Enterasys settles SEC investigation

Enterasys settles SEC investigation

Network equipment vendor Enterasys Networks has settled a US Securities and Exchange Commission (SEC) investigation into its accounting practices.

Without admitting or denying any allegations, the company agreed to an order requiring it to comply with federal securities laws and regulations in the future.

Enterasys also agreed to appoint an internal auditor who reports directly to the audit committee of the company's board of directors. The company appointed an auditor to fill that role, a permanent position, in October 2002, spokesman, Drew Miale, said.

The settlement does not require any further adjustment to Enterasys' historical financial statements and does not impose any fines or civil penalties, according to a company statement.

The company, spun off from Cabletron Systems in 2000, has faced a number of problems in addition to the weak market for networking equipment. It was notified of the SEC investigation in January 2002 and has since undergone financial restatements, layoffs and executive changes.

Enterasys also announced it had filed an SEC Form 10-Q with results from its fiscal third quarter of 2002, ending September 28, 2002, which had been delayed because of the investigation. In January it filed 10-Q forms for the first and second quarters of the 2002 financial year, which also had been delayed, Miale said.

Enterasys said it expected to report break-even operating cash flow in the fourth quarter ending December 28, 2002, with revenue remaining stable around the $US120 million mark. It also expected that it ended the fiscal year with about $US305 million in cash and marketable securities.

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