Nvidia earnings delayed by stock-option issues

Graphics-chip maker claims record revenues for quarter, refrains from full reporting until internal probe of stock options concludes.

Stock option scandals are all the rage these days. Take-Two, Activision, and EA have all been sued by investors over allegations of backdating, and THQ is responding to Securities and Exchange Commission inquiries about its own practices of granting stock options.

Now graphics-chip maker Nvidia has brought itself into the growing scandal. The company was scheduled to release its second-quarter earnings report today but instead announced an internal investigation into its stock-option practices. While the voluntary review is ongoing, the company "has reached a preliminary conclusion that incorrect measurement dates were used for financial accounting purposes for stock-option grants in certain prior periods."

When executives are granted stock options, they're given the right to buy shares in company stock at a fixed price, with the right to exercise those options--buy the shares--over a predetermined period of time. The price is set based upon the stock's current market value at the time the options are issued. Recently, a number of corporations have come under investigation for having executives backdate their options, altering the records of when the options are issued to a low point for the company stock, thus maximizing their value.

Nvidia's inaccuracies would impact the company's reported noncash, stock-based compensation expenses, so the company is refraining from issuing its full second quarter results until the internal investigation is complete. However, the company would say that it posted record revenues for the quarter. The company took in $687.5 million for the three months ended July 30, a jump from the $574.8 million it racked up for the same period the year before.

That rosy news didn't distract investors from the news of the stock-option investigation, however. Nvidia shares were trading down more than 8 percent in after hours trading, down $1.95 to $22.21.

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Discussion

13 comments
SunnySimantov
SunnySimantov

Nvidia's stocks were 30$ right after split, they had a dayly based rise - from about 45$ to 60$ per stock, then they split, my dad got some of their stocks, and then they got down to 18$ ... well, that was a complete mind-confusion for you, but every time I hear bad news like this, I feel sad for my dad, he bought their stocks just cause of me (and well, they were indeed going up that time right until my dad bought the stocks...)

watchcity
watchcity

People, this is happening to thousands of companies across the country. Don't worry about it. Also, it's not necesarily "greed". Every company nowadays has to run thsi investigation because the SEC is focusing on this exact issue. The companies' accountants will not let them file their reports unless this investigation is complete.

the_real_VIP
the_real_VIP

Is everyone cheating at the stock market now?

TorugotoShinsan
TorugotoShinsan

Ouch. Looks like thier prices are going to go up higher than they already are. Lucky I can get ATi x1900XT's for around £200 (about$360-370) ^_^ 7900's cost £300 (about $550) and 7950's cost at least £500 (about $900 AKA the prise of a PS3 in the UK) So PS3 or nvidia's latest card that can't handle HDR and AA at the same time like the entire 7 series? Given the choice I'd rather get a PS3 and wait for ATi to bring out thier next card.

adolfogomez
adolfogomez

darn, Nvidia finally had some good GPUs out the past few years after the FX disaster... it would suk if now they get back in the pits due to greed!

mnmnanu
mnmnanu

greed takes over and u are left payin out more... 1 word of addvice for these guys, measure twice cut once.

gameloverx
gameloverx

well they should start making more graphic chips

VegetaMaelstrom
VegetaMaelstrom

I guess the executives have to cover their tracks before they issue an earnings report. The bad thing is that if any wrong doings are found then the whole company will be tarnished when, in truth, only the fat cat executives are to blame. I smell jail time.

ryokinshin6x3
ryokinshin6x3

well everyone is doing it, i guess they decided to jump in

Igwababa
Igwababa

second, however I can see the problem and thats a hard one to catch

Jypson44
Jypson44

"Stock option scandals are all the rage these days." Well put.