Rosetta Stone (RST) Lost In Translation Following Q4 Results; Analysts Comment

Rosetta Stone, Inc. (NYSE: RST) shares are dropping like they're hot today, following fourth quarter 2010 results that failed to inspire investors and traders. Shares are 11% lower today.

RST reported net income of $4.97 million, or $0.23 per diluted share, a 59% decrease from $12.16 million in the same period one year ago. EPS following adjustments came in at $0.27.

Revenues for Rosetta Stone in the quarter fell 5.2% from $78.31 million to $74.28 million.

RST noted that while unt sales dropped 11% (from 195.6 thousand to 173.4 thousand), average sales price per unit increased 14% from $341 to $389.

Looking ahead, Rosetta expects a Q111 loss of $0.34 - $0.48 per share on revs of $54 - $58 million, comapred to the consensus views calling for a breakeven earnings report on revs of $62.01 million.

Commenting on the quarter:

• Key takeaways for Barclays include management citing softness in the U.S. consumer markets and recent filing of Chapter 11 by Borders for their underperformance. Barclays also notes that pressure in U.S. bookings will continue through FY11, despite improvements in Worldwide and International bookings. U.S. represents 62% of total bookings for the company, and investors will want to know how quickly management can stabilize the segment.
  
  Barclays notes the slow adoption of Rosetta's new product, Version 4 TOTALe, despite high marks for the product. They say that "shares look attractive from a valuation point of view, but we feel the execution risk of the transition to a subscription-based model (from a packaged software model), the slow launch of the new product (Version 4) and changes in the management team (new CFO announced in October), create too much uncertainty at the moment and, we think it is prudent to wait for more visibility on these issues."
  
  
• Craig-Hallum also downgraded from Buy to Neutral today.

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