RealTime IT News

Asia To Blame? CyberGuard's Fire-Eating Act

CyberGuard news that its latest quarter revenue may be overstated, the fact that its auditor KPMG resigned, and two of its execs are suspended (and one resigned) all combined for a stock plunge. Wall Street reacted swiftly, sending CYBG shares down 68% to $1.969 per share on more than 20x average volume.

The lesson is clear: aggressive companies and aggressive accounting don't mix. Rumors peg part of the problem on Asian sales shortfalls, sales booked early or sales in that market that simply dried up due to the region's downturn. If so, it behooves Wall Street to take a closer look at how much sales come from Asia for any Internet firm.

We tend to think, however, that Asia's "dragon" may be only part of the fire-eating act here. If it was a pure regional anomoly then we doubt the CEO and CFO would be suspended.

But CYBG woes don't necessarily translate into sector-wide problems. The security software sector in general has been largely ignored on Wall Street this year as consumer-driven brand Internet stocks bask in the limelight. A sector already in the doldrums doesn't need bad news from one of its components though.

In the aftermath of CyberGuard's fall does it represent a buying opportunity for investors? We don't think so. There are scores of Internet security software makers with far stronger sales, market positions and potential, and CEOs, CFOs still in place.