Why Rovi Shares Sank

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Rovi (Nasdaq: ROVI  ) , a digital life cycle management solutions company, dipped as much as 17% this morning following disappointing first-quarter earnings results.

So what: Perhaps some of the confusion relates to Rovi's earnings report that reads like stereo instructions. Highlighting wide variances in GAAP and non-GAAP results is bound to confuse investors, so for our sake, I'll stick with the more common non-GAAP. For the quarter, Rovi reported revenue of $175 million and a profit of $0.56. Comparatively, sales missed Wall Street's estimates of $177.6 million but met EPS expectations of $0.56. Rovi's management also forecast full-year EPS to range from $2.35 to $2.65, which is in line with the current Street expectation of $2.53.

Now what: Perhaps next time Rovi shouldn't spend 80% of their time explaining the differences between GAAP and non-GAAP and should instead focus on why investors ought to care about their results. Other than two very short paragraphs that noted the company had added some licensing agreements and the forward guidance, almost nothing in this report was mentioned about Rovi's performance. Considering the recent revenue shortfall with no explanation, I just assume avoid Rovi here.

Craving more input? Start by adding Rovi to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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9/19/2014 3:59 PM
ROVI $21.33 Down -0.26 -1.18%
Rovi Corporation CAPS Rating: **

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