Compuserve's Shares Plunge On Negative Earnings Surprise
March 28, 2011
Shares of CompuServe Corp. plunged after the on-line services firm said it expects to post a loss of 15 to 20 cents per share for the first quarter, surprising analysts who had predicted earnings of 5 cents a share. In afternoon trading on the Nasdaq Stock Market, the Columbus, Ohio, company's stock was down $4.625, or 30.6%, at $10.875. CompuServe cited flat subscriber growth in on-line services, continued investments in the introduction of WOW! and infrastructure improvements as factors that contributed to the loss. The results fell far below analysts' expectations. A survey of five analysts by First Call yielded an average earnings estimate of 5 cents per share. CompuServe said it will take a number of actions to reduce costs for the rest of the year that will further reduce first-quarter net income, though will benefit future periods. The company also said it will release upgrades of CIS and WOW! that will simplify and speed up browsing CompuServe and the Internet. Meanwhile, H&R Block Inc.'s board approved the spinoff of its remaining 80.1% of CompuServe to Block's shareholders, who will receive about seven CompuServe shares for every 10 H&R Block common shares.
