Tech Company’s Stock Falls as Accounting Review Drags On

0

It could be months before MRV Communications Inc. completes its investigation into possible stock option backdating and accounting problems.

And that’s bad news for shareholders, because the probe has dragged the company’s stock to historic lows.

Chatsworth-based MRV, which manufactures equipment and components that manage virtual networks, launched the investigation in early June. The investigation has centered on possible problems from 2002 to 2004. Chris King, the company’s vice president of finance, said an independent panel and team of auditors were also combing through the company’s books from as far back as 1998.

“I don’t have an idea when it will be done,” King said. “It would be measured in months. The focus now is really on getting the adjustments right and issuing financial statements that are 100 percent accurate. We’re trying to do that as fast as we can.”

The investigation into accounting problems has centered on two of MRV’s European subsidiaries, Turnkey Communications Inc. in Switzerland and EDSLan in Italy.

MRV’s stock traded at around $1.70 before news of the investigation broke this summer. Last week it fell to 22 cents, far below the company’s previous low of about 69 cents in October 1993.

Mike Lee, an analyst with Andrew Garrett Inc., spoke of the stock in denigrating terms.

“You need to get the option data issue out of the way,” he said. “That’s a big drag on the stock.”

The company has not filed its last two quarterly earnings reports out of concern that their numbers may be inaccurate. Last week, the company missed the deadline to file its third quarter results, drawing a letter from Nasdaq warning that the company is out of compliance with regulations and risked being delisted. MRV officials said the company would seek an extension from a Nasdaq panel to file its third quarter results.

The panel has already granted MRV an extension to file its second quarter results, setting a deadline of Feb. 10. MRV executives said they might seek an extension beyond that date if the investigation is not complete.

If an extension isn’t granted, the panel could rule to delist MRV’s stock. The company could appeal to a Nasdaq council but that might not prevent the delisting, said Wayne Lee, a Nasdaq spokesman.

King said MRV’s investigation began after a new finance team took over at the end of 2007 and noticed irregularities when it reviewed the company’s books.

No posts to display