Digital River Lowers Earnings Guidance For 1Q And Year

Digital River

The company had expected to report earnings of between 7 cents and 8 cents for the quarter.

The news slashed the value of the company's stock by more than half. Last Friday, Digital River closed at $14.81. But after Monday's warning, the company's stock price plunged to $7.10 by the end of the trading session.

The revised earnings per share takes into consideration acquisition- and litigation-related charges. The charges include a $2.3 million reserve established for pending litigation and a $200,000 charge for the closing of its San Jose, Calif., office.

Pending litigation includes a shareholder lawsuit, a patent infringement claim and a contractual dispute.

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On Friday, Digital River said it expected earnings per share for 2002 to range from 20 cents to 22 cents, before a one-time charge, on revenue of between $70 million and $73 million.

But on Monday the company revised its full-year earnings per share and revenue again to take into consideration the acquisition of certain Beyond.com assets.

Digital River now expects revenue of $72 million to $75 million for 2002 and earnings per share of 23 cents to 25 cents for the year, excluding the one-time charge. During a January call with analysts, the company said it expected to end 2002 with $80 million to $85 million in revenue.

Including the combined $2.5 million charge, Digital River now expects to report earnings per share of 15 cents to 17 cents for 2002.

"We believe these future expectations are very conservative and are based on an assumption that the current economic conditions will remain unchanged," said Joel Ronning, CEO of Digital River. "If we see a more robust economy in the IT sector and an accelerated sales cycle we will revise our guidance at a future date."