Reviving Bay pays off for House

Bay Networks (BAY) chief executive David House--lured from Intel in late 1996 to turn around the computer networking giant--took home $1.3 million in salary and bonus for the past fiscal year, and he was granted stock options valued at $2 million, according to the company's annual proxy statement.

House's stock package could be worth between about $13.8 million and $33 million if the company's stock appreciates at annual rates of between 5 percent and 10 percent for the term of the options. The options are exercisable at $18.375 per share, and the bulk of them expire in the year 2004. Bay Networks stock is trading at close to $30 per share.

The proxy also set April 24 for the company's annual stockholders meeting. Shareholders will vote on resolutions to increase shares that may be issued under the employee stock purchase plan by 2 million shares; approve a new 1998 employee stock purchase plan; and approve an amendment to increase the number of shares of the company's common stock "for possible future use in acquiring new businesses and technologies."

House's employment agreement with Bay Networks calls for payment of a minimum $500,000 base salary and an automatic $1 million bonus during the 1997 fiscal year, "subject to the board's review in subsequent years," the proxy says. The company's fiscal year runs through June 30.

House joined Bay Networks in October 1996 from Intel, where he was the senior vice president and general manager of the enterprise server group. House was a 22-year veteran of Intel. He is credited with putting Bay Networks on the road to financial recovery, and the company's stock has risen steadily during much of House's tenure.

Lately, however, Bay Networks has disappointed some investors. Last week, the company announced that third-quarter revenues and profits will fall short of expectations, citing weaker-than-expected demand for a broad range of products. It comes as the company is trying to enter the second phase of its turnaround, where it hopes to expand market share.

House replaced Andrew Ludwick as Bay Networks' CEO. According to the proxy, Ludwick earned $422,177 in salary and other compensation for the past fiscal year, and he got 200,000 options. He continued to serve as an employee until August 1997 pursuant to an employment agreement.