Rosetta Stone's stock crumbles after earnings warning, management shake-up
Arlington-based company says it will fall short of Wall Street sales expectations
By Bob Keefe | July 23, 2010
Shares in language software company Rosetta Stone fell sharply after the Arlington, Va.-based company warned Wall Street late Thursday it would not meet its expected sales in the second quarter and that the company's chief operating officer was resigning.
In after-hours trading Thursday night, Rosetta Stone shares fell more than $2.50 per share, or about 10 percent, to $22.99.
In a statement, Rosetta Stone said it expects second-quarter revenues of $60.5 million - about $5 million less than Wall Street analysts had expected. In giving the guidance, the company also announced that COO Eric Eichmann was resigning - becoming the second top executive to leave the company in as many months. In June, CFO Brian Helman announced he was leaving.
Rosetta Stone said CEO Tom Adams would assume Eichmann's duties and indicated that Adams would take a more hands-on approach to running the company.
"All of the company’s operational managers will now report directly to me," Adams said in a statement.
"I look forward to assuming direct oversight of our sales and marketing initiatives in order to further drive sales growth and our overall business expansion, as well as extend our position as the leading technology enabled language learning provider in the world," he said.
The management shake-up comes amid a rough few months for the company. In April, it announced it had lost a major lawsuit to Google Inc. involving ads for copycat language programs sold through Google advertisements. It has been involved in a major battle with software pirates who illegally duplicate and sell knock-off versions of its well-known language programs. And Thursday, Adams acknowledged weakening in U.S. consumer sales.
"Our U.S. consumer business was not as strong as anticipated, as our advertising impressions in the U.S. were impacted by a television advertising market that was much tighter than expected," he said.
The company expects to report complete second quarter results on Aug. 5.
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