Rainbow Technologies Stock Drops on Word of 40% Profit Decline

Shares of Rainbow Technologies Inc. fell sharply Thursday after the company reported a drop in second-quarter earnings.

The stock closed at $10.87 a share, down $2.50, in heavy Nasdaq trading.

Rainbow reported that its second-quarter profit was $1.1 million , or 20 cents a share, a 40% decline from earnings of $1.82 million, or 33 cents a share, for the same period a year earlier. That came on sales of $9.3 million, a 6.2% reduction from $9.9 million a year earlier.

The Irvine-based company, which makes software protection products, blamed competition for the lower earnings. The falling value of the U.S. dollar in some overseas market also resulted in a $270,000 deficit, compared to a $65,000 gain for the same period last year.

“Notwithstanding an increase in the number of software protection units shipped during the second quarter, revenues were lower due in part to continued competitive pricing pressures,” said Patrick Fevery, vice president.

For the first half of the year, Rainbow said it earned $2.5 million, or 44 cents a share, down 29% from a profit of $3.5 million, or 62 cents a share, for the same period last year. Six-month revenue was $18.3 million, down 1% from $18.5 million a year earlier.