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BroadSoft shares plunge on weak 2013 outlook

NEW YORK (AP) -- Shares of BroadSoft Inc. plunged Thursday after the communications software maker offered a weak outlook for 2013 profit and revenue.

THE SPARK: The company said Wednesday that fourth quarter net income fell 12 percent, to $4.9 million, or 17 cents per share, as costs grew faster than revenue. Excluding the cost of stock-based compensation and other items, the company said it would have earned 47 cents per share, which topped analysts' expectations of 41 cents per share, according to FactSet.

But investors paid more attention to BroadSoft's disappointing 2013 outlook.

The company said it expected full-year adjusted earnings of $1.10 to $1.35 per share, while analysts were looking for $1.68 per share. The first-quarter outlook of 2 to 12 cents per share was far below analysts' consensus forecast of 34 cents per share.

THE BIG PICTURE: The company says strong expected growth in its business offerings is being offset by a drop in consumer applications revenue as wireless carriers continue to roll out "4G" networks. It is also expecting a decline in professional services revenue because of timing issues.

THE ANALYSIS: Oppenheimer & Co. downgraded BroadSoft's stock to "perform," or neutral, from "outperform." Analyst Andrew Uerkwitz said 2013 would be "a transition year — code for flat — for the company."

Uerkwitz said BroadSoft's core business of providing mobile Internet protocol-based communications software is still strong but growing more slowly on the consumer side. He cited management's view that neither business-side sales nor new products could offset the consumer weakness.

Uerkwitz, the Oppenheimer analyst, blamed higher operating costs for newer products such as BroadCloud, and a decline in its BroadWorks consumer product from about 15 percent of revenue to 10 percent.

SHARE ACTION: In afternoon trading, the shares were down $8.72, or 28 percent, to $22.19. They skidded to $21.31 earlier in the session, close to the 52-week low of $20.13 reached last July.