Loudeye Announces 2006 Operating Plan and Preliminary Fourth Quarter 2005 Financial Results
February 08 2006 - 7:05AM
PR Newswire (US)
Operating Plan Focuses on Key Markets & Customers and Reduced
Cost Structure SEATTLE, Feb. 8 /PRNewswire-FirstCall/ -- Loudeye
Corp. (NASDAQ:LOUD), a worldwide leader in business-to-business
digital media solutions, today announced the implementation of a
strategic operating plan focused on key markets and customers and
streamlining its operations. This plan will enable Loudeye to
eliminate redundancies and significantly reduce its cost structure,
while minimizing impact on its largest revenue generating
customers. This plan furthers the cost reduction initiatives
implemented during the fourth quarter 2005, beginning with the exit
of the Overpeer content protection services business. In addition,
Loudeye announced record preliminary fourth quarter 2005 revenue
and other preliminary financial results. "We are implementing a
plan which aligns our operations and investment behind the areas
where we are seeing the most growth, while rationalizing our cost
structure and accelerating margin improvement," said Mike Brochu,
president and chief executive officer of Loudeye. "We are focusing
on our largest markets and revenue generating customers, primarily
in Europe, while retaining capabilities to support our strategic
goals with mobile music services." Key elements of Loudeye's 2006
operating plan are as follows: Focus on Key Markets and Customers.
Loudeye's operating plan will focus on the markets and customers
which are generating the most economic value for the company.
Approximately 80% of total fourth quarter revenue was generated by
digital media store services, and substantially all digital media
store services revenue was generated in Europe where Loudeye's
services have a significant installed customer base. In addition,
Loudeye will continue to operate its digital media content services
located at its Seattle, Washington headquarters, including encoding
and samples services. Loudeye has recently completed an upgrade to
its content encoding services, increasing the automation of those
services and improving their operating contribution. Streamline
Operations and Align Platforms. Loudeye will immediately align its
product development, engineering, information technology and
operational resources behind its largest markets and customers.
Loudeye's digital media store service operations now will be
centralized at its European headquarters in the United Kingdom.
These steps will reduce redundant costs in the United States, while
minimizing the impact on revenue generating customers in Europe. As
part of this alignment, Loudeye has ceased development efforts on a
custom digital music service for an unnamed North American
retailer, the launch of which previously was delayed. Loudeye and
this retailer have terminated their contract, and Loudeye will
continue to pursue means to realize value from its investment in
this service with other parties. Reduce Cost Structure. Loudeye
believes this plan will allow it to continue to grow revenue while
reducing its cost structure significantly. In combination with its
previously announced exit of the Overpeer content protection
services business in December 2005, the actions taken or
contemplated by today's announcement are expected to reduce
Loudeye's cost structure by approximately $2.5 million per quarter,
or approximately 30% compared to third quarter 2005 levels. Cost
savings from these actions, which include personnel reductions and
possible funded development, are expected to be realized by the end
of the first quarter 2006. Financing & Strategic Alternatives.
In addition to a combination of increasing margins and reducing
operating expenses, Loudeye continues to pursue measures to address
its liquidity needs through securing additional investments or
other strategic alternatives. Preliminary Fourth Quarter 2005
Results Fourth quarter 2005 revenue is estimated to be
approximately $8.8 million, compared to approximately $6.5 million
in the third quarter 2005 and $5.5 million in the fourth quarter
2004. These results exclude content protection services revenue
which will be included in the loss from discontinued operations for
financial reporting purposes. Digital media store services revenue
represented approximately $7.1 million of total revenue, an
approximate 48% increase from $4.8 million in the third quarter
2005 and an approximate 92% increase from $3.7 million in the
fourth quarter 2004. Substantially all of the revenue growth in the
fourth quarter 2005 was attributable to promotional services
revenue from an internet service provider in Europe. Gross profit
for the fourth quarter 2005 is expected to be approximately $1.0
million. Excluding results from discontinued operations and other
potential charges related to goodwill and other long-lived assets
in the quarter, Loudeye expects a narrowed GAAP net loss compared
to the third quarter 2005. While Loudeye is encouraged by its
revenue growth, it continues to experience significant losses and
has limited cash reserves. Unrestricted and restricted cash, cash
equivalents and marketable securities were approximately $10.8
million at December 31, 2005, compared to $16.6 million at
September 30, 2005. Restricted cash as of December 31, 2005, was
approximately $1.8 million compared to approximately $600,000 at
September 30, 2005. Loudeye intends to release its financial
results for the fourth quarter and year-ended 2005 on Thursday,
February 23, 2006. Management will host a conference call with
investors and financial analysts to discuss these results and to
provide further details about its 2006 operating plan at that time.
