Weak Financial Controls Force Veritas To Delay 10K Filing

Veritas, based in Mountain View, Calif., said Thursday its auditors need more time to review the financial reporting related to its order entry processes and software licensing transactions. Under the first deadline of the Sarbanes-Oxley Act, all U.S. public companies with more than $75 million market cap must monitor, document and report on the effectiveness of their internal controls.

In a statement, Veritas said the financial process weaknesses causing the delay should not affect its upcoming acquisition by Symantec. Veritas officials did not return calls requesting additional information.

"Lots of companies are having delays after struggling with Sarbanes-Oxley," said Dan Renouard, senior research analyst for investment banker Robert W. Baird, of Milwaukee. "Veritas is not alone. But it's not something you'd expect from a company with strong accounting systems."

Renouard suggested that Veritas might also be preoccupied with its impending acquisition. "The management team may be distracted. [Veritas' CFO] Ed Gillis heads the [Symantec/Veritas] integration team."

Tom Berquist, a financial analyst with Smith Barney Citigroup, wrote in an investors report Thursday that he is concerned about the delay for two reasons.

First, wrote Berquist, Veritas had the time, money and early notification about the pending Sarbanes-Oxley deadline to finish the filing on time. Second, and more worrying, is the possibility of Veritas' lowering its licensing revenue for the fourth quarter, said Berquist. The company's services revenue growth already outpaces that of its license revenue.