Volante Group Limited’s shares plummeted last week falling from a relatively stable $1.38 to $0.94 (about 30 per cent fall) due to an earnings downgrade.
The harsh reaction comes only two months after the company reported a 14.1 million dollar profit in September.
The system integrator is in the middle of changing its business model and is trying to increase its revenue share form services away from low margin product sales.
The move towards higher margin services work has seen the company incur some restructuring costs.
With the current healthy trading conditions in the IT sector, some analysts are speculating that Volante’s earning shortfall suggests the company’s service division is not as advanced as it suggested last year.
According to Australasian Investment Review, management has also blamed most of the operational underperformance on the traditional product reselling division, however Macquarie disagrees and believes the larger than expected decline was due more to an internal execution problem which management needed to address.
In September Volante restructured staff by sacking 26 people on the same day. A month later, Volante CEO Ian Penman said the company could either grow organically or through mergers and acquisitions.
“We recently made one very small acquisition which will be publicly announced soon,” Penman told Computerworld, adding Volante also has its eye on as many as seven other companies, with up to three “serious opportunities”.