Today: Chegg moves a substantial chunk of its textbook business to a new partner and LeapFrog suffers while waiting for results from its new products. Also: Analysts suggest Apple and Visa will partner on payments technology in new iPhone.
The Lead: Chegg gains, LeapFrog falls amid new efforts
Chegg and LeapFrog have not enjoyed the same stratospheric rise on Wall Street as other Silicon Valley companies, and both are attempting makeovers to improve their images for investors, but only one scored Monday for its efforts.
Online textbook-rental company Chegg saw a modest improvement in its stock price in late trading after signing on a partner to handle a substantial chunk of its business, but continued suffering from last year's struggles sent Leapfrog's stock price plunging as the toy company waits for new products to revive revenues.
Chegg announced a new partnership with book distributor Ingram Content Group to warehouse and handle the millions of textbooks that college students order and return to the Santa Clara company, ridding itself of one of a labor-intensive function that required a great deal of cash changing hands, but also costing it a big chunk of its revenue stream. Chegg will receive 20 percent of the revenues from what was its main function as a company, though those sales will now be recorded as "digital" instead of "print" revenues, making them more attractive to investors who believe print to be a dying industry.
"Investors would prefer that we not commit capital to something that won't be around forever," CEO Dan Rosensweig told Recode in an interview Monday, adding, "People care about our digital revenue, not our print revenue."
In its 2013 fiscal year, the company reported $255.6 million in total revenues, $203.1 million from its print-textbook business, a total that will be chopped by its partnership with Ingram, though Chegg acquired tutoring marketplace InstaEDU earlier this year and will look to expand similar non-textbook educational offerings in order to grow revenues. On Monday, Chegg reported a second-quarter loss of $8.25 million, or 10 cents a share, on sales of $64.5 million.
On the open market, Chegg stock has never reached the $12.50-per-share price commanded in its initial public offering, and has not even cracked double digits since its first day of trading. After falling 8.5 percent to $5.89 in Monday's regular session, shares recovered those losses to move higher than $6.40 in late trading.
LeapFrog was not as fortunate: The Emeryville kid-tech company continued to suffer from a horrible holiday-shopping season in 2013, with unsold merchandise being discounted and leading to losses of $16.4 million, or 23 cents a share, on sales of $47 million, a revenue decline of 43 percent year-over-year. LeapFrog also announced the acquisition of kids-focused Web browser KidZui, which will likely be included in new products the company hopes will revive its fortunes, wearable products for children and a video game console that focuses on educational games for young children.
"Our business so far this year has been significantly hindered by retail inventory carry-forward from Holiday 2013, tough conditions in most of our key markets and the planned later launch of our major new product introductions for the year," CEO John Barbour said in Monday's earnings announcement.
Barbour seems to be betting on LeapFrog's new products leading to a jump in this year's holiday shopping season, saying Monday, "we are making good progress on our growth initiatives, which should position us well for a strong holiday season."
Investors were less enthused: After gaining 1.8 percent to $7.39 Monday, LeapFrog shares plummeted in late trading to around $6.50.
The only other SV150 company to announce earnings Monday, San Jose's Tessera Technologies, reported net income of $3.77 million, or 5 cents a share, on sales of $37.2 million; shares gained about 4 percent in late trading after closing at $25.65.
SV150 market report: Stocks gain amid Apple-Visa partnership report
Ahead of Monday's earnings reports, Wall Street scored gains across the board, though Silicon Valley tech stocks slightly trailed the Nasdaq and Standard & Poor's 500 indexes as Apple declined amid talk of a payments partnership with Visa.
A report from Pacific Crest analysts suggested that Apple and Visa could team up on a payments system that would be the key to using mobile devices instead of credit cards at the point of sale in physical retailers, which Google Wallet and PayPal have tried to accomplish with little success. Foster City-based Visa recently rebooted its online-payments system, calling it Checkout, and Pac Crest analysts believe Apple could include technology in the next iPhone this fall that would pair with Visa to offer a new payments solution.The report suggested that Visa's wide adoption at retailers and Apple devices' popularity in the United States could allow for immediate widespread adoption, removing the need to scale that has been the "key obstacle that has muddled previous mobile payment projects." Apple fell 0.6 percent to $95.59 while hiring a new social-media marketing executive, and Visa gained 0.2 percent to $212.16.
Hewlett-Packard sniped at the former Autonomy chief financial officer Monday, after the official stood in the way of a proposed settlement with shareholders on the ill-fated acquisition; HP shares gained 0.4 percent to $35.33 on the day. Facebook added 1.6 percent to $73.51 while facing a class-action lawsuit from European users, and LinkedIn gained 0.4 percent to $202.50 while agreeing to pay $6 million to workers who were denied overtime pay. Tesla Motors jumped 2.3 percent to $238.52 while states continued to battle for the Gigafactory, while CEO Elon Musk's other Silicon Valley company, SolarCity, gained 0.4 percent to $70.06 after naming a new chief financial officer. Oakland streaming-music company Pandora Media rose 3.1 percent to $25.30 while pondering the addition of talk radio to its offerings, and Symantec gained 1.7 percent to $23.56 despite reports of a Chinese ban on its security software.
Up: Yelp, Pandora, Workday, Salesforce, Yahoo, Tesla, VMware, Symantec, Facebook, Google, SanDisk, Oracle, eBay, Intel
Down: GoPro, Twitter, Zynga, SunPower, Netflix, Apple, Juniper, Adobe, Nvidia
The SV150 index of Silicon Valley's largest tech companies: Up 9.03, or 0.59 percent, to 1,544.73
The tech-heavy Nasdaq composite index: Up 31.25, or 0.72 percent, to 4,383.89
The blue chip Dow Jones industrial average: Up 75.91, or 0.46 percent, to 16,569.28
And the widely watched Standard & Poor's 500 index: Up 13.84, or 0.72 percent, to 1,938.99