selling to businesses. Before that, he was chief executive of Dallas-based CompuCom Systems Inc.
Coleman might be considered somewhat of a surprise pick.
Speculation had included Stephen Ward, the IBM Corp. executive who became chief executive of China’s Lenovo Group Ltd. in 2004. He stepped down in December and was replaced by William Amelio, one of Dell Inc.’s senior executives for Asia.
Chairman Rick Snyder, who’s filled in as chief executive since February, also talked about being a candidate. But in the spring he revealed he didn’t want the post.
Coleman has a big task ahead of him with a weak stock price, red ink and sputtering sales for its direct and business units.
His experience selling to businesses at Arrow likely appealed to Gateway.
Investors responded with somewhat muted approval. The stock went up nearly 2% the day of the announcement and then sagged the following day.
Earlier this year, Wayne Inouye left as Gateway’s chief executive over slow direct sales.
Last month, Orange County businessman Lap Shun “John” Hui offered to buy Gateway’s retail business, or even all of the company.
Gateway rejected Hui’s $450 million offer.
Hui cited Gateway’s lack of a permanent chief as a problem at the company.
In 2004, Hui sold low-cost PC maker eMachines to Gateway for $290 million. Inouye spurred a turnaround at eMachines and later Gateway.
In an interview with The Wall Street Journal, Coleman declined to discuss the possibility of a sale of the company, saying it would take some time to get to know Gateway.
In a press release, Coleman said he hopes to “meet the challenges ahead and position the company to better capitalize on its strengths.”
New Offering
Irvine-based VitalStream Holdings Inc. plans to offer nearly 9 million shares to help fuel its growth.
The company, which uses software to deliver audio and video over the Internet, has been publicly traded since June and has a market value of about $225 million.
It plans to use the offering proceeds for “additional network build out, international expansion, expansion of its advertising services sales force and marketing programs, working capital and general corporate purposes.”
