In a shocking turn of events, Shutterfly Inc ( SFLY - Analyst Report ) announced that Mark Rubash, the company’s Senior Vice President and Chief Financial Officer (CFO), has decided to step down from his position, effective February 24, 2012. The company cited that Rubash’s resignation was in light of his decision to pursue a personal interest in joining an early stage medical technology company.

Rubash joined the leading provider of Internet-based personal publishing services company as the CFO in November 2007 and was responsible for managing all financial activities. Rubash can claim experience of more than 25 years, and prior to joining Shutterfly he served as the CFO of Rearden Commerce and Critical Path, Inc. and has also held the position of senior vice president of finance at Yahoo! Inc. ( YHOO - Analyst Report ) .

Until a permanent CFO is selected, Shutterfly has decided that president and Chief Executive Officer (CEO) Jeff Housenbold and Vice President and Chief Accounting Officer Brian Manca will jointly share the role of the CFO.

The company’s search for the new CFO has begun, but until the appointment of the new CFO, we prefer to remain on the sideline. The share price of the online photo site also tumbled 89 cents to close at $24.06 on Thursday.

The announcement of the management churn comes right after the company lowered its guidance for the fourth quarter of 2011. For the fourth quarter of 2011, Shutterfly slashed its net sales forecast to $259 million - $264 million from the previous range of $270.5 million - $275.5 million and adjusted EBITDA guidance to $84 million - $88 million from the earlier projection of $96.3 million - $101.1 million.

The company reduced its outlook due to the challenging economic conditions and fierce discounting war among the competitors during the crucial holiday season.

For the fourth quarter of 2011, the company expects GAAP earnings in the range of 98 cents to $1.03 per share.

For fiscal 2011, Shutterfly expects net revenue to range between $480 million and $485 million. On a GAAP basis, earnings are estimated between 42 cents and 46 cents per share.

Redwood City, California-based company is slated to release its fourth quarter results on February 1, 2012 and Rubash will remain in the company through year-end accounting close and annual audit process. The Zacks Consensus Estimate for the fourth quarter of 2011 and fiscal 2011 are pegged at 86 cents and 60 cents, respectively.

Shutterfly currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.