Computer chip maker Nvidia Corp. and software maker Wind River Systems Inc. on Monday both warned they will miss government-mandated deadlines for filing their most recent quarterly reports, joining a long list of tardy tech companies scrambling to clean up a stock option mess.
The delay will expose both Santa Clara-based Nvidia and Alameda-based Wind River to being dropped from the Nasdaq Stock Market. But that process takes several months, giving the companies time to comply with the Securities and Exchange Commission’s reporting rules before getting bounced from the Nasdaq.
Like dozens of other companies, Nvidia and Wind River are reviewing whether they properly accounted for past stock options awarded to its employees. Both companies disclosed internal investigations last month.
Many companies with stock option problems aren’t filing quarterly reports with the SEC until they straighten out their finances. The list of other high-tech companies that have recently missed the SEC’s filing deadlines because of stock option woes includes Broadcom Corp., Apple Computer Inc., Cnet Networks Inc., Juniper Networks Inc., Rambus Inc. and VeriSign Inc.
Nvidia’s inquiry already has concluded the timing of some stock option awards were incorrectly recorded on the books. The company is now trying to determine if it needs to wipe out some of its previously reported profits.
Meanwhile, the SEC has asked Nvidia to provide more details about its stock option troubles, the company said Monday.
Wind River’s audit committee is still examining whether the company mishandled any of its stock options. If trouble turns up, Wind River also may have to revise its financial statements.
Investors took Monday’s news in stride. Nvidia shares rose 43 cents to close at $28.13, or up 1.5 percent on the Nasdaq, where Wind River gained 5 cents to $10.75.
Troubles similar to those facing Nvidia and Wind River are widespread. The SEC is investigating more than 100 companies for the possible manipulation of their stock options.
The government investigations are focused on a practice known as “backdating.” This occurs when stock options are issued retroactively to coincide with low points in a company’s share price — a maneuver that increases the potential windfall for the recipient of the award.
Backdating isn’t necessarily illegal as long as the costs are fully disclosed and reflected on the books. If the accounting is botched, backdating can exaggerate a company’s profits and wrongly lower taxes.
Fixing the errors sometimes dictates dramatic changes. For instance, Mercury Interactive Corp. wiped out more than $530 million of its profits earlier this summer and just last week Broadcom said it will absorb a $1.5 billion charge to correct its stock option flaws.
