Options Backdating Scandal Doubles Broadcom Expenses to $1.5 billion

September 8, 2006 (PLANSPONSOR.com) - Chipmaker Broadcom Corp. announced that it will have to restate 1989 and 1990 earnings and double its expenses to at least $1.5 billion as a result of the stock options backdating scandal.

The Irvine, California-based firm said in  a Web site statement that most of the non-cash expenses will affect periods through the end of 2003.

In July, Broadcom said it would have $750 million in costs after an audit committee found options backdating from 2000 to 2002. That review continues.

The $1.5 billion expense figure is more than twice the $727.5 million in total net income Broadcom reported for its four profitable years since going public in 1998, according to data compiled by Bloomberg. The company had $6.63 billion in net losses for the other four years.

The Justice Department has asked Broadcom for some documents already requested by the US Securities and Exchange Commission in its informal probe, Bloomberg reported. At least 120 companies face federal investigations or are conducting internal reviews into whether they manipulated dates to inflate option values.


Broadcom in July said as much as 95% of its options are awarded to employees below executive officer level.

Scott McGregor, Broadcom’s president and chief executive officer, said in the Web statement: “We believe it [is] important to release this supplemental report to apprise investors that our ongoing review has identified measurement date issues involving additional option grants. The additional stock-based compensation adjustments are all non-cash and will not change our reported revenues or net shareholders’ equity. We are working with outside counsel and auditors to complete the detailed analysis necessary to bring the restatement process to an expeditious conclusion. However, we cannot yet estimate when the effort will be completed.”