Gemstar Plunges as Accounting Worries Arise

The stock drops 28% as investors worry that revenue figures might be optimistic.

Author:: George Mannes
Publish date:: Apr 2, 2002 10:40 AM EST

Gemstar

(GMST)

plunged 29% Tuesday morning as Wall Street worried about the company's accounting and the quality of its earnings.

The selloff was fed by notes from CIBC World Markets, Deutsche Banc Alex. Brown and Salomon Smith Barney. CIBC analyst John Corcoran, for one, said he found indications of "aggressive accounting treatment of two items" in the company's 10-K filing. In early trading Gemstar shares slid $4.16 to $10.20.

In its annual report filed Monday with the

Securities and Exchange Commission

, Gemstar disclosed that some $20 million of the company's reported $101 million Interactive Platform segment revenue was in fact noncash ad revenue on a barter deal involving its interactive program guide.

In addition, about $59 million of the company's Technology and Licensing revenue is related to accruals from

Scientific-Atlanta

(SFA)

, which Alex. Brown analyst Karim Zia said would only be realized upon the successful outcome of a pending patent case.

Gemstar's shares have been roiled in recent weeks as investors worried about the departure of a key executive and the disposition of another key patent case.