Copyright 1999 The Denver Post Corporation
The Denver Post
July 22, 1999 Thursday 2D EDITION
SECTION: BUSINESS; Pg. C-02
LENGTH: 450 words
HEADLINE: NEON discounts talk of insider trades
BYLINE: By Robert Schwab, Denver Post Business Writer
BODY:
The chairman of New Era of Networks said Wednesday the software developer "obviously stumbled" during the second quarter, but he said allegations of insider trading contained in shareholder lawsuits filed against the company were "absolutely untrue."
"Many things can go wrong for a technology firm," NEON Chairman and Chief Executive Officer George F. "Rick" Adam Jr. told reporters in a conference call.
He said the company's second-quarter performance fell apart during the last two weeks of the period ended June 30, so its executives' stock trades - most of which were made in May - were not based on inside information. One lawsuit alleges that 10 officers and directors of the company sold a total of 111,834 shares of the company's stock for $ 4.9 million between April 21 and July 6, when other investors were unaware of any NEON financial problems.
But Adam said the trades were conducted in the normal course of business, were timed by executives not to take particular advantage of prices at the moment, and are similar in scope to trading of executives across the business world who sell shares of their own firms.
He said the number of shares sold in the transactions identified in one lawsuit - from 10,000 to 30,000 shares - was indicative of normal executive trades because they reflect a fraction of the total shares held by NEON managers, which he said was "north of 10 million shares."
"We believe we will prevail," Adam said of the 16 shareholder suits filed in Denver federal court.
The suits were filed this month after the company, which makes software that allows incompatible computers to communicate with each other, announced July 7 that it expected to post a per-share loss of 12 to 22 cents for the quarter on less revenue than it had produced in the first quarter.
The news stunned Wall Street analysts, who were predicting a 12-cent profit for the company.
On Tuesday, NEON confirmed it had suffered a 19-cent-per-share loss for the three months.
"We obviously stumbled last quarter," Adam said, attributing the fall to sales mishaps that wreaked havoc on company plans.
He said NEON managers misunderstood the purchasing processes of its largest customer, IBM, which embeds NEON software in its machines; and several million-dollar deals fell apart because they were kicked up corporate ladders for approval, in one case to the board of directors. The board, Adam said, canceled the purchase from the Greenwood village company and put its procurement program on hold.
NEON's stock dropped 56 percent, from $ 44 to less than $ 20 a share, on July 7, when the company surprised the markets. On Wednesday, NEON shares closed at $ 15.25, down $ 1.25.
LOAD-DATE: July 22, 1999
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