Quest exec resigns amid probe
The software firm says the former CFO refused to answer questions about past stock option grants during an internal investigation.
From Bloomberg News
November 25, 2006
Quest Software Inc., a maker of database-management programs, said Friday that former Chief Financial Officer Brinkley Morse resigned after refusing to answer questions about the company's past stock option grants.
Morse, most recently senior vice president for corporate development, declined to answer questions about options for an internal investigation, Quest said in a statement.
The Aliso Viejo-based company's options review is continuing.
Analysts questioned whether Quest's chairman and chief executive, Vincent Smith, could be caught up in the options scandal.
Last month, the company demoted its controller and chief accounting officer as part of its internal review of stock option grants.
"The major outstanding issue overhanging the stock continues to be the potential impact on founder, Chairman and Chief Executive Vinny Smith," Sarah Friar, a Goldman, Sachs & Co. analyst in San Francisco, said in a note to investors Friday. She rates Quest shares "neutral."
At least 60 executives nationwide have left their jobs as a result of investigations into whether option grants were backdated and compensation costs misreported.
At least 187 companies have begun option probes, which are being conducted to determine whether grants were backdated to increase their value to executives and other recipients.
Although Morse's departure won't cause significant problems, Smith is viewed by Wall Street "as being a critical component to Quest," Todd Weller, a Stifel, Nicolaus & Co. analyst in Baltimore, wrote in a report. He rates Quest shares "buy."
If Smith does leave, Weller said, that could lead to an acquisition of the company.
Goldman analyst Friar said the company's "take-out" value was about $16 to $19 a share.
Friar said the potential harm to the company's shares if Smith leaves was balanced by the heightened chance of an acquisition if he goes.
Quest has indicated that it is near the end of its options probe, Friar said, adding that compiling needed restatements will be the next step.
On July 5, Quest said it would restate results since 2000 because of mistakes in options accounting.
Shares of Quest fell 24 cents Friday to $15.35 and have risen 5.2% this year.
Morse, whose resignation took effect immediately, was chief financial officer of Quest from May 2003 to April 2005, according to Bloomberg data. He previously worked for Houston-based BMC Software Inc., a maker of mainframe computer programs, as senior vice president for corporate development and as general counsel.
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