Digital River Shares Plummet 37% After Symantec Pulls Plug

According to the Twin Cities Biz Journal, Digital River shares plunged  almost 40% in pre-market trading Monday morning after the e-commerce services provider announced it will lose its largest customer.



Cupertino, Calif.-based Symantec Corp. (NASDAQ: SYMC) notified Digital River on Oct. 9 that it will not extend its e-commerce agreement.



That deal, under which Digital River provides a variety of e-commerce-related services to Symantec, expires on June 30, 2010.



Eden Prairie-based Digital River’s stock fell $15 per share, or 37 percent, to $25.42 in pre-market trading following the announcement.



Symantec plans to move all of the online traffic currently outsourced to Digital River to an internally developed Symantec e-commerce system before its deal with Digital River expires. Symantec has not yet informed Digital River of the timing of its migration plans or the nature of the support it will require from Digital River during the transition period.“We are surprised and deeply disappointed that Symantec has chosen to move to an internally developed system, but we remain very confident in the future of our business,” Digital River CEO Joel Ronning said in a statement.



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Here is the Press Release from Digital River

Digital River Informed By Symantec That It Will Not Extend E-commerce Contract Beyond June 30, 2010 Expiration

MINNEAPOLIS--(Business Wire)--Digital River, Inc. (NASDAQ: DRIV), a leading provider of global e-commerce
solutions, announced today that Symantec Corporation (NASDAQ: SYMC) has notified
Digital River that Symantec will not extend its existing e-commerce agreement.
The agreement, under which Digital River provides a variety of
e-commerce-related services to Symantec, expires on June 30, 2010. 

Symantec informed Digital River on Friday, October 9th that it expects to move
all of the online traffic currently outsourced to Digital River to an internally
developed Symantec e-commerce system before the current contract expires.
Symantec has not yet informed Digital River regarding the timing of its
migration plans or the nature of the support it will require from Digital River
during the transition period. 

"We are surprised and deeply disappointed that Symantec has chosen to move to an
internally developed system, but we remain very confident in the future of our
business," said Joel Ronning, Digital River's CEO. "While Symantec is still our
largest customer, the proportion of Symantec revenues relative to our other
customers has declined significantly over the past few years as our non-Symantec
business has grown at an increasing rate. Our company is financially strong, our
new business pipeline remains healthy, and sales activity in the software,
consumer electronics and business-to-business sectors continues to grow. As more
businesses move to online sales and distribution, Digital River is well
positioned for future growth and we are confident in our ability to unlock
potential in key markets." 

In 2008, sales of products for Symantec accounted for 24.3% of Digital River
revenue and sales derived from proprietary Digital River services sold to
Symantec consumers accounted for 9.4% of Digital River revenue. For Digital
River`s quarter ended June 30, 2009, sales of Symantec products accounted for
22.5% of revenue and related services revenues accounted for 7.5% of revenue. 

Digital River also announced that it expects financial results for the third
quarter ending September 30, 2009, will be at or slightly above the top end of
the guidance it provided on July 29, 2009. At that time, the Company said it
expected third quarter revenue of $96.5 - $98.5 million, GAAP diluted net income
per share of $0.26 - $0.29 and non-GAAP diluted net income per share of $0.38 -
$0.41, both assuming a 27 percent tax rate. The Company also said it expects
sequential revenue from its non-Symantec business to have grown at approximately
8% during the third quarter, compared to approximately 2% sequential growth
during the second quarter 2009. The Company expects to provide additional
information in its third quarter earnings announcement which will be released
after market close on November 3, 2009. 

Digital River will hold a conference call today at 8:30 a.m. Eastern to discuss
this announcement. A live webcast of this conference call can be accessed at
http://www.digitalriver.com/2009/investorrelations/. Alternatively, a live
broadcast of the call may be heard by dialing 1-888-373-5705 inside the United
States or Canada, or by calling 1-719-457-3840 from international locations, and
using the conference ID # 245630. A webcast replay of the call will be archived
on Digital River`s corporate Web site.