Lionbridge quarterly report leaves investors baffled

Lionbridge Technologies (Nasdaq: LIOX) released yesterday its 10-Q report for the third quarter of 2011. This report spooked shareholders who watched as shares continued to slide since the announcement, completing a nearly 50% drop in the last year.

Lionbridge Stock Chart 2011

What is spooking investors? Well, I can think of a few things:

Currency issues. Lionbridge reported a jump in revenues for the quarter when compared with Q3 2010, but this is only due to currency issues. As we all know, the US Dollar took a dive against most currencies and especially against the Euro. Since Lionbridge has a strong customer base in Europe, the revenues which are counted in US Dollars increased. But this is not a real increase.

Downsizing. Lionbridge has become quite sack happy and terminated over 100 staff in the last 1.5 years. It also closed several office facilities. As we all know, less production capacity spells less production period. Which does not bode well for Lionbridge’s future revenue stream.

The $3.3 million of restructuring charges recorded in the nine-month period ended September 30, 2011 included $2.9 million for workforce reductions in Europe, the Americas and Asia consisting of 50 technical staff, 5 administrative staff and 1 sales staff. Restructuring charges recorded in the nine-month period ended September 30, 2010 included $4.0 million for workforce reductions in Europe, the United States and Asia consisting of 65 technical staff, 1 administrative staff and 1 sales staff.

Unclear signals about the future of GeoFluent.  Read the following paragraph from the 10-Q. Do you see any concrete forecasts about when and how Lionbridge plans to make money from this project? It sounds very vague (i.e. the company “expects to enter subscription agreements in the coming quarters”). Lionbridge’s CEO has sounded very bullish in the past about the future of GeoFluent.  So show us the money, where is it?

During 2010 and the first nine months of 2011, Lionbridge has invested in technology development, infrastructure, sales and marketing to support the development and commercialization of GeoFluent™, a SaaS-based, customizable, real-time automated translation technology that instantly translates content and communications into multiple languages. GeoFluent is based on IBM’s machine translation engine and is the result of a technology partnership between Lionbridge and IBM. GeoFluent offers enterprises the ability to increase their multilingual communications through an easy-to-use application that translates online chat sessions, Websites and documents in real-time. In May 2011 the Company announced general availability of the GeoFluent application and expects to enter into subscription agreements for the technology in the coming quarters.

Altogether, this report gave investors nothing to cheer about. But given the position that Lionbridge has in the translation industry, its capable management and A-list client base, maybe it’s time to buy some LIOX shares? Things should only get better.

One thought on “Lionbridge quarterly report leaves investors baffled

  1. I think you are missing the biggest downward pressure on the price (IMO) is the quality of the executive management

    It is hard to get a ship sailing in the right direction when the Captain really sucks at his job