SDL stock plummetsIf poor quarterly figures don't really shock anymore after several financial quarters where some of the really big IT companies have failed to hit their targets, the announcement by SDL will. The fact that its profits will only be between 50% and 60% of what the markets expected this year saw its stock price plunge by close to one third in London earlier today.

SDL Acquisition Target?

While it said in a statement that it will still make a profit of between US$ 23.4 million and US$ 31 million, it was expected to make close to US$ 46.7 million.

The statement issued by the company to the markets, said that despite difficult trading conditions it “... remain(s) confident in [its] strategy and in the outlook for the business in the long term.”

The question is whether the markets will have confidence in the light of SDL's performance and whether this kind of financial performance -- the worst since it went public in 1999 -- makes it vulnerable as a takeover target.

For any larger company that is looking for established translation and customer experience software it might just be the time to strike, and we have seen over the past few months that there are a number of large companies that have very deep pockets.

SDL Reaction

But that’s for the future, and today Chief Executive Officer of SDL, Mark Lancaster explained why he believed the year has been so poor.

While there are a number of subsidiary problems, they all stem from the same cause: poor sales.

…Across the Technology segments, first half licence revenues are below management expectations, primarily due to previously highlighted lack of sales and marketing investment over the last two years. Although we did not expect the recent sales and marketing investments to have any positive effect on revenues in the first half of 2013, we did expect to have continued sales momentum from 2012. Bookings have also been weaker than expected."

The statement also said that new investments combined with new technology builds in the pipeline has "… given the Board confidence that sales will improve"

There is no reason to think that sales won’t improve and keep in mind that the company is still profitable. However, it is operating in a very tough macro-economic environment and all the positives that it mentions in the market statement will take time to bear fruit. Definitely a company to watch in the coming months.