The heavy sell off of interactive television technology maker Gemstar-TV Guide International's shares is yet another sign of Wall Street's enduring skepticism with iTV, compounded by widening accounting investigations, an emerging industry analyst said.

"This is a jittery market," said Marla Backer of investment and research firm Brean Murray & Co., Inc., as shares of Gemstar closed at $9.01 Tuesday, down 77 percent since the end of 2001.

"People have talked about (interactive television) for years, and it hasn't yet reached (its potential). It's only beginning to translate into a real phenomenon; and it's the industry's job to educate analysts as to how these services will produce incremental revenues."

Investors that bought into, and overpaid for the promise of iTV at the height of the tech bubble are still smarting over losing a lot of money on those stocks, Backer told an iTV conference in New York Tuesday. In addition, already-jittery investors are growing increasingly nervous as the number of SEC investigations into companies' accounting practices grows to record levels.

Investors raced to the exits on Gemstar Tuesday after two Wall Street analysts raised questions about Gemstar's accounting methods in reporting revenues as cash. Gemstar disclosed in its annual report that it didn't actually receive $108 million that it booked during 2001 related to licensing fees it expects from set-top box maker Scientific-Atlanta, Inc.

The fees are tied up in a patent infringement case the Pasadena, Calif.-based Gemstar brought against Scientific and other companies over its interactive programming guide (IPG) software licenses. Gemstar claims that Scientific continued to ship the boxes after it license for the guides expired in 1999.

In addition, Gemstar revealed that about $20 million of the $101.4 million that it took from interactive advertising was actually barter income.

But Merrill Lynch & Co. media analyst Jessica Reif Cohen, who is still bullish on Gemstar with a strong buy recommendation, called the sell-off overblown.

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"Even if the licensing fees are removed from the three years of balance sheets, the growth rate for licensing the technology would be 10 percent vs. 26 percent," as reported in its annual report, she wrote Tuesday.

"While this is somewhat misleading, barter advertising is a common practice. We note Gemstar was able to attract 80 new advertisers to its advertising platform in 2001."

Gemstar has also been under pressure since it recently announced that it would write off as much as $5 billion in goodwill amortization under new accounting rules. That's in addition to the $2 billion that News Corp. wrote off related to its stake in Gemstar.

But Backer's view is that analysts and investors alike are in a show-me mood about whether interactive television programming and virtual channels can deliver incremental revenues on new services.

She pointed to interactive technology maker OpenTV as another example of Wall Street's indifference towards iTV companies. During the height of the tech bubble, investors paid about $245 per share for OpenTV. The company now trades around $5.50.

"There's an erroneous perception that OpenTV has not made inroads into the US markets, but that's not true. Through alliances ... it has become the most vertically integrated company in the iTV space."

The main problem, she noted, is that digital set-top box penetration among the nation's cable subscribers is moving move slowly than anticipated.

Media research firm Kagen and Associates estimates that roughly 11 million of the nation's cable subscribers have digital set top boxes. By 2004, that number is expected to grow to 43 million.

"The ability to deliver enhanced interactive services is there, the infrastructure is there. However, only 25-30 percent of cable households actually have digital cable right now," said Backer.

The sluggish rollout is due to a number of factors, she said, such as consolidation in the cable and media industry, the collapse of interactive cable play Excite@Home, and the weak advertising market overall.

Backer said despite concerns over how Gemstar booked just under 6 percent of its revenues, she sees strong fundamentals in the company.

"TV Guide is a strong brand name. Gemstar has a 66 percent market share of the (electronic programming guide) market. Viewers return to it several times daily and it is turning out to be an important portal for iTV."

In addition, Gemstar has several different income streams in place and is the only positive cash flow generator among the iTV players, she said.

Still, Backer expects another disappointing year for investors in iTV stocks because of the slow deployment of new interactive television services in the marketplace.