Auditor Exit Slams MicroStrategy Shares
Updated from 12:03 p.m. EST
Shares of
MicroStrategy
(MSTR) - Get Report
were off sharply Wednesday, after the software maker disclosed that its auditor has resigned, prompting several analysts to downgrade the stock.
In recent trading, MicroStrategy was off $7.62, or 10.8%, to $63.21, up from the day's low of $59.17.
The company said in a filing with the
Securities and Exchange Commission
that PricewaterhouseCoopers has decided not to stand for re-election as its auditor as soon as PWC completes its review of MicroStrategy's books for 2004 and the first calendar quarter of 2005.
Although losing an auditor is a black eye for any company, PWC said in a letter to the SEC that it had no material disagreement with MicroStrategy's filings from 2002 through March 9, 2005.
Even so, sell-side analysts were quick to downgrade the stock. First Albany analyst Mark Murphy knocked the stock down to buy from strong buy, saying PWC's departure leaves open the possibility of a potential delay or material disagreement with the upcoming 2004 10-K filing and the March 31, 2005, 10-Q. First Albany does not have a current investment banking relationship with MicroStrategy.
Making matters somewhat worse for the stock, is MicroStrategy's recent decision to scale back the amount of information it shares with analysts and the financial press; the company refused to comment on PWC's departure beyond the material in the 8-K filing.
Wedbush Morgan and Pacific Growth Equities also downgraded MicroStrategy.
But Patrick Walravens of JMP Securities maintained his outperform rating, saying, "PWC, based on our experience, appears to be perhaps the most conservative of the large accounting firms. It would not surprise us if PWC simply decided the risk-reward trade-off associated with auditing MicroStrategy did not support continuing its work." His company does not have a banking relationship with MicroStrategy.
MicroStrategy's business intelligence software offers a large number of users the ability to sift through massive amounts of corporate data and receive answers to extremely complex queries. It competes with such companies as
Business Objects
( BOBJ),
Cognos
( COGN) and
Hyperion Solutions
( HYSL).