The company, however, still remains under investigation by the Securities and Exchange Commission for accounting irregularities stemming from a restate of its earnings going back several years, said Informix's chief executive Bob Finocchio. That investigation has been on-going for the last two years and the company has been fully cooperating, he noted.
Meanwhile, today's sizable shareholder settlement stems from a rash of lawsuits that began in spring 1997, after the company shocked investors with the news that its first quarter revenues would be sharply lower than expected due to sluggish sales and that it would post a "substantial" loss.
The shareholder lawsuits alleged that the company and some of its officers and directors misrepresented the company's earnings outlook and inflated Informix's performance--booking revenues before they were sold to the end-user. As a result of this practice, Informix later announced it would have to restate its earnings from 1994 through mid-1997. Shareholders alleged that this allowed the company to inflate the stock.
The company said today's settlement resolves the lawsuits, except for "two very small cases" that are seeking less than $200,000.
Pending court approval of today's settlement, Informix will pay about $3.2 million in cash and a minimum of 9 million newly issued shares of company stock worth $91 million. Ernst & Young, the company's former independent accountants, will fork over $34 million, while Informix's insurance company will pay about $13.8 million.
Informix plans to take a $94.2 million charge in the second quarter for its portion of the settlement. And Finocchio noted that there will be little dilution--less than 5 percent--to existing shareholders once the new shares are issued as part of the settlement.
Today's agreement allows Informix to protect its cash reserves, which according to its latest quarterly results, is about $211 million. "It is a well-structured solution that allows Informix to move forward unhindered," Finocchio said.
The settlement helps free up the cash reserves for potential acquisitions, Finocchio said. Last year, with the suits still hanging over the company, Informix purchased data warehousing firm Red Brick Systems for $35 million in stock. "We now know what our constraints are [with the cash]," he said. "It increases the degrees for freedom."
Jean Orr, an analyst with Nutmeg Securities, said the settlement shouldn't hit Informix too hard.
"This case largely relates back to previous management, so I don't think it would have particular impact on the view of the current company. It really is the past," Orr said. "This clears up a cloud hanging over the company since the suits were filed."
Informix has been working on the settlement for the past eight months, and Finocchio said it was one of his objectives to conclude the agreement before he steps down as CEO in mid-July. He added that the timing of the settlement and his announcement earlier this month that he will only retain the chairman's role was a coincidence.