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Strategies & Market Trends : Value Investing

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From: E_K_S	2/10/2006 1:48:06 PM
	of 78777

Another example of Bad Management & a good company . . . Brocade (BRCD) a case study in bad management at the top February 06, 06 Reyes tried to sell Brocade to Cisco Criminal charges to follow? techworld.com I bought this company as both a value play (when I bought they had over $3/share cash) and excellent technology. My average cost was just over $4/share and I find out that a deal was in the works for a cash buy out from CSCO for $9.00/share. After CSCO finished their due dilligence, they uncovered some accounting issues for unvested stock option grants by the CEO which were way out of line. The BOD gave the CEO complete unilateral control to hand out these stock options w/ no over sight. The CEO was asked to resign and CSCO terminated their buy out option. The company continues to have lots of cash and excellent technology but now faces more competition in both their hardware and software businesses. One of their biggest new competitors is CSCO. Here is the original Business Week article which carried the full story. businessweek.com From the article"...Brocade: Stung By Stock Options As the government investigates Brocade and ex-CEO Reyes, he may sue the board After Greg Reyes suddenly resigned as chief executive of Brocade Communications Inc. a year ago, the reputation of the swashbuckling onetime billionaire immediately went from gold to mud. The reason: His ouster came just weeks after Brocade announced options accounting irregularities that required a restatement of earnings. But now, more than his image is on the line. Three sources tell BusinessWeek that the Securities & Exchange Commission is likely to bring civil charges against him in the coming weeks. The Justice Dept. is also investigating a criminal case. "I'm scared," says Reyes...." EKS

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