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Avid Technology stock in tailspin

The video- and audio-editing software maker's stock goes into a free fall after it warns of lower-than-expected revenues.

Stock in Avid Technology went into a free fall today, losing more than 40 percent of its value and closing at a new 52-week low after the company warned of lower-than-expected revenues.

The video- and audio-editing software maker warned after the markets closed Friday that it expects lower revenues. It stated at the time, however, that it still will "record a modest profit" during its third fiscal quarter.

The company said it expects revenues to be between $112 million and $114 million, compared to revenues of $116.5 million for the like quarter a year ago. Avid reported revenues of $112.9 miilion for the second quarter this year.

Avid shares finished down 9.3125 or more than 40 percent today at 13.6875, making Avid the second-biggest percentage loser on the Nasdaq Composite Index for the day. The dubious top spot went to Aspen Technology, which lost more than 53 percent today. Avid's shares have traded as high as 47.75 and as low as 18.625 during the past year.

"In this market, companies that deliver bad news are going to be taken out to the woodshed and beaten mercilessly," said Charlie Finnie, managing director at Volpe Brown Whelan.

Wall Street was expecting Avid to post a profit of 34 cents per share, according to First Call. Avid reported earnings of 34 cents per share for the third quarter last year.

The company is slated to report its financial results October 22.

Avid will take a one-time charge against earnings this quarter for its acquisition of Softimage, which it bought from Microsoft in June. Avid's stock was trading in the mid-30s at the time.

Avid executives said the process of incorporating Softimage's products, along with the launch of several new tools, affected the company's bottom line.

"We believe that these factors have resulted in a transition quarter with some customers delaying buying decisions, which contributed to the revenue shortfall," Avid chief executive William Miller said in a statement.

Volpe's Finnie, who has a "buy" rating on Avid, said the risk-reward ratio for the patient Avid investor remains good. He expects the stock to fall to no lower than $9 per share and to possibly reach as high as $29 per share in the next 12 months.

He warned, however, that Avid won't snap back overnight.

"No one believes there's just one bad quarter," Finnie said. "There's never just one cockroach in the kitchen. There's always several more behind the stove."