The Germany-based Balda, believed by many analysts to be the primary iPhone touch screen supplier, is under scrutiny for its financial practices. Financial analysts are questioning the secrecy surrounding a US$50 million deal that gave unnamed investors "convertible profit participation rights," according to BusinessWeek.

The October 31 deal included an eight percent interest rate that analysts are calling too expensive, and was sorely lacking on information about why the transaction happened and who it involved.

BHF-Bank analyst Tobias Loskamp said that Balda displayed a "needless lack of transparency."

Balda’s revenues have been coming in lower than expected, and the company has been operating with a net loss. For the third quarter of 2007, that loss totaled $30 million. The company is also burdened with money losing divisions that it has not been able to sell off.

Not everyone, however, thinks that Balda deserves the negative press. Wyser-Pratte & Co. owner Guy Wyser-Pratte, who owns a seven percent interest in the company, thinks that Balda’s touch screen technology is ahead of other companies, and that some of its financial issues can be blamed on short selling by rival hedge funds. "You have people wishing bad on the company, trying everything they can to spread bad stories," he said.

If Balda is the primary iPhone touch screen provider -- a fact that Apple will not confirm -- that will likely prove to be a strong positive for the company. It may be supplying displays for the iPod touch as well, which could also help shore up the company’s bottom line.

Despite the company’s potential grown thanks to iPhone component sales, it may have a difficult time winning over analysts until it changes its disclosure practices.