Network equipment maker Enterasys Networks ( ETS) is trying to clean up its operations a few weeks after announcing that it improperly booked revenue at one of its units. The company said Wednesday that it fired three employees in its Asia-Pacific office. Previously, the workers had been placed on administrative leave as a result of the accounting irregularities.
Earlier this month, Enterasys said executives in the Asia-Pacific region had improperly booked $4 million in revenue, causing the company to delay the filing of its fourth-quarter results. Enterasys, formerly known as Cabletron, now believes it won't release the results before late March. The firings apparently weren't doing much to instill confidence, as shares of Enterasys were dropping 5% to $3.62 in afternoon trading, enough to put the stock around an 11-year low. The stock has skidded 66% since Feb. 1. Investors still have no idea what the impact will be on the company's financial results and are still largely in the dark about a Securities and Exchange Commission investigation. "The Asia-Pacific problem seems to be confined to a small area and it's not a big part of revenues," said Steven Kamman, an analyst at CIBC World Markets who has suspended his rating on the stock. "But there's no way of knowing what the outcome of the SEC investigation will be or how the story will unfold." In a separate release, Enterasys said it will no longer allow senior executives to sell company shares on a set schedule. "The elimination of selling under the program helps maintain alignment of management and shareholder interests, preserves the incentive value of equity participation by senior management, and drives increased shareholder value," Enterasys said in a statement. Some analysts suggested that the firm may have received complaints about executives selling stock while the company is under investigation. Enterasys executives weren't able to control when shares were sold under the previous program. "What they do internally is secondary to a bigger concern out there -- the SEC investigation," said Michael Weintraub, an analyst at UBS Warburg. Given the amount of time that has elapsed and the fact that the company has provided documentation to the SEC, Weintraub said Enterasys has to know what the inquiry pertains to, even though the details haven't been released. The company said earlier this month that the revenue recognition issue and the SEC probe seemed to be unrelated. "I don't have a rating on this stock," Weintraub said. "I don't believe in good conscience I can recommend it until we know more."