Rosetta Stock Takes A Tumble

Brent Finnegan -- August 18th, 2009

The Washington Post is reporting that Rosetta Stone, which had a positive initial public offering in April, has put the kibosh on a second offering, causing stock prices to take a hit.

[Rosetta Stone] cut its earnings outlook and canceled a secondary offering of stock Monday, sending its shares tumbling more than 25 percent … Rosetta Stone has hit some head winds since its IPO, as rising operating costs have cut into profitability. At the end of July, the company posted a second-quarter loss of $7.3 million compared with a profit of $3.4 million a year earlier, despite an 18 percent increase in sales. During the quarter, Rosetta’s operating expenses jumped to $60.4 million, from $34.4 million in 2008 …

[Analyst Brandon Dobell] said Rosetta’s recent missteps would be minor for many companies. “They didn’t do a good job executing on a few small things, but this is a small company and a few small things can have a big impact on a company’s performance,” he said.

6 Responses to “Rosetta Stock Takes A Tumble”

  1. Holly says:

    A source tells me that the product doesn’t work; bi- or tri-lingual employees are being edged out by monolingual ones. Anyone heard conflicting reports?

  2. Scott Rogers says:

    Holly — When you say “a source tells me that the product doesn’t work” I’m not sure if you mean their total suite of products, or their new TOTALe product. I believe their history of success as a company proves that their total suite of products works, and that there is a strong market for those products.

    As for their new product (TOTALe), you might find it interesting to read this Wall Street Journal review by Walt Mossberg/Kate Boehnert (they’re important people that consumers listen to for reviews of technology products).

  3. Holly says:

    This review from of the boxed product is basically verbatim what others have said to me about it:

    “There is absolutely no way you can learn a foreign language by solely using this software. There is nothing included that breaks down the rules of the language being studied. Nothing on conjugation, exceptions, gender, colloquial expressions, idioms etc. I guess they thought the fundamentals were optional. There are just pictures associated with sentences which the user has to match; nothing more….

    “I feel that the people who sing the praise of this software are those who have never learned another language. The program does a good job of giving you a sense of accomplishment when in reality it still leaves you lacking the skills necessary to venture out on your own.”

    What I have heard also is that it’s more or less an empire built on illusion, and in a couple years when folks realize it doesn’t work, the empire will crumble.

    These reports, coming from a tri-lingual employee who is well-acquainted with the language learning process, give me pause as to Rosetta’s long-term viability, at least in its current model. Perhaps the online suite is their ticket to future success.

  4. Holly says:

    None of the above would really help explaining their short-term loss however. I have no theories on that, except as they say, massive overhead increases.

  5. Emmy says:

    I would guess that they have grown too big too fast. I have heard some of the same things Holly has and from someone who already knew a second language and was trying to learn a third.

    I have used the RS program a little bit and it did make me wonder if people were able to come away speaking the language. But, three years of it in school didn’t help me learn a new language so perhaps it’s a flaw in my design, not theirs.

    I do wonder what this will mean for the 100 new jobs they were to create when they bought that new building,

  6. Jeremy Aldrich says:

    As a language teacher, whenever I’m asked about Rosetta Stone by parents or students I advise them that it can be a nutritious part of a balanced language learning diet, but shouldn’t be all they eat. The TOTALe program looks good (haven’t tried it yet), but there are some similar competitors already out there, and some of them are free (like Babbel and LiveMocha). In light of this discussion and to prepare for the new school year (when I will be encouraging students to take advantage of our school division’s Rosetta Stone licenses as part of their language learning), I just posted a paper I wrote last spring about the history and future of Rosetta Stone.

    For the sake of Harrisonburg (which has quite a lot of money and hope riding on the company), I wish the company every success.

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