Already contending with a US Securities and Exchange Commission (SEC) investigation into a $4 million accounting irregularity, Enterasys Networks is now faced with replacing its three top executives, including its CEO, after a mass walkout yesterday.
Enrique Fiallo resigned as chairman, CEO and president, effective immediately, while chief operating officer Jerry Shanahan and executive vice president of marketing JE Riddle also walked out.
The resignations come as Enterasys released revised revenue estimates for the fourth quarter, ended December 29, 2001, of approximately $145 million-$155 million. This estimate is lower than previously stated due to revenue recognition issues in the Asia-Pacific region and a comprehensive analysis of revenue recognition in the remaining regions of the company.
The company expects to report a loss from operations in the fourth quarter, a statement to the New York Stock Exchange said.
For the first quarter, ended March 30, 2002, Enterasys Networks expects an operating loss and a cash decrease of approximately $70 million. The company blames poor sales execution, the SEC investigation, and difficult market conditions, which have blown out sales cycles.
William O'Brien has been appointed interim CEO and will assumed overall operating responsibilities, while Yuda Doron will focus on sales, the channel and customer relationships as president.
"In light of our estimated results and the current business environment, we are implementing a comprehensive plan to restructure the company and achieve break-even cash flow as soon as possible, while maintaining our investment in new product initiatives," said Robert Gagalis, Enterasys Networks' chief financial officer.
Sheldon Speer, the managing director of Enterasys Networks Australia, is currently on holidays and was unavailable for comment.