Nvidia ends options probe, takes $127 million charge

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Graphics chip maker Nvidia found some irregularities in past stock-based compensation practices during an internal probe, and took a total of US$127 million in non-cash charges over associated expenses, the company said Wednesday.

The figure fell within the $150 million charge Nvidia said it might have to take.

The company also amended financial results for its fiscal years 2006 and the first two quarters of 2007 as a result of the internal probe. The non-cash charge and amendments to previous financial statements ends its internal probe, but an inquiry by the Securities and Exchange Commission (SEC) remains ongoing, Nvidia said.

The restated earnings reports did not have a material impact on Nvidia’s operating results, it said. The company plans to cooperate fully with the SEC.

A number of technology companies have launched reviews over stock-based compensation to employees, finding instances in which stock options have been dated back to a time when the stock had hit a low. The practice is unfair to shareholders and was made almost impossible to legally execute by Sarbanes-Oxley, and for good reason. Stock options were designed as a way for employees to share in the success of the company and give them an added incentive. But by back-dating the options, employees — often executives — were essentially given shares that were already valuable.

So far, stock options probes, carried out either by companies themselves or by the SEC, have affected over 160 companies. Investigations at memory chip developer Rambus and security software vendor McAfee have led to the resignation or firing of top executives.

Apple Computer Inc. could be kicked off the Nasdaq by Dec. 29 if it fails to submit its SEC Form 10-Q for the quarter ended 1 July 2006, and any required restatements linked to its stock options probe by that time. Other companies have faced shareholder lawsuits over the issue.

This story, "Nvidia ends options probe, takes $127 million charge" was originally published by PCWorld.

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