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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.
Tom Taulli is the author of several books, including the Complete M&A Handbook and All About Short Selling.
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Reader Comments (Page 1 of 1)
3-01-2011 @ 3:59PM
Iridium said...
Rosetta Stone has and always will be a terrible product. It is built to supplement high school and college language courses, not learning on your own. My favorite part of the product is that you can buy it and there will be nothing in your native language past the box. For $400 I got a CD and two books without a single word of English. Both books were over 500 pages filled with lessons but I couldn't read one word. The language program had all the menus in Mandarin so I couldn't tell what type of lesson I was choosing.
It is pretty hard to even start learning a new language when the menus are all in Chinese. Unless you have someone who is fluent in the language you are trying to learn right next to you, forget it. Rosetta Stone won't help you.
Let Rosetta Stone be a lesson that public market greed doesn't always work. Some companies should just stay private, in fact all corporations should.
3-15-2011 @ 7:30PM
Jamie said...
@Iridium
You obviously took the cheap route and bought a fake product online. That's what happens when you're 50% committed and you try to shave off a few hundred bucks. Is $500 really too much to ask to learn a language? I've boughten three Rosetta Stone products, two for my kids and one for myself, and all of them come with instructions in English. Also, the menus are all always in English, not Chinese or any other language. The biggest mistake you made is saying it came with books of lessons. That goes completely against all the principles of Rosetta Stone. There are absolutely no books in any of their products. All lessons are done on the computer. Mention of books does come up on threads online talking about counterfeit products...you should have done your research.