Several days ago, Larry Dignan dropped a quick note about Symantec’s recent reported performance. The company attributed its wild miss from expectations as due to:
–Weak performance in the company’s data center management business, notable the company acquired when it bought Veritas;
–Higher deferrals of enterprise maintenance contracts;
–And higher costs from “the implementation of our new ERP system.”
In an email conversation, RSS guru Charlie Wood exploded:
This is such a lame excuse for incompetence. If your CIO is not savvy enough to structure your contracts in such a way as to protect you from the inevitable ERP project cost overruns, she deserves to be fired.
During the ensuing conversation, Jeff Nolan piped up with:
I don’t doubt their ERP system is running over budget but it’s a stretch to suggest that this was material in light of shortfall in the datacenter mgmt business. In other words, while expedient to put it on an expense item it’s much more plausible to pin it on a failure in one of their major business units.
In the meantime I went away and crunched some numbers I found covering John Thompson, CEO at Symantec’s share dealings. These cover the periods 18th-19th December, 2006 and 5th-9th January, 2007. During those periods, Mr Thompson engaged in a series of transactions, the net effect of which was to reduce his holdings by 15,000 shares to a net total of 1,497,260 shares. The net of those transactions saw him pocketing $1,540,567.
Look closely at what Mr. Thompson said and ask yourself this: Is it conceivable that he knew about each and every one of those factors before the date of the announcement, ie 16th January? Given what you can discover about trading patterns at Symantec from its public filings, I think the answer is yes. If so, then regardless of the strict legality of Mr Thompson’s, share trading activity:
- Are his trading actions ethical?
- Is it possible that his trading activities represent bad faith as it relates to his fiduciary duty of care for all shareholders?
- Should he have ordered an earlier declaration of business condition under SOX?
- How easy is it for managerial shareholders to disguise their ability to profit at a time when their company may well be performing in sub-optimal fashion?
People who are far smarter than I might want to think about these things.
ENDNOTE: I would have had this post prepared for the same day the conversations took place but I got side swiped. Even so, this is a great example of how services help discover information. In this case, I trawled through Symantec’s website, found the company’s regulatory filings, copied the content into an EditGrid spreadsheet and applied a few simple calculations. the entire process took less than two hours, which included reading the detail from the company’s latest online 10-Q filing to discover prior stated factors impacting performance.
PS – I dare someone to follow up with a “Nero fiddles while Rome burns” piece -:)
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