Clarent on Tuesday said it may have overstated its revenue for the first two quarters of the 2001 fiscal quarter and expects to have to restate its earnings after an internal investigation that includes the help of outside auditor Ernst & Young.
In addition, Clarent placed three top-level executives on administrative leave, including board Chairman Jerry Chang, who two months ago stepped down as chief executive to become the company's chief strategist.
A Nasdaq spokesman said Clarent's stock will remain suspended until the company sends the Nasdaq additional information. Clarent's stock was halted before the market opened Tuesday with a price of $5.37.
Clarent executives said the restated earnings are expected to result in lower revenue and larger net losses for the first two quarters of the 2001 fiscal year. The company also expects revenue for the second half of 2001 and for fiscal 2002 to be substantially below its previous estimates with losses significantly larger than expected.
"The investigation is at an early stage," said Steven d'Alencon, Clarent's chief marketing officer. "Our commitment to our customers and partners is that once all the facts are known, we will share the results."
D'Alencon said the company is coordinating and working with Nasdaq and the Securities Exchange Commission on the issue, but said he did not know whether the SEC has begun its own investigation. An SEC spokesman declined to comment.
Clarent's announcement is the latest in a string of woes afflicting the once high-flying Internet telephony equipment maker, whose stock reached a high of $178 in the spring of 2000.
The company, which makes technology that allows people to make phone calls over the Net, has been hit hard by the economic slowdown, resulting in a corporate restructuring that has included layoffs and executive turnover. The executive changes include the resignation of Clarent President Barry Forman, who resigned in July after four months on the job.
Clarent in July laid off 27 percent of its work force after announcing a second-quarter loss of $9.6 million, or 24 cents per share, on revenue of $63.2 million. Clarent laid off 10 percent of its work force in May after posting a first-quarter loss of $2.1 million, or 5 cents a share, on revenue of $61.2 million.
The Redwood City, Calif.-based company, which now has about 700 employees, ranks third in sales of Net telephony equipment, behind Cisco Systems and Lucent Technologies. Clarent, whose biggest customers are carriers and service providers, had recently begun selling its products to businesses and consumers.
In addition to Chang, Clarent's board of directors on Tuesday placed two other executives on administrative leave: Matthew Chiang, president of Clarent's Asia-Pacific region; and Kevin Chang, general manager of Clarent's northern Asia operations.
Frank Lee, president of Clarent's China operations, has been named acting head of the company's Asia-Pacific region. The Clarent board also expects to name Chief Executive Michael Vargo as the company's acting chairman of the board.