TechWeek: Brain Dead

If there was ever a low-IQ week for tech stocks this was it.

CACA demonstrated once again that it hasn't reached the bottom of its seemingly endless well of bad news and even worse accounting. MicrosoftMSFT demonstrated that nobody in Redmond can hit a deadline, and Red HatRHAT confused nearly everyone with the most perplexing earnings release and call in recent memory.

EMCEMC, meanwhile, discarded its strategy of relatively small targeted acquisitions and agreed to pay a surprisingly rich premium for RSA SecurityRSAS, a move that puzzled plenty of Wall Street types.

CA, though, stood out with an astonishing admission that previous management had, in effect, created a slush fund of employee stock options between 1997 and 2001. Here's the official rundown of what happened: "The company believes that in fiscal years prior to 2002, the company did not communicate stock-option grants to individual employees in a timely manner." Not timely is right; in some cases, the options hung around for as much as two years.

The liability for this strange practice could be as much as $540 million, CA says, the largest options-related hit to date, according to Patrick McGurn, senior vice president of Institutional Shareholder Services.

Why did CA's now deposed, disgraced, and in some cases, admittedly felonious former management pull just a stunt? The current management refuses to even speculate.

"This was the CA way; make up the rules as you go along," says McGurn.

McGurn says he can't come up with a valid explanation, but he speculates that management used the fund as a way to hand out options that were already in the money as a reward to employees.

Given CA's tarnished past, you'd assume the golden options went to former CEO Sanjay Kumar and friends, but the company says that was not the case; they went to the rank and file.