Why Support.com 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 Support.com (NASDAQ: SPRT  ) plunged 26% during intraday trading Thursday after the company beat expectations with its third-quarter results, but outlined disappointing support program changes which will negatively affect its business at Comcast in 2014.

So what: Quarterly adjusted revenue rose 30% year over year to $23.7 million, which translated to non-GAAP income from continuing operations of $4.6 million, or $0.08 per share.  By contrast, analysts were expecting adjusted earnings of just $0.03 per share on $21.51 million in sales.

What's more, Support.com also stated fourth-quarter non-GAAP revenue should be in the range of $24 to $26 million, with non-GAAP earnings in the range of $0.06 to $0.08 per share. The midpoint of both ranges came out well ahead of analysts estimates, which were modeling adjusted earnings of $0.03 per share on sales of $23.24 million.

However, CEO Joshua Pickus also elaborated on the company's subsequent earnings conference call that today's beat largely occurred thanks to a later-than-anticipated transition by Comcast away from its current signature support program. As it stands, Pickus stated, though they expected revenue from the program to decrease this quarter, the "subscriber cutover is largely occurring toward the end of the year."

Now what: Going forward, Comcast's signature support program should be discontinued by the end of this year in favor of a bundled network support package, which will be fully implemented in 2014. As a result, though Pinkus says Support.com's Comcast revenue next year should be "at least equal and likely exceed Comcast revenue in 2013," it will come at the price of "considerably lower margins."

In the end, while Support.com should have little trouble continuing to grow its top line, I can't blame investors for bidding the stock price down today given its impending reduced profitability going forward.

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