Preliminary unaudited fourth quarter results and details concerning
the 2006 operating plan reflect management's expectations as of the
date of this release and are based upon limited available
information which is dynamic and subject to change. Results may be
materially affected by many factors including those described in
the Forward-Looking Statements section below. About Loudeye Corp.
Loudeye is a worldwide leader in business-to-business digital media
solutions. Loudeye combines innovative products and services with
the world's largest music archive, a broad catalog of licensed
digital music and the industry's leading digital media
infrastructure, enabling partners to rapidly and cost effectively
launch complete, customized digital media stores and services. For
more information, visit http://www.loudeye.com/. Forward-Looking
Statements This press release contains forward-looking information
within the meaning of the Private Securities Litigation Reform Act
of 1995, including forward- looking financial guidance regarding
Loudeye's 2006 operating plan and statements about expected margin
improvements and cost reductions from the operating plan, as well
as other matters. The words or phrases "believes," "expects,"
"will" and "anticipates" and similar words and phrases are intended
to identify such forward-looking statements. The forward-looking
statements contained in this press release are based on current
estimates and actual results may differ materially. In particular,
the preliminary financial results announced today are unaudited and
are subject to change. Loudeye's estimated unrestricted cash, cash
equivalents and marketable securities balance as of December 31,
2005, of approximately $9.0 million raises substantial doubt about
Loudeye's ability to continue as a going concern. Additional risks
Loudeye faces include: -- inability to secure additional
investments on acceptable terms, or at all; -- the potential
effects of the restructuring announced today on our business and
operations including potential loss of customers, inability to add
new customers, and inability to continue to provide services to
existing customers on discontinued technology platforms; --
customer concentration, especially in our European digital media
store business and our digital media content encoding services; --
potential loss of key employees; -- competitive pressures in the
market for mobile music services and customer concentration and
technical risks associated with Loudeye's mobile music service
offerings; -- competition with other providers of
business-to-business digital media store services and associated
pricing pressures; -- the complexity of Loudeye's services and
delivery networks; -- pressure on our margins, in particular
resulting from increasing wholesale content rates; -- adverse or
uncertain legal developments with respect to copyrights surrounding
the creation and distribution of digital content; and -- other
risks set forth in Loudeye's most recent Form 10-Q, 10-K and other
SEC filings which are available through EDGAR at
http://www.sec.gov/. These are among the primary risks we foresee
at the present time. Loudeye assumes no obligation to update the
forward-looking statements. As disclosed in our annual report on
Form 10-K for the year ended December 31, 2004, we determined that,
as of the December 31, 2004 measurement date, there were
deficiencies in both the design and effectiveness of our internal
control over financial reporting. We assessed those deficiencies
and determined that there were eight material weaknesses in our
internal control over financial reporting as of December 31, 2004.
As a result, management concluded that our internal control over
financial reporting was not effective as of December 31, 2004. We
may not be successful in remediating each of these material
weaknesses and we identify further material weaknesses during the
course of our internal control assessment as of December 31, 2005.
The existence of a material weakness or weaknesses is an indication
that there is more than a remote likelihood that a material
misstatement of our financial statements will not be prevented or
detected in a future period. FCMN Contact: glee@mprm.com
DATASOURCE: Loudeye Corp. CONTACT: Karen Demarco of mPRm Public
Relations, +1-323-933-3399, or , for Loudeye; or Investor Relations
of Loudeye Corp., +1-206-832-4000, or Web site:
http://www.loudeye.com/
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