Gemstar Ex-Accountant Warns Investors on Financial Results

KPMG, the former accountant for Gemstar-TV Guide International Inc., Thursday warned investors not to rely on its most recent audit of the company’s financial statements.

The auditor withdrew its report on Gemstar’s past results after the company on Nov. 15 restated its 2000 and 2001 results to write off more than $100 million in previously recorded revenue after losing a patent dispute involving Scientific Atlanta Inc.

But a month earlier, a dispute over whether the results should be restated led Gemstar to fire KPMG as its auditor. The company has since hired Ernst & Young, which is reviewing Gemstar’s most recent financial statement.

The November restatement meant that Gemstar’s management had implicitly withdrawn representations made to KPMG in regard to previous financial statements, the accounting firm said in a letter, which was dated Nov. 22 and filed to the Securities and Exchange Commission.

“Accordingly, KPMG hereby advises you that our report on the company’s financial statements should no longer be relied upon,” the accounting firm said in the letter.

Pasadena-based Gemstar, run largely by its biggest shareholder, News Corp., had said in November that it would revisit its handling of that revenue after consulting with Ernst & Young.

KPMG responded at the time by saying it was “not surprised” by Gemstar’s decision to change auditors and said it would detail its disagreement in an SEC filing.

Gemstar, publisher of TV Guide and a maker of on-screen television guides, has seen its share price decline 87% so far this year.

Thursday, the company’s shares slid 13 cents to close at $3.36 in Nasdaq trading.