Secure Computing Defections Raise Eyebrows (SCUR)

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Secure Computing Corp. (NASDAQ:SCUR) has ‘reaffirmed its guidance’ after yesterday’s close.  The press release notes that it expects to meet or slightly exceed its billings, non-GAAP revenue and non-GAAP earnings-per-share guidance ranges, which were provided on July 26th for the third calendar quarter.  But it is the "Other Corporate Matters" that looks suspicious:

The company announced that Vincent M. Schiavo, senior vice president of worldwide sales, and Dr. Paul Judge, chief technology officer, have tendered their resignations from the Company effective in the first half of October 2007. Both Mr. Schiavo and Dr. Judge advised the Company that they were resigning for personal reasons.

John McNulty, chairman and chief executive officer: "On behalf of Secure Computing, I would like to thank Vince and Paul for the hard work and contributions that they made to the company.  We wish them all the best in their future endeavors."  It would be interesting to see what he really thinks about the head of worldwide sales and chief technology officer bailing at the same time after new products and initiative have been launched.

If you have followed this company, you will know that company reaffirmed guidance in mid-September as well.  But it simultaneously announced that one of its directors was resigning his position, also due to personal reasons.  The company did recently name Daniel Ryan, a former Oracle and Stellent executive, as chief operating officer at the end of August and said he’d be responsible for Worldwide Sales, Marketing, and Product Development. 

We received a statement from the company in an inquiry, "Both Vince and Paul have moved on for personal reasons, and we thank them for their many contributions.  With two sizable acquisitions over the past two years the company has undergone tremendous change, and has largely reinvented itself.   Their assistance in the integration of technology, products and people has helped us to achieve a market-leading position, with strong momentum and a rich portfolio of products entering into Q4 and beyond."

I was also told that these were not firings and that it was the "personal reasons" issue.  I have not found anyone on record willing to state that Daniel Ryan, the new COO, is driving on the other side of the road.  This would make one raise some questions.  The company can reaffirm guidance all it wants.  But this is the sort of issue that makes a skeptic look for fire around the smoke. 

Jon C. Ogg
October 4, 2007

Jon Ogg can be reached at; he produces the SPECIAL SITUATION INVESTING NEWSLETTER and he does not own securities in the companies he covers.