August 11, 2006 8:02 AM PDT

Juniper expects Nasdaq delisting warning

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Juniper Networks said Thursday that it expects to receive a warning letter that it is not in compliance with Nasdaq rules after the company said that it would delay a quarterly regulatory filing.

Juniper released the conclusions of an internal review conducted by its audit committee into issues raised concerning stock options issued before 2006.

According to the company, the investigation is ongoing. But Juniper said in a statement that, based on information already uncovered, it needs "to restate historical financial statements to record additional noncash charges for stock-based compensation expense related to past option grants."

But the company also admitted that it still could not "determine the amount of such charges, the resulting tax and accounting impact, or which specific periods require restatement."

As a result, Juniper said that all financial statements and all earnings press releases and similar communications issued before Jan. 1, 2003 should therefore not be relied upon.

The company also said that as a result of this "delinquency" it expects to receive a notice of delisting from Nasdaq, in accordance with Nasdaq's standard process.

Juniper is the latest in a line of companies forced to announce that they had broken the rules of the Security and Exchange Commission. Mostly, the transgressions have centered on the issue of stock options to senior executives.

Stock options have long been a standard way for rewarding executives, and one shareholders generally approve of. Stock options are linked to a company's stock price, thus the value of the options are linked to the performance of the company. But in the past, options have been open to abuse by executives acting on inside information. It was for that reason that the rules have been considerably tightened.

By backdating stock options, a company could let an executive benefit from an option grant pegged to a date when the stock was trading at a relatively low price, thus making the option more valuable if the stock price has since climbed.

Among the companies facing probes over the issue are storage networking supplier Brocade Communications Systems, whose ex-chief executive is facing charges.

Apple Computer also has been the subject of an investigation, as are Rambus, Comverse and News.com publisher CNET Networks.

And on Friday, Nvidia saw its shares fall by 8 percent after it announced good results but admitted that it, too, may have granted some share options on the wrong dates.

Colin Barker of ZDNet UK reported from London.

See more CNET content tagged:
Juniper Networks Inc., stock option, financial statement, stock price

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Also facing investigation...
C/Net
Posted by roger.d.miller (41 comments )
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That's a good one!
Add Apple, Brocade and number of others as well. Their CEOs and board members should be in jail.
Posted by pdude (65 comments )
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