UPDATE 2-ArthroCare to restate results, shares tank

(Recasts; adds details, updates share movement, analyst comments)

July 21 (Reuters) - ArthroCare Corp (ARTC.O: Quote, Profile, Research, Stock Buzz) said it will restate some results due to incorrect accounting methods related to product sales to certain entities, raising analyst concerns about the credibility of the medical devices maker and sending its shares plunging as much as 43 percent to a four-year low.

The company said it would restate results for 2006, 2007 and the latest first quarter, and expects the action to reduce revenue and earnings for these periods.

"While ARTC evaluates the financial statements, we find it difficult to have confidence in the financials going forward," Needham & Co analyst Ed Shenkan wrote in a note to clients.

Shenkan downgraded the stock to "hold" from "strong buy," and said that during the review, any delays in financial statement filings could hurt the stock.

Additional concerns include a potential U.S. Securities and Exchange Commission probe, shareholder lawsuits and higher-than-expected legal expenses, the analyst said.

The company said it will restate its results due to incorrect accounting methods relating to product sales to certain entities, including the DiscoCare unit, which it acquired last year.

The relationship between the company and DiscoCare during the periods being restated was a sales agent relationship, rather than that of a traditional distributor, it said in a statement.

"This has triggered a review of the company's internal controls... and may call into question management's credibility and the strong results reported of late," Susquehanna analyst David Turkaly said.