Shares of Rovi Corp. fell as much as 17 percent Friday before recovering some lost ground, one day after the digital entertainment technology company reported that it swung to a net loss in the first quarter on disappointing revenue and that its chief financial officer was leaving.
THE SPARK: The company reported after the market closed Thursday that it lost $4.6 million, or 4 cents per share, in the first quarter compared to net income of $17 million, or 15 cents per share, a year earlier.
Rovi said that excluding stock-based compensation expense, amortization, some research spending and other items, it would have earned 56 cents per share, which was lower than last year's 58 cents per share but met analysts' forecast of adjusted earnings, according to FactSet.
Revenue rose to $175 million from $152.7 million a year ago, but missed analysts' forecast of $177.7 million.
The company predicted full-year earnings of $2.35 to $2.65 per share, while analysts were expecting $2.53 per share.
CEO Thomas Carson announced on a conference call late Thursday that CFO James W. Budge would leave this month for "a new opportunity" and be replaced by Peter Halt, who worked under Budge for four years.
THE BACKGROUND: Santa Clara, Calif.-based Rovi provides technology for digital entertainment devices to consumer-electronics manufacturers, cable- and satellite-television operators and movie studios.
THE ANALYSIS: Cowen & Co. analyst Robert W. Stone said the quarter had been "OK" and guidance on full-year earnings was unchanged, leaving the departure of Rovi's chief financial officer as a possible explanation for the sell-off.
Stone said investors might also be worried about what the company plans to do with $500 million in additional borrowing, "given the risks inherent in acquisitions."
JMP Securities repeated its "Market Outperform" rating on the stock, calling the adjusted results and 2012 guidance "in-line."
SHARE ACTION: Down $1.25, or 4.4 percent, to $27 per share in afternoon trading after falling as low as $23.32 earlier in the day. They are near their 52-week low of $23.20 per share.
