From Standard & Poor's Equity Research
Brean Murray downgraded SafeNet (SFNT) to hold from strong buy, after the company disclosed a federal subpoena and informal Securities and Exchange Commission inquiry into its accounting.
Analyst Andrey Glukhov notes that while these do not impact the company's core business, investigation creates a cloud over the stock, and in the near term it will not likely trade on fundamentals. He notes that while the company struggles to improve execution, senior management is likely to be distracted. Since the SEC's inquiry appears broader than just option practices, he believes there are some risk of further accounting restatement. He also sees potential risk to government contracts and cuts his stock price target to $21.