Veritas Software ( VRTS) will restate its financials for 2001 through 2003 to make good some accounting missteps. The company said a forensic audit concluded Friday "identified certain accounting practices not in compliance with generally accepted accounting principles during 2002, 2001 and prior periods under the direction of former financial management." The company cited the "incorrect deferral of professional services revenue and the unsubstantiated accrual of certain expenses, which had a positive impact in some periods and a negative impact in others." Veritas said the restatement would cut net income by $15 million to $20 million for the year ended Dec. 31, 2003, and slash revenue for that period by $10 million to $15 million. Veritas maintained first-quarter 2004 guidance, however. The news came as the company's stock was halted Monday on the Nasdaq stock market. "Upon conclusion of the investigation, we decided that restating our reported financial statements was the appropriate course of action," said CEO Gary Bloom. "The Company is committed to accurate financial reporting and our financial leadership has been substantially improved since the arrival of Ed Gillis, our chief financial officer, in November 2002." Veritas also said it would settle federal tax audits related to its 2000 acquisition of Seagate Technology, 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 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. Veritas shares were halted around midday Monday after slipping 55 cents to $30.47.