Veritas Tumbles on Restatement

The investigation included reviews of documents and emails, as well as interviews with current and former employees.

Veritas also said it would settle federal tax audits related to its 2000 acquisition of Seagate (STX), a settlement that will boost 2003 net income by some $95 million. Veritas said that other than the Seagate move, the expected adjustments for 2003 were "primarily a consequence of correcting errors from the prior periods." The company said it would seek an extension on its 2003 10-K filing.

Veritas acquired Seagate's software business, but not its large hard drive manufacturing arm. After a period of private ownership, Seagate became a public company again in 2002.

Veritas reiterated first-quarter guidance, calling for earnings of 18 to 21 cents a share on a pro forma basis and 17 to 20 cents a share on a GAAP basis. Revenue should be $455 million to $470 million.

Monday's news comes as the big Mountain View, Calif., storage company licks its wounds from a critical market share report. That brief showed Veritas losing ground in its faceoff with the nation's No. 1 maker of software to manage data storage for large businesses, EMC (EMC).

Market researcher IDC said Monday that EMC boosted its fourth-quarter market share to 32% from 26% last year, driven by last year's acquisition of Legato. Meanwhile, No. 2 Veritas saw its share inch up to 21.9% from the year-ago 21.3%. Bringing up the rear were Computer Associates (CA), IBM (IBM) and Hewlett-Packard (HPQ).

The companies are battling over a market that grew by 18% year over year in the fourth quarter, to $1.78 billion.

In part, Veritas has fallen victim to the great expectations that come along with its premium earnings multiple. In January, Veritas swung to a profit and posted 17% year-over-year license revenue growth. But Wall Street was expecting more, starting a slide that leaves the stock more than 20% below its recent high. Even so, Veritas has risen some 75% over its year-ago level.

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