Enterasys completes 2001 restatements

Enterasys completes 2001 restatements

Enterasys Networks has finished reporting its financials through to the end of 2001 and announced its president will leave the company at the end of the year.

The company has not released any final financial results since the third quarter of 2001 because it was carrying out an internal review of its accounting practices. On October 31 it announced that the review was finished.

Yuda Doron, who became president of the network equipment vendor in April and concentrated on sales, will leave on December 31 when his employment contract expires, according to a company statement. His position will be filled by CEO William O'Brien, who also came on board in April and has concentrated on financial issues. Enterasys has consolidated its president and CEO positions because it has become a smaller company, and Doron's contract was not renewed, according to spokesman Drew Miale.

On Tuesday, Enterasys said it has been notified its stock is under review by the New York Stock Exchange because it dropped below US$1 on October 30. According to exchange rules, delisting procedures can begin if the stock doesn't recover within six months.

Enterasys, which was spun off from Cabletron Systems in 2000, has faced a number of difficulties in addition to the ongoing downturn in the market for network gear. In January, the company discovered inconsistencies in accounting related to its Asia-Pacific operations and was also notified it was under investigation by the US Securities and Exchange Commission (SEC). Aprisma Management Technologies, which Enterasys had planned to spin off as an independent company earlier this year, was instead sold to buyout firm Gores Technology Group in August.

The restatements came in a Form 10-K filed to the SEC on Tuesday. Enterasys restated its results for its 2001 fiscal year, to March 3, 2001, cutting its stated revenue by US$78 million to $784 million and increasing its net loss by $76 million to $705 million.

Because the company has shifted its reporting schedule from a fiscal year to a calendar year, it also reported results for a "transition year", a 10-month period to December 31, 2001.

For the transition year, Enterasys reported revenue of US$415 million and a net loss of $715 million. In doing so, it restated earlier reported results for the first seven months of that period. The restatement showed $75 million less revenue and a $69 million greater loss.

For the last three months of the transition year, Enterasys on Tuesday reported financial results for the first time. The company has put off filing any quarterly results since it began an internal review of its accounting practices, said Bob Ray, vice president of marketing. In the next few weeks it will state its results for the first, second and third calendar quarters of 2002, he said.

More recently, Enterasys has stabilised its revenue, estimating that it brought in about US$120 million or more during the first, second and third quarters of this year, according to the statement. This was achieved partly by reducing the company's cash usage through steps that included layoffs. The company announced on April 8 that it would reduce its workforce by about 30 per cent to approximately 1,700 employees.

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