BroadSoft Shares Plunge 32% on Weak Forecast

Thursday, 28 Feb 2013 04:08 PM


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Shares of BroadSoft Inc. fell 32 percent Thursday – the most ever – after the telecommunications-software maker forecast annual earnings and revenue lower than analysts estimated.

The shares ended down $9.91 at $21, for the biggest intraday drop since the company's market debut in June 2010. The Gaithersburg, Maryland-based company's stock had fallen 15 percent this year through Wednesday, while the Russell 2000 Index advanced 7.1 percent.

BroadSoft, which counts Verizon Communications Inc. among its customers, creates software allowing mobile and cable service providers to deliver voice and multimedia over their Internet protocol-based networks. Those clients saw fewer new additions of their own, which contributed to the low forecast, said Richard Valera, an analyst with Needham & Co. Verizon added 134,000 FiOS TV accounts in its most recent quarter, compared with 194,000 a year earlier.

“There aren’t a lot of new customers out there and the rate of growth is slowing,” Valera said.

No one customer accounted for more than 10 percent of revenue as of Dec. 31, according to BroadSoft’s annual filing. Verizon had accounted for about 15 percent of BroadSoft’s sales at the end of 2010.

The company forecast 2013 earnings per share of $1.10 to $1.35. Analysts had estimated $1.72, on average, according to data compiled by Bloomberg.

Revenue will be $181 million to $189 million, according to a statement. Analysts had estimated $197.7 million.

Professional Services

“If you look at where the consensus numbers were versus where they guided, there’s a substantial gap there,” said Valera, who maintained a buy rating on the stock.

The forecast prompted at least two downgrades.

Additionally, BroadSoft’s professional services, which has benefited from deferred revenue in recent years, will not do so in 2013, which contributed to the weaker outlook, Valera said. However, BroadSoft’s cloud-based communications segment is likely to grow in 2013 and the company should meet or beat estimates, Valera said.

“We would hope they’ve set the bar at an achievable, if not beatable, level,” he said.

The company Wednesday reported fourth-quarter earnings excluding some items of 47 cents a share, from 38 cents a year earlier. Analysts had estimated 41 cents.

Sales increased 13 percent to $45.8 million. That compared to an average estimate of $45.7 million.

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