Lotus Shares Wither on Word of Lower Quarterly Results
Lotus Development Corp. shares lost more than a fourth of their value Tuesday, as investors responded to the company’s forecast of lower second-quarter revenue and profit.
The stock closed down $14.375 at $37 per share on the Nasdaq, a drop of 28%. It was the most active issue on Nasdaq, with a volume of 12.7 million shares, compared to an average daily volume of about 1 million shares.
After the close of trading Monday, Lotus announced that delays in new versions of its 1-2-3 spreadsheet and other office software had diminished its chances of meeting analysts’ estimates for the quarter ending July 2.
Lotus said it expects revenue between $230 million and $240 million, with earnings of 20 to 25 cents per share. Analysts had forecast profit of about 48 to 50 cents per share.
Lotus has recently been trading in the $50-per-share range; shares had posted a 52-week high of $86.50 on March 18.
Analyst Charlotte Walker of Bear Stearns & Co. said Tuesday that Lotus stock has been trading too high but that the company will probably rebound as it ships a new generation of its office software this summer.
“The software business is a commodity business now, so your business is going to be affected by the products you ship. If you’re late, you pay,” she said.
Jeff Tarter, editor of the industry SoftLetter newsletter, noted that the market for office software is saturated after more than a decade of growth. “There are not a lot of new buyers for spreadsheets and word processors,” he said. “All the low-hanging fruit has been picked in those markets. The cost of selling this stuff has gone up because it’s hard to find those users, and they have to be lured in.”
In addition to its product delays, Lotus cited “the fact that our major competitor is at the top of its Windows desktop product cycle this quarter.” That is a reference to Microsoft Corp., the largest PC software company. Microsoft rolled out new versions of office software over the winter.
Walker said: “What you hope will happen is that their new products--which, by the way, are getting great reviews--will help (Lotus) rebound, and you’ll go back and forth (with Microsoft), back and forth.”
Of Tuesday’s drop in share value, Lotus spokesman Richard Eckel said: “You’re never happy about this type of reaction, but it wasn’t unanticipated. Wall Street rewards consistency, and as Wall Street has shown before, if you deliver a surprise, you pay a price. But as we said (Monday), we think this is a one-quarter phenomenon.”
