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 Rosetta Stone (RST) were getting lost in translation today, tumbling 18% after a disappointing earnings report.
So what: The language-software maker saw revenue fall 5%, to $60.9 million, well below estimates of $70 million, as sales in Japan and Korea fell sharply. The bottom line also missed expectations, as the company finished with a per-share loss of $0.12, against the consensus at $0.10. Finally, full-year guidance missed the mark as the company said it now expects revenue of $270 to $280 million, and adjusted EPS of -$0.12 to -$0.01. Wall Street had been looking for $286.5 million in sales, and a $0.01 profit per share.
Now what: CEO Steve Swad touted the company's improvements in its SaaS business and Enterprise & Education segment, but there are two fundamental components working against Rosetta Stone. Americans are largely unwilling to learn foreign languages, and have little need to do so, and mastering a foreign language is difficult enough through immersion, but nearly impossible through computer programs alone. That may be one explanation for why this 21-year-old company is operating at a loss, and why it's unlikely to make a meaningful move into the win column anytime soon.
