Nvidia Options Ills Delay Results

The graphics chipmaker delays full quarterly results on options problems but says sales rose.
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Nvidia

(NVDA) - Get Report

was supposed to announce its second-quarter earnings on Thursday afternoon; instead, the company warned that it had found problems with its past options grants and, as a result, would likely delay filing its quarterly report.

The news sent the graphics chipmaker's stock spiraling in the after-hours markets. In recent trading during the extended session, the company's stock was off $2.34, or 9.7%, to $21.82.

After a preliminary review of its past options grants, Nvidia now believes that some of them carried "incorrect" dates, the company said in a regulatory filing. The graphics chipmaker's audit committee has already hired an outside counsel to head the probe.

The investigation is looking at grants dating back to Nvidia's initial public offering in 1999, Nvidia said in the filing.

"As a result, Nvidia may record additional non-cash stock-based compensation expense related to stock option grants," the company said in the filing. "Nvidia does not expect to be in a position to announce additional financial results for the second quarter until the audit committee has completed its review."

The company is only the latest to draw scrutiny for its past options practices. Also on Thursday afternoon, video-game software publisher

Electronic Arts

(ERTS)

warned investors that it has been sued by shareholders over its past grants.

The company did not say whether it has launched its own internal investigation or whether it has been contacted by federal regulators.

The

Securities and Exchange Commission

has said that it is investigating more than 80 companies over options problems in its broader probe into backdating. With backdating, corporate insiders are accused of retroactively assigning to options a grant date on which their company's stock was known to have hit a short-term low.

On Wednesday, federal authorities indicted former officials at

Comverse

, marking the second time the options probe has lead to criminal charges.

Because of the options problems, Nvidia declined to release its earnings figures or detailed financial results Thursday. However, the company did announce that it recorded $687.5 million in sales in its second quarter, up from $574.8 million in the same period a year ago.

Analysts polled by Thomson First Call were expecting the company to earn 27 cents a share, not including options costs, on $673.6 million in sales. The

guidance the company gave in May forecast that sales and earnings would essentially be flat compared with its first quarter, implying earnings of about 29 cents a share, excluding options costs, on sales of about $682 million.

Nvidia's shares closed regular trading on Thursday off 17 cents, or 0.7%, to $24.16.