Shares of e-commerce firm Digital River Inc. plummeted nearly 16 percent Friday after the company cut its financial projections for the full year and disclosed that a slowdown had hit areas that account for more than 10 percent of its business.
The stock was down $4.72 a share on Friday, closing at $25.50. And that was after the stock dropped about 9 percent in after-market trading on Thursday, following the release of the second-quarter earnings after the market closed.
Digital River runs online stores for retailers, video game makers, software publishers and consumer electronics companies. It earned $291,000 on revenue of $92.5 million in the second quarter. Its adjusted earnings of $6.4 million, or 17 cents a share, beat Wall Street expectations by 2 cents.
But the company apparently drew investors' attention when it dropped its year-end projections. Anticipated year-end net income dropped 3.5 percent to 56 cents a share, projected revenue dropped 3 percent to $393 million and expected adjusted net income dropped 3 percent to $1.12 per share.
In addition, Digital River said it anticipated third-quarter adjusted net income of 24 cents, which was 4 cents below a consensus of analysts' estimates, on revenue of $94 million -- $6.9 million below the consensus estimate.
"We did have a couple of lines of business and a few clients underperform to our expectations during the quarter," CEO Joel Ronning told a conference call for analysts late Thursday. "Combined with the uncertain consumer spending environment and some risk around seasonal client launches, we reevaluated our full-year revenue expectations."
Analyst reaction was mixed, with recommendations ranging from hold to neutral to outperform.
During the conference call, Digital River said slowdowns in its shareware and education businesses contributed to the downward financial revisions. CFO Thomas Donnelly said the shareware business, in which Digital River helps customers demonstrate their software, had previously accounted for a little more than 10 percent of the company's revenue. The education business includes Web development and hosting software for universities.
