Rumors that Cisco's CFO may quit under a cloud seem to have tanked the stock today

August 1, 2002

2 Min Read
Cisco Stock Falls on CFO Rumors

Shares of Cisco Systems Inc. (Nasdaq: CSCO) fell more than 7 percent in heavy trading today, apparently on rumors that the company’s CFO Larry Carter may leave without certifying the company’s fourth-quarter financial results.

Carter, who's been CFO since 1995 and has overseen the company's growth from $1.2 billion to $22 billion in annual revenues, has been said to be looking to leave Cisco for some time. But the timing of his departure seems to be what spooked investors today.

Some have whispered that Carter won't be around to sign off on the sworn statement that Cisco, along with 946 other public companies, is now required to submit to the Securities and Exchange Commission (SEC) (see Optical Companies Challenged by SEC). There's even been speculation that CEO John Chambers may not sign off on the financials either.

CFOs and CEOs are required to sign separate statements, according to the SEC ruling.

Cisco ended its quarter on July 27th and will report its financial earnings on August 6th. The deadline for filing the sworn SEC statements for most companies is August 14th, but Cisco says its statement won't need to be filed until later, since -- like some other vendors in the sector, such as ADC Telecommunications Inc. (Nasdaq: ADCT) -- it reports its earnings on a fiscal calendar that's later than that of other companies. Presumably, Cisco's official 10-Q for the earnings announcement will lag the public presentation.

Cisco would not comment on the rumors regarding Carter's departure, stating, as always, that as a policy the company does not comment on rumors or speculation.

As to the financial certifications, Cisco says it's business as usual. A spokesperson says that in previous quarters, both Carter and Chambers have personally certified the quarterly and yearly results before submitting them to the SEC. So the present SEC order is essentially an extension of normal business practice.

"We can't comment on any rumors, but what I can say is that formalizing this process does not give us any concern," says Robyn Jenkins, a Cisco spokesperson.

Some equity analysts seem confident that Carter’s supposed departure is nothing more than an executive moving on to do other things. In a note published today, Tim Luke of Lehman Brothers wrote: “We would underline that long time CFO Larry Carter has, as far as we know, been looking to move on for some time so the key question has been one of timing. However, we do believe that he is likely to stay around to sign off on the financials.”

Analysts from Credit Suisse First Boston also said earlier today that they are confident management will sign off.

Cisco’s stock was trading at $12.10, down $1.09 (8.26%) late today.

— Marguerite Reardon, Senior Editor, Light Reading

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