Back in early February, shares of Avid Technology
Today, Avid is proving me right.
The company just published preliminary results for the first quarter. $152 million in sales fell far below the $160 million expected by Wall Street analysts. Management sees a GAAP operating loss of $15 million, which would be the weakest result since the spring of 2009.
The culprit of Avid's disappointing numbers is a 30% year-over-year drop in sales to the enthusiast market. That's where Avid sells tools for making music and movies to amateurs like you and me, helping us make and manage media with somewhat simplified versions of the professional tools. That's a price-sensitive market that doesn't play well with attempts to ratchet up gross margins. I'm surprised that Avid didn't see that backlash coming.
And while Adobe Systems
So I feel pretty good about my call on Avid today as shares plunged more than 17% in after-hours action. At these prices, Avid has taken a 60% haircut over the last year and I'm pretty sure we haven't seen the worst of it yet. Avid investors should consider moving their at-risk capital to a basket of stronger technology stocks instead.
Fool contributor Anders Bylund holds no position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Adobe Systems and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a diagonal call position in Adobe Systems. The Motley Fool has a disclosure policy.
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