Gemstar-TV Guide in SEC Probe of Accounting

Gemstar-TV Guide International Inc., reeling from a raft of accounting concerns, disclosed late Monday that it is the subject of a formal Securities and Exchange Commission probe.

A leading provider of electronic TV program guides, Gemstar said the SEC issued the formal order Oct. 17, allowing regulators to subpoena individuals and entities while digging for additional information. Gemstar previously had discussed the results of an internal accounting review with the SEC, and the Pasadena-based firm said Monday it intends to “fully cooperate” as the probe progresses.

The firm was considered a technology highflier on Wall Street just two years ago, but its stock value has plummeted 96% since then, suffering from questionable accounting practices and court rulings that undermined the company’s patents for on-screen programming guides.

Rupert Murdoch’s News Corp. first invested in the company during the technology boom in 1999 and has been forced to take write-downs of nearly $6 billion since March to deal with Gemstar’s decline. Gemstar delayed its second-quarter earnings in August and said it would restate its 2001 results after an internal review.

In announcing the review, the company said it intended to restate 2001 earnings by reducing revenue from its TV Guide subsidiary by about $20 million. Gemstar said its audit committee also would examine revenue accounting practices for “certain other transactions” and the allocation of revenue in its interactive-platform division and media-and-services division.

Gemstar then failed to certify its financial results by the SEC’s Aug. 14 deadline.

News Corp. recently wrested control of the company from its founder, Henry Yuen, and installed one of its own executives. Yuen and his chief financial officer, Elsie Leung, agreed to step down in exchange for huge severance packages.

Gemstar’s disclosure Monday came after the stock markets closed. Its shares dropped 9 cents to $3.57 in after-hours trading on Nasdaq.