Investors in nano-toolmaker VeecoInstruments (NASDAQ:VECO) were disappointed on Friday when the company announced it would be filing its audited accounts late due to "an internal enquiry into the errors in accounting of their TurboDisc business."

The TurboDisc unit was originally purchased from Emcore Corp. (NASDAQ:EMKR) in November 2003. Veeco paid $60 million in cash for the net assets of the business. The deal also included a two-year earn-out feature that would require payment of up to an additional $20 million if future revenue targets are achieved.

Veeco has had a full year to absorb that business into operations, upon which it has only now discovered "discrepancies" in the value of inventory, accounts payable, and revenue items carried on the books of TurboDisc.

Veeco's shares fell over 10% on that news and were not helped when Veeco's guidance for the first quarter of 2005, given at the same time, fell below analysts' estimates. The stock hit a 52-week low of $16.23, only to finish marginally higher at $16.96 by the end of trading on Friday. Even at this lowly valuation, the company is still boasting an eardrum-popping P/E of 53. This is a testament to the market's faith in the nano "picks and shovels" theory -- i.e. that the toolmakers will be the first to benefit with the growing commercialization of nanotechnology.

Although not yet certain of the full impact, Veeco management expects at least $5.5 million to $7.5 million of pre-tax earnings from the last nine months to be affected by the accounting inquiry. According to third-quarter filings, the company posted a pre-tax loss of $876,000 on revenues of $290 million, so any restatement along the values indicated should not have a substantial impact on Veeco (unless there is worse to come).

In addition, any restatement would put into jeopardy the $20 million Emcore may have been expecting. Veeco has hired an outside attorney to aid in its investigation, and without even waiting for a final finding, it is easy to predict there is going to be a fight between the two companies over that $20 million.

Emcore has reported for the first quarter of fiscal 2005, posting a $9 million loss. With only $38 million in its coffers, the company pointedly added in its release that it anticipates receiving between $15-$17 million cash as an additional payment for the TurboDisc business. It might be a good idea to rethink that, Emcore!

The theory of the picks-and-shovels argument has not yet worked in practice for the nano-toolmakers. If and when it does, we will be the first to look at them as potential Motley Fool Rule Breakers . Why not take a no-obligation free trial to this ultimate growth service?

Neither Carl Wherrett nor John Yelovich own shares in any of the companies mentioned in this article. You can reach Carl or John via email. The Fool has a disclosure policy.