Wednesday, February 18, 2009

Cry me a Digital River - Not all companies are reporting disappointing earnings.

Not all companies are reporting disappointing earnings. Recently shares of Digital River Inc. (NASDAQ: DRIV) soared as the company posted better-than-expected earnings and revenue for the fourth quarter.

The e-commerce software service provider said it earned 48 cents per share in the quarter, excluding amortization and stock-based compensation charges, beating analysts' expectations of 44 cents per share according to Thomson Reuters.

Sales fell slightly from a year ago, to $95.9 million, but also beat the Street's forecast of $94.9 million. The company also said it expects results for the current quarter to come in between 48 to 53 cents per share with revenue of $96 million to $100 million, within the range analysts were expecting.

Minneapolis-based Digital River, which builds and manages online businesses for software publishers, consumer technology manufacturers, distributors, online retailers and affiliates, said it continued to make progress during the quarter growing its client base and deepening its client relationships in its core markets. Chief Executive Joel Ronning believes several factors are contributing to the company's success.

First, the bad economy is driving companies to Digital River and away from the complex e-commerce demand that they don't understand, he said. Much like what happened in early 2000, Ronning says companies are moving away from high fixed-cost and large infrastructure investments.

Second, he says ongoing changes in the retail channel are causing more companies to go direct to consumer. Some retailers are declaring bankruptcy and others are selling more private-label brands, he says, and companies aren't as concerned with channel conflict as they are with opening new revenue streams.

Last, Ronning says Digital River's clients are more motivated than ever in acquiring and retaining customers and generating more revenue from their products. And helping companies successfully manage through these market forces is where Digital River excels and has demonstrated industry leadership. The company's continued success in the consumer electronics segment is evidenced by winning new opportunities or launching stores for including Samsung, Seagate, Phillips and Hewlett-Packard among others.

The online retail world is booming as evidenced by Amazon, Inc. (NASDAQ: AMZN)'s fourth-quarter performance. During a difficult economic environment, AMZN beat estimates. This bodes well for the future of DRIV.

The half a billion dollars in cash on DRIV's balance sheet is also comforting, as is its low debt level.
Louis Navellier's PortfolioGrader Pro, which rates Wall Street stocks, rates DRIV a B or Buy.
via bloggingstocks

Jason Kiwaluk

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Ideation | Ecommerce | Fintech | Innovation | Strategy | Opinionated Agitator RevenueWire,FuturePay+PayMotion

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