The first CEO to face criminal charges in the stock-options backdating scandal, Brocade Communications Systems’ Gregory Reyes, was found guilty by a jury in San Francisco just before noon.
The U.S. District Court jury found him guilty of all 10 counts.
Reyes faces 20 years in prison on nine of the 10 counts. Reyes, 44, was accused of misleading investors by backdating employee stock option grants and altering company documents to hide the practice and make Brocade, the San Jose maker of switches for data-storage, appear more profitable than it was. More than 150 companies nationwide have been or are being investigated for the practice.
Stock options allow holders to buy shares at a later date, usually at the trading price on the day they were granted. Through backdating, companies change the grant date to a day with a lower stock price, giving recipients built-in profits.
Unless disclosed and recorded as an expense, the practice is illegal because it hides costs from shareholders and regulators, prosecutors claimed during the trial.
The White Collar Crime Prof Blog, run by two law professors, called the case “a significant victory for federal prosecutors,” but noted several likely grounds for appeal.
Also: Check out Business columnist Vindu Goel’s blog post about the verdict.
Sun cuts ahead: So, just how many jobs will Sun cut this time? That’s the burning question as Sun Microsystems, the Santa Clara maker of servers and storage gear, said in a filing today that it will spend up to $150 million the rest of this year to pay for staff cuts and to maintain profits.
Bloomberg kept updating the news all morning. First, it quoted a research note from UBS analyst Benjamin Reitzes that Sun could cut as many as 1,000 jobs. Then, a couple of hours later, it dropped the Reitzes’ reference in favor of a research note by J.P. Morgan Securities analyst William Shope that Sun could slash as many as 2,000 jobs, that would be about 6 percent of its workforce.
Neither the regulatory filing today with the Securities and Exchange Commission, nor a Sun spokeswoman, confirmed either number.
Sun will spend about $100 million to $150 million in the next several quarters, mostly related to cash severance costs, the company said.
Sun hinted about the possibility of more job reductions last week, when Chief Financial Officer Michael Lehman told Mercury News reporter Mark Boslet, “We realize we have to continue lowering our cost structure and are looking at ways to do that.”
The company already has eliminated 3,700 jobs. It now employs about 34,000 people.
Cisco profit jump: San Jose networking giant Cisco Systems announced another strong quarter today, saying profit rose 25 percent from the same quarter last year, to $1.9 billion, or 31 cents a share, from $1.5 billion, or 25 cents a share.
“Cisco delivered another record quarter with great execution across the company,” said Cisco Chairman and Chief Executive John Chambers in a statement released after the markets closed. “Again, the performance was based on our balanced approach across products, services, geographies and customer segments and our ability to catch and execute on key market transitions.”
The company met Wall Street’s expectations, with its stock trading near a 52-week high of $29.86 at the end of the day.
An increase in the use of cable, video and Internet has spurred sales of Cisco’s routers and switches in the past year.
Fed are interested: The AP reported, with an urgent no less, that the Federal Reserve kept a key interest rate unchanged today.
The vote was unanimous, by Fed Chair Ben Bernanke and the rest, to leave the rate that banks charge each other at 5.25 percent. In a statement, the Fed acknowledged a certain turbulence in the economy, but maintained that its goal is to moderate the risk of inflation.
The market didn’t like what it heard, and the midday numbers reflected that dislike. Still, by day’s end, everyone was mellowing out, and the numbers were mostly up.
Apple’s iMaculate Presentation: Merc columnist Dean Takahashi is all over the debut of Apple’s redesigned iMac all-in-one desktop computers, including new iPhoto and iMovie features.
Dean stops writing about the new stuff long enough to critique Jobs’ job so far: He “always does a great job with his presentations. He stopped to look at his notes on his demo desk just once so far. Pretty polished.”
Silicon Valley’s largest tech stocks:
Up: Yahoo, Intel, eBay, Cisco Systems, Hewlett-Packard, Sun Microsystems, Google and Apple. Down: Oracle, Applied Materials.
The tech-heavy Nasdaq composite index: Up 14.27 points or 0.56 percent, closing at 2,561.60
The blue-chip Dow Jones industrial average: Up 35.5 points or 0.26 percent, closing at 13,504.30.
And the Standard & Poor’s 500 index: Up 9.04 points or 0.62 percent, closing at 1,476.71
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, the Associated Press, Bloomberg News and other wire services.