Nuance Communications Inc., a maker of speech-recognition software, plunged 18 percent after reporting fiscal second-quarter profit and sales that missed estimates.
The shares fell to $19.04 at the close in New York, the lowest since March 19. Profit excluding some items was 34 cents a share on sales of $484 million, the Burlington, Massachusetts-based company said today in a statement. Analysts on average had estimated profit of 40 cents on revenue of $514.8 million, according to data compiled by Bloomberg.
The earnings miss and stock slump could prompt Nuance’s shareholders to replace management, or even consider a breakup or a sale of the business, said Daniel Ives, an analyst at New York-based FBR Capital Markets & Co. Billionaire investor Carl Icahn earlier this month disclosed a 9.3 percent passive stake in Nuance, spurring speculation that he may seek significant changes in how the company operates.
“The big question on investors’ minds is -- is this the right management team?” said Ives, who rates the shares outperform. “There’s a lack of confidence investors have in the management’s execution. It puts the heat in the kitchen in terms of the activist situation.”
Icahn didn’t immediately return a call seeking comment.
“I think you have to call it a mess,” said Tom Roderick, an analyst at Stifel Nicolaus & Co. in Chicago who has a hold rating on the stock.
Nuance, which specializes in audio software for the health-care industry and for mobile devices, also announced a $500 million stock-buyback program. The company in February reduced its full-year 2013 earnings forecast as new technology curbed use of older transcription services.
“Our share buyback program announced today underscores our confidence in the business and our focus on shareholder value as we expect growth to accelerate in fiscal 2014,” Nuance Chief Executive Officer Paul Ricci said in today’s statement.