Prudential Downgrades Digital River to 'Hold'

Analyst Mark Rowen is concerned about weaker software sales and the company's lowered guidance

Prudential downgraded Digital River (DRIV ) to hold from buy.

Analyst Mark Rowen says lower than expected seasonal software sales were due to weak sales in tax-related software as Intuit is gaining market share on one of Digital River's largest clients, H&R Block. He believes the problems likely run deeper as management also cut guidance for the rest of the year.

Rowen says e-business services should be flat to slightly down sequentially, marking the third straight quarter without growth. He cut his $0.42 2002 EPS estimate to $0.24, and trimmed the $0.50 (pro forma) 2003 estimate to $0.38. He also cut his $25 target to $12.

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