The local Enterasys operation will not be investigated by the US Securities and Exchange Commission (SEC) despite SEC investigations into the company`s Asia Pacific, North America, Europe and Latin America operations.
This is according to Martin May, regional director, sub-Saharan Africa, Enterasys Networks. "We`ve got a very straight, easy model here, all our figures are reported on time."
May notes that while the local office is responsible for sales and marketing in the area, the South African office sees no capital going through its books, with all monies paid directly to Enterasys Europe in dollars.
May explains that Enterasys moved from a "sales-in" to "sales-out" model last September. This allows Enterasys to report on its distributors` sales, rather than sales to its distributors. The effect is the presentation to analysts of a more accurate sales figure than was available under the "sales-in" model. Enterasys may also be able to write down stock depreciation without holding the stock directly - hence profit without the risk. May says that since the money doesn`t enter his books, there are no local tax incentives to the new model.
The irregularities that triggered the SEC investigation into Enterasys` operations, as well as the resignation of the chairman and two top executives and the removal of a managerial team responsible for the offending area, was due to "dubious reporting of figures that made us hold up the fourth quarter results" under the "sales-out" model, according to May.
The SEC is also investigating Enterasys` Aprisma organisation, which does not exist locally.
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