Informix has settled charges brought by the US Securities and Exchange Commission (SEC) that it fraudulently inflated revenues and earnings between 1994 and 1997. But the database software vendor's legal woes may not be over.
In a case that was filed and settled earlier this month, Informix was accused of "fraudulently and otherwise improperly" inflating revenues by $US295 million and earnings by $244 million between 1994 and the first quarter of 1997, according to the SEC.
Informix agreed to the settlement without admitting to or denying the SEC's findings, but the commission ordered the vendor to stop violating securities laws and cooperate with its continuing investigation.
Through former employees, Informix violated antifraud provisions of the federal securities laws, the SEC said, as well as the reporting, books and records, and internal control provisions of the Securities Exchange Act of 1934.
The commission also found that Informix, through former employees, made materially false and misleading filings with the SEC between 1994 and 1997. The company's books and records during those periods were falsified, and Informix failed to employ a sufficient system of internal accounting controls, the SEC said.
As the alleged illegal conduct came to light, managers at the company acted fraudulently to avoid restating Informix's financial results, the SEC found. After its former managers were replaced, Informix uncovered more than $100 million of accounting irregularities and restated its financial results, the SEC said.
Informix was ordered to stop violating various securities laws and cooperate with the SEC's continuing investigation.
Informix officials said no monetary fines or penalties were imposed against the company, and Informix will cooperate with the ongoing investigation.
"The company is gratified to have resolved the investigation," Robert Finocchio, the chairman of the company's board of directors, said. "The resolution of the investigation and the recently announced settlements of the private securities litigation mean that the company has closed the book on the past and now can concentrate on the future."
Informix announced last month that it had settled shareholder lawsuits related to the irregularities.
How's Informix performing now?
After the embarrassment of the US Securities and Exchange Commission charges and despite the continued slowdown in the database market, Informix has improved its financial performance in recent quarters.
For the third quarter, ended September 30, 1999, the company beat analysts' expectations to record a 30 per cent increase in year-on-year profit to $US23.9 million.
Licensing revenue also grew 17 per cent to $215.9 million, compared to $185.2 million in 1998.
Informix has been repositioning itself as a software infrastructure provider for the Internet economy. Like most of its rivals, it is migrating its products to leverage the Internet and has declared support for Linux. It is also amongst a swathe of vendors whose products support Java and XML (Extensible Markup Language). In December 1999 it announced its intention to acquire data warehousing infrastructure supplier Ardent Software by the end of this quarter.
It has already purchased data warehouse provider Red Brick Systems and embedded-database vendor Cloudscape during the past 18 months.
Informix embarked on the acquisition strategy to obtain technologies that would help customers integrate their transactional and analytical systems.