Stec shares fall on auditor resignation

Shares of Stec tumble on PricewaterhouseCoopers's resignation as auditor

Associated Press

NEW YORK (AP) -- Shares of Stec Inc. fell Wednesday, after the data storage device maker said its auditor resigned.

THE SPARK: The Santa Ana, Calif.-based company announced the resignation of PricewaterhouseCoopers LLP in a Securities and Exchange Commission filing late Tuesday. The decision was made by PricewaterhouseCoopers last week, and no action was taken by the company's audit committee or board of directors to recommend or approve the change, Stec said.

THE BIG PICTURE: In its filing, Stec said there were no significant disagreements between it and PricewaterhouseCoopers during its two most recent fiscal years and the current year to date.

Stec said that its board's audit committee is in talks with an independent registered public accounting firm to succeed PricewaterhouseCoopers and plans to hire a new firm as soon as practicable.

The move comes after the SEC in July charged Stec CEO Manouchehr Moshayedi with insider trading.

The SEC claims that the CEO went ahead with the sale of 9 million shares of his stock, along with shares owned by his brother, a company co-founder, in 2009 despite receiving confidential information that a major customer's demand for one of its top products was less than expected. The SEC said each brother reaped about $134 million from the sale, which it described as a fraudulent scheme.

Moshayedi has denied the charges. His brother, Mark Moshayedi, who serves as Stec's president and chief operating officer, was not charged.

THE ANALYSIS: Benchmark analyst Gary Mobley backed his "Hold" rating for Stec, saying that the filing "reads fairly innocent" and noting that the accounting firm drops hundreds of clients every year for a variety of reasons.

"Very often, PricewaterhouseCoopers scrubs through its list of clients in attempt to find imbalanced risk versus reward scenarios with certain clients," Mobley wrote in a note to investors.

The analyst added that the move could be related to the pending insider trading charges against Stec's CEO, saying that PricewaterhouseCoopers may have determined that the company's situation is too "messy" and that it may get pulled into an increasing amount of litigation as a result.

THE SHARES: Down 37 cents, or 4.9 percent, to $7.14 in afternoon trading, after dropping as low as $6.92 earlier in the day. Over the past 52 weeks, the company's shares have traded between $6.53 and $11.98.

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