Enterasys CEO Resigns Amid Investigation

The resignations at the networking hardware vendor come during both a Securities and Exchange Commission investigation and an internal investigation of the company's accounting practices.

The company appointed William O'Brien as interim CEO and director, and Yuda Doron as president. O'Brien was a global managing partner at PricewaterhouseCoopers until 2000. Doron is a former manager of Computer Associates International's channel sales operation, Enterasys said.

O'Brien has assumed overall operating responsibilities. Doron will focus primarily on sales execution, partner and customer relationships, Enterasys said. The board is searching for a permanent CEO, the company said.

Enterasys in late February terminated three senior employees in its Asia-Pacific operations in response to its internal investigation of accounting irregularities. The employees had been on administrative leave since Feb. 1, when Enterasys discovered irregularities in at least one contract, valued at $4 million, in its Asia-Pacific unit.

Enterasys said that while preparing its fourth-quarter earnings it discovered that its independent auditor, KPMG, was provided with a version of the $4 million contract with terms that supported revenue recognition, while the vendor's own version of the contract did not.

Scheduled to report its earnings Feb. 5, Enterasys delayed its earning report for the fiscal fourth quarter and 10-month year ended Dec. 29, 2001, when it learned of the Asia-Pacific situation.

Now, the company estimates that revenue for the fourth quarter ended Dec. 29 will be between $145 million and $155 million. The company said it is lowering its earnings estimate because of the revenue recognition issues in the Asia-Pacific region and a comprehensive analysis of revenue recognition in the remaining regions of the company.

The company estimates that revenue for the first quarter ended March 30 will come in between $110 million and $120 million.

Enterasys said it would provide more detailed financial results for the quarters ended Dec. 29, 2001, and March 30, 2002, and an update on the SEC investigation "as soon as practicable."

Also, Enterasys has expanded the investigation of its revenue recognition practices to include North America, Europe and Latin America as well as the Asia-Pacific region.