Saturday, November 11, 2006

Adobe CFO Furr Resigns--Window into His Universe

On May 18, 2006, Adobe Systems (ADBE-$39.41), which makes a number of popular software applications, including PhotoShop and Acrobat, introduced Randy Furr as its new Chief Financial Officer. Pursuant to his employment agreement, Mr. Furr’s was to receive (i) an annual base salary of $500,000; (ii) a bonus of up to 75% of his annual base salary; (iii) a sign-on bonus of $100,000; (iv) eligibility to participate in the Adobe profit sharing plan and an executive “Performance Shares” program (with a targeted grant of 20,000 shares in FY 2007); and, (v) an option grant—which vested over four years—to purchase 300,000 shares of Adobe common stock at an exercise price of $28.78 per share (which was equal to the closing price of the Company’s common stock on June 19, 2006).

CEO Bruce Chizen lauded Furr's move to Adobe, saying: “Randy, welcome to the Adobe team. We are proud of the company we have built and are confident you will soon discover why it’s simply better at Adobe. We look forward to your contributions to Adobe’s ongoing success.”

Yesterday, after just six months on the job, Adobe Systems announced
the resignation of CFO Randy Furr. The Company said, “Furr's departure had nothing to do with his job performance. In addition, no issues had been raised regarding the integrity of the company's financial statements.”

The 10Q Detective called the Company seeking additional clarification and was told that Furr left of his own accord, for “personal reasons.”

A salary/cash bonus potential of about $875,000 per annum and the forfeiture of (up to) 300,000 share options more than $10.00 (per share) ‘in-the-money’—we had to pinch ourselves. Human nature—we speculated—who would pass up such a sweet compensation package? Did Furr leave voluntarily, without prompting or coercion, or was the “personal reason” more rhetoric than fact?

Before arriving at Adobe, Furr spent thirteen years at the integrated electronics parts manufacturer Sanmina-SCI (SANM-$4.17), serving as President and COO from 1996 to 2005, and as CFO from 1992 to 1996.

Some analysts
pondering the mystery of Randy Furr believe that he resigned from Adobe because of his possible involvement in a stock option scandal announced by a Special Board Committee at Sanmina on October 12, 2006.

Sanmina said last month that its internal inquiry found that most stock option grants to executives and other employees between 1997 and 2006 were not correctly dated or accounted for and would require that the Company restate its historical financial results and record non-cash compensation charges. In addition, two former senior level executives employed during this time period had been implicated in the backdating option scandal.

In a conversation with Sanmina spokeswoman, Paige Bombino, she declined to identify the two executives who helped to engineer the option scheme, confirming to us only that it was not the company's [current] chief executive officer or chief financial officer.

Similar to his stated reason for leaving Adobe, Furr left this other San Jose-based technology firm (and a $500,000 –plus- annual salary) in October 2005, citing “
personal circumstances and family reasons that required his immediate attention.”

Sadly, the 10Q Detective has since learned that Furr was telling the truth, for his wife, Karen, was fighting (a losing) battle with cancer.

When talking about
quantum mechanics, Albert Einstein said: “The theory yields a lot, but it hardly brings us any closer to the secret of the Old One. In any case I am convinced that He [God] doesn't play dice.”

As to whether or not the hint of scandal shadows Furr’s resignation from Adobe, the 10Q Detective prefers not to roll the dice, for we are convinced that only Furr, God, and the SEC know for certain.

Editor David J Phillips does not own any of the stocks mentioned in this article. The 10Q Detective has a full disclosure policy.

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