RealTime IT News

Enterasys CEO Quits; Cuts Loom

Telecom gear maker Enterasys Networks said CEO Enrigque P. Fiallo and two senior executives have resigned.

The shakeup comes as the Portsmouth, N.H., company faces an accounting probe, Securities and Exchange Commission (SEC) investigation and sluggish sales.

Along with Fiallo, J.E. Riddle, executive vice president of marketing and Jerry Shanahan, COO, will depart.

William K. O'Brien, a former PricewaterhouseCoopers managing partner, will serve as interim CEO. Yuda Doron, a former Computer Associates executive, is now president.

"We are . . . confident that (O'Brien and Yuda) bring with them the wealth of experience, skill sets and leadership abilities necessary to lead the company successfully through its current challenges," said Jim Davidson, an Enterasys director.

Enterasys expects losses after restating fourth and first quarter results. It projects fourth-quarter revenue of $145 million to $155 million, lower than past estimates because of revenue recognition problems in Asia Pacific.

These irregularities prompted a company investigation earlier this year and the firings of employees.

For the first quarter, Enterasys expects to report revenue of between $110 million and $120 million on sluggish sales.

Analysts had expected earnings per share of 3 cents on revenue of nearly $190.87 million for the fourth quarter and 4 cents per share on revenue of $190.4 million in the first quarter.

"We are implementing a comprehensive plan to restructure the company and achieve break-even cash flow as soon as possible, while maintaining our investment in new product initiatives," CFO Robert J. Gagalis said.

Specifics were not revealed.

The lowered guidance and management shakeup sparked a sell off, pushing shares down 2.54, or 61 percent, to 1.6 at midday. In the last 52 weeks, the issue has ranged from 3.26 to 24.5.