Rosetta Stone - Financials

2164 WordsFeb 10, 20139 Pages
The Rosetta Stone is a leading developer of software for learning languages in the world. Rosetta Stone revolves around a very simple idea: learning a language should be fun, easy, and most definitely effective. Rosetta Stone began their business with one man’s quest for a better way to learn a language. The company’s idea came to the world when Allen Stoltzfus began studying Russian in 1980s and became very frustrated with his slow progress. He knew there was a better way to learn a language, through immersion, which he had experienced years earlier while studying in Germany. He started to learn German not from sitting in the classroom, but from learning of being a part of the culture and the world of Germany. However, his idea had to…show more content…
Rosetta Stone experienced a first-day run-up to $25.12 from an offering price of $18.00, so its indirect costs totaled 3.125($25.12 - $18.00) = $22.25 million. Thus, Rosetta Stone received proceeds of 3.125($18.00 - $1.26) = $52.3 million, the underwriters and their sales forces received $3.9 million, other expenses totaled about $3.5 million, and $22.5 million was left on the table. Numbers like those are definitely encouraging and they show demand is slowly outpacing fear in another formerly shunned corner of the market. However, one of the hottest stocks in 2009 has become an investor disappointment in 2010. From 2009 to 2010 shares of Rosetta Stone have dropped 33 percent. Shares, initially offered at $18.00, hit closing high of $31.67 by May 5, 2009. On September 2, 2010, the stock traded below its initial offering price. Year after year, Rosetta Stone, has seen their bottom line shrink from a gain of $13.3 million to a loss of $20.0 million despite an increase in revenues from $258.90 million to $268.40 million. An increase in the percentage of sales devoted to SGA (all direct and indirect Selling, General & Administrative expenses) costs from 71.12% to 83.26% was a key component in the falling the bottom line in the face of rising revenues. Shares of Rosetta Stone are still dropping. Everyone looks for the reasons and Mr. Adams, CEO, explains that the reason for poor U.S. sales was not weak consumer demand, but it was

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