UPDATE: Investor confidence wanes following IDC's revenue drop in Q3

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Major investors expressed their declining confidence in Ottawa-based International Datacasting Corp. (TSX:IDC) Wednesday after the company announced significantly reduced revenue and slip into the red during the third quarter.

International Datacasting Corp.'s Kanata headquarters.

By Jacob Serebrin

Several investors, speaking on a conference call discussing the results, criticized the board’s decisions and called for resignations.

“My confidence has been significantly rattled,” said Frank Helt a vice-president at TD Waterhouse. He is one of IDC’s largest shareholders individually and, through his clients, oversees over 10 per cent of the company’s stock.

He called for some board members to step down.

“They have to take responsibility.”

Mr. Helt pointed to warnings made in the summer of 2012 by the losing side of an internal conflict between board members as an example of what he thinks has gone wrong.

According to Mr. Helt, Adam Adamou, the company’s former chair who had advised that IDC pursue a different business strategy, “prophesied almost exactly where we are today.”

The flurry of criticism came after IDC, a digital content distributor, reported revenues of $2.5 million during the three-month period that ended on Oct. 31. That’s down from $7.1 million during the same period a year ago and $4.9 million during the previous quarter.

The drop in revenue pushed the company’s net loss during the quarter to $2.2 million. That’s compared to a profit of $0.5 million a year ago.

“The results were disappointing,” said Doug Lowther, the company’s president and CEO. “We earned little new business this quarter.”

He said the company also had “challenges bringing new products to market.”

According to Mr. Lowther, two of the company’s new products are significantly behind schedule.

He said this “late product delivery not only impacted IDC’s ability to close deals for the new products, but resulted in reduced sales of existing products as significant sales effort was expended on products that, in hindsight, were not fully ready for volume sales.”

Mr. Lowther highlighted changes IDC has made in response to its poor performance.

The company announced a management shakeup on Dec. 2. This included replacing the company’s CFO and restructuring its sales force to increase its focus on emerging markets.

He said the company plans to diversify its offerings to include more “hybrid products” and move away from being strictly focused on delivering content from satellites.

But that wasn’t enough for some investors.

“When I hear of the voluntary departure of a CFO a huge red flag comes up,” said Mr. Helt.

“Out of the blue we are not facing a five or six hundred thousand dollar loss, but our largest single quarterly loss and our lowest quarterly revenue that I can remember as a shareholder and you’re asking us, the investment community, to simply wait for the next plan to go into place? How are we supposed to do that when confidence is basically lost?”

Mr. Helt was not the only investor to express his concern on the conference call. Others criticized the company for waiting so long to review its business operations.

While IDC does not usually give specific guidance on expected revenues, Mr. Lowther said he expects better performance next quarter. However he said it won’t be enough to take the company out of the red.

“I’m not anticipating a profitable Q4,” he said. “We expect improvements in revenue and profitability to be progressive over the next several quarters.”

The company’s share price was down 22 per cent to $0.13 by midday trading on Wednesday.

Geographic location: Ottawa

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