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Vendor Options Draw SEC Scrutiny

Broadcom's disclosure today that it will restate earnings is the latest example of the stock options plague nibbling at the edges of the storage world. (See Broadcom to Restate Earnings.)

Outside of switch vendor Brocade, no pure-play storage company has been implicated yet in an options backdating scandal. (See Backdating Backlash.) But chip maker Broadcom is among at least six vendors that have moved into storage to expand their business and coincidentally have been caught in the options snarl.

Broadcom today said it discovered questionably timed stock options issued between 2000 and 2002 and will restate financial results for the years 2000 through 2005 and the first quarter of 2006, which ended in March. The company will assign new accounting measurement dates to the options, resulting in extra non-cash expenses of roughly $750 million, by the company's preliminary estimates.

Broadcom began a voluntary review May 18 of awarded options grants that appeared to be backdated. Regulatory questions arise when this happens, since backdating can increase the value of options to recipients. The Securities and Exchange Commission (SEC) announced an informal inquiry into Broadcom's books June 12. (See SEC Investigates Broadcom.).

Other companies that sell storage products sullied by internal or SEC investigations include software vendor CA; chip vendors Vitesse Semiconductors, AMCC, and Marvel Technology Group; and network accelerator/WAFS vendor F5 Networks.

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