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Monster’s Weak 2nd Quarter Prompts Selloff

by Aug 5, 2014, 3:26 pm ET

Job board revenue Q2 2014Although it’s much too early yet for Monster’s ambitious “three pillars” strategy to become the transformative force executives are predicting, the financial markets were hoping the company did a little better in the second quarter of the year than in the first quarter.

It didn’t.

After Monster reported earning 8 cents a share on revenue of $194.4 million, and lowering its financial outlook for the current quarter, investors sold off shares of the struggling company at twice the normal volume, pushing down its price almost 13 percent by early afternoon. Monster stock closed Monday at $6.62 a share. Not long before the market’s close, the stock was off 15.6 percent to $5.59.

Analysts were predicting the company would earn 9 cents a share, off from last year’s same quarter earnings of 13 cents. The also wanted $4.4 million more than the company delivered in revenue. And for this third quarter, the consensus of analyst expectations was for 10 cents a share.

Instead, the company predicted it might earn 4 cents. Or nothing.

Putting a positive spin on the numbers, Monster Chairman, President, and CEO Sal Iannuzzi noted the first year-over-year growth in North American careers revenue since the recession (up just over $500,000), and a $32 million sale to the State of Florida. However, he acknowledged these “were tempered by the fact that overall revenue was somewhat muted in the quarter.”

He blamed the 2.8 percent overall decrease in revenue on price competition from Monster’s market competitors and a salesforce distracted by changes to its organization as it was being readied for selling the realigned product line. This includes new job posting and sourcing services, especially the TalentBin profiling service and Monster Twitter Cards, as well as its software-as-a-service tools.

Announced on May 14, the company began rolling out its products and packages over the last few months, formally launching the talent cards and TalentBin on July 1. By then, Monster’s new job search aggregation strategy had collected and made available more than a million job postings. Iannuzzi said the number has now reached 3 million plus and will eventually top 6 million.

Complaining about the repricing by competitors, Iannuzzi called it a commoditization of the job posting business. Nevertheless, it prompted the company to “speed up rather than slow down our transition, even at the risk of experiencing some disruption of our short-term sales efforts and revenue.”

Whatever the reason behind Monster’s financial performance, it’s the only one of the public careers publishers to show a decline. Last week, both Dice Holdings and LinkedIn reported strong revenue growth, both of which were in double digits. LinkedIn turned in an especially strong performance, with a nearly 50 percent increase in recruitment revenue.

Privately held CareerBuilder said it grew its North American sales by 1.7 percent to $176 million.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • http://www.EngineeringReferral.com Douglas Friedman

    That was a tough call for Monster. As you point out, Q3 guidance (non-GAAP EPS flat to 4 cents) was especially disappointing. I think, as per Monster’s comments, that commoditization is indeed to blame. But I also think it is short sighted to see it only in terms of competition in the job posting business. The broader commoditization that impacts all vendors is the ability to deliver the right candidate at a competitive price. A lot of the big players want to price their data and services in a vacuum. Maybe LinkedIn can get away with that because their market position is so unique. But it’s also worth pointing out that many companies (not all) do get an okay return on their LinkedIn investments. Dice’s proprietary data pool is also well aligned to corporate pain points right now. But the broader trend is towards delivering benefits that can be clearly identified at price points that are easily quantified. I think it is a great time to be a talent acquisition technology vendor but some of the names with higher priced services are probably going to continue to struggle for a while. Margins are very tricky right now in most areas of the information economy. IMHO, trying to hold onto traditional pricing structures is a mistake for most vendors. But, I also think that most well capitalized TA vendors, including in all probability Monster, are going to come out stronger than ever with clearer value propositions. Like H.G. Wells said, “we are kept keen on the grindstone of pain and necessity.”

    Doug Friedman
    EngineeringReferral.com
    LinkedIn Profile