Stock Watch: Digital River Gains as Results Beat Forecasts

Digital River, Inc. (Nasdaq: DRIV) rose 2 to 6 3/8 Friday after the company reported a smaller-than-expected loss for the third quarter.

The Minneapolis, Minnesota-based e-commerce service provider said revenue for the quarter was 89 percent ahead of the year-earlier period, at $7.6 million. The loss before items totaled $5.5 million, or 25 cents per share, compared with analysts’ predictions for a 34 cent loss. After all items, Digital River lost $8.1 million, or 37 cents per share, compared with a loss of $8.69 million, or 42 cents, in the 1999 third quarter.

Chief executive officer Joel Ronning said the company “was able to deliver solid results in what was perceived to be a challenging environment for the technology and Internet sectors.”

Fourth-quarter revenue is likely to be 25 to 30 percent above third-quarter levels, Digital River said. The company predicted a loss before items of 21 cents per share.

Digital River’s software services division is on track to achieve its “first profitability milestone” in December, said Ronning. “This will send a clear message to the financial community regarding the strength of the business model Digital River has built.”

The company cut its cash use to $6.8 million during the quarter, leaving it with $32.5 million in cash and investments on hand at quarter’s end. “We anticipate that our cash utilization in the fourth quarter will be cut in half,” Ronning said.

“We’re seeing substantial growth opportunities among mid- to large manufacturing companies as they take their businesses to the Internet,” said Perry Steiner, president of the company’s e-business division.

Digital River provides e-commerce services, including site development and hosting, order and transaction management and customer service, to more than 8,000 customers. Clients include Fujitsu, 3M, Siemens, Hewlett-Packard and Autodesk.

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