- The Washington Times - Tuesday, August 18, 2009


Following the company’s ballyhooed initial public offering in April, shares of Rosetta Stone Inc. have marched steadily higher. On Monday, they tanked.

The cause was self-inflicted. The Arlington company behind the popular language acquisition software cut its third-quarter profit forecast because of higher-than-anticipated costs. At the same time, it nixed a planned public offering announced a week ago of about 4 million shares.

Just a few months before, Rosetta Stone was giving investors hope that the IPO market had found its feet again. The company raised $112.5 million with its initial offering April 16, and shares climbed nearly 40 percent on the first day of trading. A few weeks later it had climbed more than $31.

After settling back down near $22 in May, the stock has been driving back toward its peak.

But Monday’s news sent shares into a dive. The stock closed down $7.72, or 27 percent, at $20.63, the lowest closing bid since the IPO.

Rosetta Stone blamed its revised profit forecast for the quarter, as well as the full year, on higher marketing and product development costs. Some apparently mishandled advertising campaigns hurt as well.

The company “experimented with a significant amount of Internet and television test marketing programs and we did not expeditiously terminate certain of those programs that were not yielding acceptable results,” said Brian Helman, Rosetta Stone’s chief financial officer.

The company now expects net income of 22 cents to 24 cents per share for the quarter ending in September, down from a previous estimate of 30 cents to 32 cents

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