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Synacor CEO Quits as Financials Plunge

Alan Breznick
3/6/2014
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Synacor's stock price sank as much as 10% Thursday before recovering a bit. The company reported disappointing earnings for the fourth quarter and the full year, and its longtime chief executive, Ron Frankel, abruptly announced that he would resign.

Synacor Inc. -- which provides TV Everywhere authentication technology and web portals to a such large and midsized cable operators and telcos as Verizon Communications Inc. (NYSE: VZ), Charter Communications Inc. , CenturyLink Inc. (NYSE: CTL), Suddenlink Communications , and WideOpenWest Holdings LLC (WOW) -- reported that its net income for the quarter dropped 75% from a year earlier to $200,000. The vendor's revenue fell 8.7% to $29.4 million as its main sector, search and display advertising, came in $3.1 million lower than it did a year earlier. (See Synacor & Mediacom Extend Deal.)

The Buffalo, N.Y., company took an even bigger financial hit on its annual results. It reported a net loss of $1.4 million for the year, versus a profit of $3.8 million in 2012. Revenue slipped 8.4% to $111.8 million, due to an $11 million shortfall in search and display ad revenue.

Curiously, on an earnings call with financial analysts late Wednesday, Synacor executives did not provide much insight into the causes of the disappointing financial results beyond a little discussion about how changes in Microsoft Corp. (Nasdaq: MSFT)'s Windows 8 operating system affected its search business. Nor, surprisingly, did analysts press the executives all that much on the reasons for the quarterly and yearly declines.

Instead, Synacor officials highlighted metrics where the company did make progress, such as subscription-based products. They also spelled out some initiatives meant to boost the company's fortunes in 2014 and beyond, including a next-gen TV Everywhere search and discovery platform, an enhanced Cloud ID authentication program, a personalized service for Android devices, and more personalized web portal start pages.

"I think we have some fantastic new products, and our customers are demanding those products," Frankel said on the call. "And we just need to launch them, get them out in the marketplace… Our pace of launching the new products is a key question."

However, in a telling note, the CEO announced his resignation several minutes later. Frankel, who has run Synacor since 2001 and has steered it through several acquisitions (along with an IPO two years ago), said he will step down once the company finds a successor. He did not say why he was resigning.

Frankel, who will remain on the Synacor board of directors and become an adviser to the company, said he expects the search for his replacement to take at least 4-6 months. "It's a little hard to say" how long it will take. "I mean, we just kicked it off."

Analysts questioned whether Synacor, which has been bulking up through acquisitions over the past few years, might now put itself up for sale. Executives said that, even though a sale could always be an option, it's far more likely that Synacor will remain a buyer. (See Synacor Acquires Teknision.)

"We continue to regularly look at acquisitions," said CFO Bill Stuart. "You will probably see some activity on our part over the course of this year as a buyer," assuming the right opportunities are available.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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albreznick
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albreznick,
User Rank: Blogger
3/11/2014 | 10:19:58 PM
Re: Too bad
Yep, Craig. That's true.  Synacor did, and still does, seem well positioned. Just seems another video tech company caught in the crosswinds of cable change right now. I wonder what Ron will do next.  
albreznick
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albreznick,
User Rank: Blogger
3/11/2014 | 10:17:52 PM
Re: Satisfactory answer?
I agree. Mitch. I thought the analysts should have presed Synacor officialsmore as well. Not sure why they didn't.
craigleddy
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craigleddy,
User Rank: Blogger
3/7/2014 | 10:51:43 AM
Too bad
Sorry to hear this. Synacor has good people and seems to be in the right place, but execution and integration with cable tech is never easy. Ron worked hard to build this company and I wish him good luck. 
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
3/6/2014 | 7:17:44 PM
Satisfactory answer?
If I were an investor on that call, I'd want to hear more about what Synacor was doing to fix its problems and not about what went well. Although perhaps the CEO's resignation answered that question. 
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