It seems that whenever I'm at the mall, the airport or watching TV, I'll wind-up seeing a Rosetta Stone (RST) commercial. They are actually good marketing pieces. And who doesn't know the name? Yes, the company is a dominant player in the language market.
The problem is that it has been tough to boost overall sales. Less than two weeks ago, Rosetta Stone gave a warning about its fourth-quarter results. So the stock price fell 17% on the news.
Unfortunately, this was not the end of the bloodletting. Tuesday, the company issued its quarterly results. Well, on the news, the stock is off 10% to $13.43.
In the quarter, Rosetta Stone posted revenues of $74.3 million, down 5% over the past year. Earnings were off 59% to $5 million, or 23 cents per share. The Wall Street consensus was for 28 cents per share.
An yes, it looks like the problems will continue. Rosetta believes that Q1 will see revenues of $54 million to $58 million with a loss of 34 to 48 cents per share. Keep in mind that the consensus was for revenues of $61.3 million, with a break-even on earnings.
Why the problems? Simply put, Rosetta is finding it much tougher to get new business in the U.S. In fact, the recent bankruptcy of Borders Group has been another big drag on results.
True, Rosetta Stone is getting lots of traction in global markets. Yet it will take time for this to overcome the weakness in its core market.