VeriSign Hits Vortex

Len Lauer, COO of Sprint Nextel (S Quote - Cramer on S - Stock Picks), also unexpectedly left the VeriSign board, which Lin called "very odd timing."

"Given the abrupt nature, timing and lack of any explanation, (Lauer's) resignation raises a number of questions," Katherine Egbert, an analyst with Jefferies, wrote in a recent note. "Sprint is a key strategic customer and we believe his departure is a loss for the company."

O'Shaughnessy explained in a follow-up email that Lauer had announced his intention to depart the board a year earlier. In addition, he left to concentrate on the integration of Sprint and Nextel and "to avoid any perception of conflict." Sprint is a growing customer of VeriSign services.

(Sprint posted a disappointing quarter on Thursday, missing its second-quarter estimates and slashing full-year guidance.)

Egbert suggested that the departures may indicate the stock-options investigations have intensified and "that other key directors and executives could be at risk." She has a hold rating on the stock, and her firm makes a market in VeriSign.

VeriSign CEO Stratton Sclavos and CFO Dana Evan have been with the company for more than 10 years, and while they are one of the most stable CEO-CFO teams in Silicon Valley, they were at the helm when and if any backdating took place, analysts said.

"I think in this case people are not paying attention to the fact that people who have built this company -- and who run it now -- could potentially be implicated," says Scott Kessler, an equity analyst with Standard & Poor's, who has a hold rating on the stock. "These are people that are very important to the franchise." S&P does not have a business relationship with the company.

And there's even more: Juniper Networks (JNPR Quote - Cramer on JNPR - Stock Picks) CEO Scott Kriens also sits on the board at VeriSign and is a member of its corporate governance committee, which oversees board actions. Juniper itself is facing scrutiny from the U.S. attorney for the Eastern District of New York. Juniper did not report profit data for its most recent quarter because it believes the stock-options inquiry will likely impact results.

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