Muerto. Tot. Mort. Umer. Any way you say it, Rosetta Stone
Rosetta Stone shot itself in the foot Friday, issuing an earnings warning just days before its fourth-quarter report, which was already expected to be less-than-lifelike. The report is due out next Monday. Revenues for the quarter, previously expected to come in between $76 million and $81 million, are now expected to fall short at just $74 million. Earnings, posited at anywhere from $0.28 to $0.38 per share, will probably max out at $0.23. After reciting the bad news, CEO Tom Adams penned the obituary: "Despite record sales of Rosetta Stone Version 4 TOTALe ... our sales to US consumers for the full quarter were below expectations. ... The bankruptcy of Borders Group
"Eto ne ya, eto ty."
Yes, you read that right. Bad as the news is, it's not really Rosetta's fault that it's going to badly miss earnings next week. Essentially, Rosetta's CEO is blaming you for the failure. You, the cash-strapped U.S. consumer who's not anteing up for the company's language learning products. You, who, in your search for savings, bought your books from tax-free Amazon.com
Which raises the question, if Borders' going bankrupt and closing 200 stores affected Rosetta Stone so drastically, how will exposure to other bricks-and-mortar retailers continue affecting it? Just today, Barnes & Noble
How do you translate "chutzpah"?
This may come as a bit of a shock to shareholders who find themselves 17% poorer than they were a day before Rosetta issued its earnings warning. Fancying themselves smart stock shoppers, buying a stock valued at 16.7 times earnings, expecting it to grow at 17.5% per year -- that sounded like a pretty good early last week. (A deal so good, in fact, that our very own Motley Fool Stock Advisor recommended buying in.)
Yet we're now told Rosetta sells for something closer to 26 times earnings, and far from growing at a double-digit clip, is poised to show a 60% decline in Q4 profits. And it's all our own fault. Guess there's just one thing I can say to that, Rosetta: Mea culpa.