PricewaterhouseCoopers LLP, the auditing firm that stuck with MicroStrategy Inc. through the depths of its accounting scandal, is jettisoning the McLean company as a client.
MicroStrategy said it received notice last week that the accounting firm will not remain its auditor in fiscal 2005, according to a filing yesterday with the Securities and Exchange Commission. Neither MicroStrategy nor PwC said why.
The company, a provider of business software, said PwC will finish auditing its 2004 results. MicroStrategy's filing said the accounting firm doesn't have any disagreements with the company on accounting practices or financial statements from 2002 through March 9. PwC agreed in a letter submitted to the SEC.
Steven G. Silber, a spokesman for PwC, said the accounting firm would not comment on client relationships. A MicroStrategy spokeswoman also declined to comment on the auditor's decision.
The SEC in 2000 charged MicroStrategy with overstating profits by tens of millions of dollars. The company restated earnings and settled the charges that year. No enforcement action was taken against PwC, but the auditing firm agreed to pay more than $50 million in May 2001 to settle a shareholder lawsuit filed by MicroStrategy investors.
Some analysts have speculated that power is once again becoming tightly concentrated within MicroStrategy, as it was before the accounting fraud. In December, Eric F. Brown, the firm's president and chief financial officer, left MicroStrategy to join McAfee Inc. Michael J. Saylor, chairman and chief executive, also assumed the role of president after Brown's departure.
"I don't know that any of this is any way correlated, but in addition to being difficult to work with, it's a company that I as an investor would have a difficult time being comfortable with from a corporate-governance standpoint for a number of reasons," said Tom Ernst, an analyst with Deutsche Bank Securities Inc., which owns stock in the company. He said the accounting firm's departure "could be a complete non-event or . . . it could be a big deal."
In 2003, MicroStrategy paid PwC $1.4 million for audit and audit-related services, including tax services, according to an SEC filing. PwC and its predecessor firms had served as MicroStrategy's auditors since 1994.
Shares of MicroStrategy closed unchanged at $70.83 yesterday before the SEC filing.