President fired, chairman resigns in major shakeup at McAfee amidst rumors of buy-out
Security giant McAfee announced today that it has fired its president, and its chairman and CEO has retired following an internal investigation that revealed stock option improprieties.
Dale Fuller, a member of the McAfee Board of Directors since January and former president and CEO of Borland Software, was named acting chairman and CEO. Charles J. Robel, who joined the McAfee board in June, was appointed non-executive chairman.
The intrusion prevention and risk management company's shares were trading markedly higher today - as much as four percent in early trading - as investors banked on the news opening the door for McAfee to be acquired.
McAfee announced during a morning conference call that George Samenuk stepped down as chairman and CEO, and Kevin Weiss was fired. The purge was the fall-out of a special committee investigation into shady options practices going back 10 years at the company.
As a result of the probe, the company must restate historical financial reports. That earnings restatement likely will fall between $100 million and $150 million, said Eric Brown, McAfee's CFO and COO.
Samenuk said in a statement issued today that he stepped down "in the best interests of the company, its shareholders and employees," adding that he felt "regret" over the questionable stock options practices occurring during his tenure.
Brown declined to comment on why Samenuk left on his own terms but Weiss was fired. Weiss, who joined McAfee in October 2002, was responsible for sales, business operations and partner relationship development, according to a biography on the company's website.
"The board has had to make some very difficult decisions in the last 24 hours, but we believe they were in the best interests of the McAfee shareholders," Fuller said. "Chuck (Robel) and I know this company and many of the people here, and we are confident with McAfee's bench strength."
Jon Oltsik, a senior analyst at Enterprise Strategy Group, told SCMagazine.com today that the shake-up means little to existing customers but could have larger implications on where the company is heading.
"This is a huge issue on Wall Street and a big issue with the SEC (Securities Exchange Commission), but in terms of the customer and (his or her) products…the products are good and the market is hot," he said. "McAfee can manage its way out of this, but they have to be transparent."
But with new blood now at the helm, talk of the Santa Clara, Calif.-based firm possibly being acquired is again heating up.
"Rumors have been circulating that they've been on the (selling) block," Oltsik said. "They're a strong player in the security market, but they're a small player compared to other technology companies."
According to a Merrill Lynch research report issued today, the brokerage house reiterated its opinion to buy McAfee stock. Merrill Lynch believes the leadership change makes McAfee "appear even more attractive as an LBO (leveraged buy-out) or M&A target."
When asked how the Board of Directors viewed the company's "strategic alternatives" in light of the two departures, Fuller said McAfee's continued success would guide the company's decision-makers.
"I would say as any public company, all options are on the table," he said. "But if you look at the company's record, it has a lot of consecutive successes in the quarters and I think it's got a long way to go. The board is really open to all the opportunities it has for its shareholders and looking to maximize shareholder value."
Still, Oltsik said the announcement deals McAfee "a black eye" and may squash any plans to acquire or partner with other vendors. In addition, the news gives competitors such as Symantec an advantage when trying to pluck some of McAfee's market share, he said.
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