Software Sales Stall Pushes O.C.’s TouchStone Stock Down : Computers: Shares in the Huntington Beach company fell 33% to $6 from $9 after an analyst scaled back her forecast for the quarter.
Two months after a new software release propelled the stock of TouchStone Software Corp. to unprecedented highs, a stall in sales of the same program yanked the company’s stock price down by 33% Tuesday.
TouchStone shares tumbled to $6, down from $9, in extremely heavy trading on the Nasdaq market, after a sales dip prompted a Wall Street analyst to scale back expectations for the company’s performance in the current quarter. More than 1 million shares changed hands, about seven times the normal daily volume.
Fourth-quarter sales are expected to total $3.7 million, $400,000 short of previous projections, because TouchStone has dropped the price of its Win’95 Advisor program, said Cherlynn Blatter, an analyst at Punk, Ziegel & Knoell in New York.
She lowered her estimates of TouchStone’s quarterly profits to $486,000 from earlier projections of $729,000, she said.
The company lowered the price of the program after sales fell by about 30% last week, Blatter said. Win’95 Advisor helps computer users prepare their machines for installation of the top-selling Windows 95 operating system.
Blatter’s revised projections, published in a report Tuesday, triggered a selloff by institutional investors, she said.
“I didn’t expect [TouchStone] to drop the price this early,” said Blatter, whose firm helped underwrite a secondary stock offering by TouchStone in August.
Blatter added that she thought investors were overreacting to her report. “I’m still recommending [the stock],” she said. “The company has new products coming out that should play well.”
Officials at TouchStone said they were surprised by the sharp stock price dip, though they acknowledged the company’s stock has been on a wild ride since the release of Win’95 Advisor, which has accounted for about 85% of the company’s revenue in recent months.
“We were at a loss to understand why the stock went as sky-high as it did,” said Ray Norberte, a spokesman for the company.
TouchStone’s stock soared to more than $16 per share in August, after trading at just $5 per share in early July, as investors snapped up the company’s stock after the Advisor program was introduced.
The program was expected to sell briskly because of its ties to Microsoft Corp.’s hugely popular Windows 95 operating system for computers.
Norberte said he could not explain why sales of the Advisor program tumbled last week, though he pointed out that software sales often stall this time of year before picking up again during the Christmas shopping season.
The program has been selling for between $25 and $30 per copy, but the price was slashed to about $19 in an effort to clear distribution channels before the company rolls out new copies of the software that will be bundled with other computer products.
“We’re kind of clearing the way because in the fourth quarter there will be some special promotions,” Norberte said.
The company shipped 170,000 copies of Win’95 Advisor to meet initial orders for the product, and still expects to meet its goal of selling 250,000 copies by the end of the year, Norberte said.
Later this month, TouchStone is scheduled to release a new version of its WIN Check-It product, a computer trouble-shooting program designed to be used with Windows 95.
