DivX issues disappointing guidance, hits 52-week low

Digital media company DivX, Inc. (Nasdaq: DIVX) reported fourth-quarter earnings a penny above the consensus on Wall Street, but issued disappointing guidance for 2008 that sent shares crumbling to a 52-week low.

Shares of DivX plummeted 29.54%, or $3.01, to a 52-week low of $7.18. Shares have been trading in the range of $8.78 to $23.76 for the past 52 weeks.

The San Diego, Calif.-based company said it expects earnings to range from $0.44 to $0.52 per share on revenues of $95 million to $100 million due to higher product development costs.

Seven analysts polled by Thomson Financial are on average forecasting revenue of $104.24 million for 2008, while five analysts polled by Thomson Financial are on average projecting earnings of $0.67 per share.

“Guidance for 2008 was substantially below consensus,” wrote Avondale Partners analyst John Bright. “We continue to believe that DIVX has an attractive licensing business model with the potential to tap into online video distribution. However, DIVX also has a transition period ahead of it.”

Bright said he sees 2008 as a transition year in which DivX will invest in new initiatives, including forming agreements to become involved in online video distribution whether with "retailers" such as Netflix, Inc. (Nasdaq: NFLX), Blockbuster Inc. (NYSE: BBI) and CinemaNow. The analyst also noted the company will expand into new product categories beyond DVD players such as Blu-Ray players, and new certifications such as DivX HD and a new H.264 certification.

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