The high-flying mobile content industry is experiencing some turbulence as two leading content providers issued sobering announcements.
Disappointing earnings from its content business led VeriSign Inc. to lower its third-quarter revenue forecast late Thursday. The Mountain View, Calif.-based company expects total revenue for the quarter to be $410 million, down from a previous projection of $435 million to $440 million.
The company blamed new regulatory guidelines and other factors for its decreased sales.
VeriSign, which sells content directly to consumers through its Jamster! and Jamba! businesses, has come under fire on both sides of the Atlantic for what some say are deceptive marketing practices. An independent U.K. regulator upheld nearly 300 consumer complaints against the company earlier this month, banning the company’s Crazy Frog commercials from airwaves before 9 p.m. to prevent children from seeing the ads.
Consumers have claimed Jamster is deceptively selling subscription services to young wireless users. The company was censured by the regulatory agency in April following similar complaints and is the subject of a lawsuit brought by a San Diego man who claims his teen daughter was hit with recurring premium short message service charges after accepting an offer for a “free” ringtone.
RBC Capital Markets downgraded VeriSign from “outperform” to “sector perform” following Thursday’s announcement. Banc of America Securities downgraded the company from “buy” to “neutral.”
“VeriSign experienced mixed results in the third quarter as the strength of our Internet and core communications businesses was not enough to offset a revenue shortfall in the mobile content area due to higher-than-expected seasonal churn and further developments in industry requirements and guidelines for the marketing of mobile content in Europe,” said Stratton Sclavos, VeriSign’s chairman and chief executive officer.
Investors seemed unconcerned with VeriSign’s announcement, which came after Thursday’s closing bell. Shares were up 71 cents to $21.37 on the Nasdaq in mid-day trading Friday.
Meanwhile, Seattle-based Dwango Wireless is slashing 30 percent of its workforce in an effort to cut expenses. The company said it expects the layoffs to save $1.5 million annually.
The struggling content provider declined to disclose specific numbers, but a spokesman said more than 20 people would be affected. Dwango, which in August announced a second-quarter loss of $5.56 million, said it will sharpen its focus on “high-potential products and services.”
The company publishes branded content and applications from Napster, USA Today, Playboy and Rolling Stone.
Rick Hennessey stepped down following the recent quarterly report, which marked Dwango’s second straight multimillion-dollar quarterly loss. Shares of the over-the-counter stock held firm at 50 cents Friday. Dwango stock was trading at more than $2 per share as recently as February.
