Razorfish Falls on Outlook, Downgrades

Razorfish, Inc. (Nasdaq: RAZF) fell 1 11/32 to 1 3/4 on Wednesday as the company joined the parade of Internetbusiness predicting bigger losses than previously thought.

The news sparked a series of analyst downgrades as the company reduced itsguidance for revenue and earnings.

The New York-based company, which provides Internet consulting services,said revenue for the fourth quarter will be about US$50 million, with a lossof 17 to 22 cents per share, before amortization and restructuring charges.

“The market for our services has changed dramatically, and we underestimatedthe magnitude of this shift,” said Razorfish chief executive officer JeffDachis.

“Despite the market shift, we still believe that the underlying trends andstrengths of our business model remain in place,” Dachis added.

Razorfish, which adopted what it called a “performanceimprovement plan” in October, has “no plans to undergo any significant staffreductions,” according to Dachis.

“We believe in our employees and our ability to weather this transition,” he said.

At Robertson Stephens, analyst Steven Birer downgraded Razorfish to a ratingof market performer from buy, saying he had expected the company to earn 2cents per share on revenue of $77.5 million in the fourth quarter.

“In our opinion, Razorfish is taking the wrong approach, choosing long-termpotential over near-term survival,” Birer wrote. “We believe that if thecompany continues along its current course, and the slowdown in technologyspending is protracted, it could face critical funding issues in the nextsix months.”

Analysts at ING Barings, Southwest Securities, JP Morgan and SG Cowen alsoreportedly lowered their ratings on Razorfish after the announcement.

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