Symantec Completes Internal Probe, Will Defer $12M Of Revenue
Symantec has finished its internal investigation into concerns raised by a former employee and will defer $12 million of revenue that had been recognized in the quarter ending March 2018.
The Mountain View, Calif.-based platform security vendor said $13 million from a customer transaction had been improperly recognized as revenue in the company's fiscal fourth quarter, while just $1 million should have actually been recognized during that time period. The quarter was still an open period, and Symantec doesn't anticipate having to adjust any of its other financial statements.
The Audit Committee of Symantec's Board of Directors also identified certain behavior inconsistent with the company's code and conduct and related policies, and referred the matter to the company for appropriate action. However, no employment actions with respect to any of Symantec's highest-ranking executives have been recommended as a result of the investigation.
All told, the Audit Committee noted relatively weak and informal processes with respect to some aspects of the review, particularly as it relates to the approval and tracking of transition and transformation expenses.
Symantec's stock is up $0.90 (4.31 percent) to $21.80 in pre-market trading Monday. However, that's still $7.38 (25.3 percent) below the company's trading price of $29.18 prior to the announcement of the internal probe on May 10.
The investigation came in response to issues raised by an ex-employee around retaliation, stock trading plans, commentary on historical financial results, and reporting of some non-GAAP measures, including those that could impact executive compensation programs.
A formal investigation launched by the U.S. Securities and Exchange Commission into the matter remains open, and Symantec said it will continue to cooperate with the probe.
The Audit Committee proposed that Symantec appoint a separate chief accounting officer; appoint a separate chief compliance officer reporting directly to the Audit Committee; clarify and enhance the company's code of conduct and related policies; and adopt enhanced controls and policies related to the matters investigated. Symantec's Board of Directors has adopted these recommendations.
Symantec said it had already initiated a review by an outside accounting firm of the company's policies and procedures related to non-GAAP measures beginning in the quarter ended Sept. 29, 2017. The company also took other steps to enhance its policies and procedures at that time.
The Audit Committee was assisted by independent legal counsel and a forensic accounting firm in its investigation. Symantec said it hopes to file its annual report for the fiscal year ended March 30 prior to Oct. 27, 2018.
The completion of the internal investigation comes just one week after Symantec reached an agreement with activist investor Starboard Value to name three new independent members to its board of directors.
The three new directors all come from a five-person slate of candidates proposed by Starboard in August, and include a Starboard managing member, a former McAfee interim CEO, and an Arrow Electronics board member. In addition, a fourth new independent director agreeable to both Starboard and Symantec will be added after Symantec's 2018 annual shareholder meeting later this year.
Starboard had said in its August SEC filing that it believes shares of Symantec were undervalued at the time of purchase, and that it hoped to change the makeup of Symantec's board to unlock more value.