Liberate shares were down $1.66, to $12.66, far below its 52-week high of $119.88.
Deutsche Banc Alex Brown analyst Peter Ausnit downgraded Liberate to "market perform" from "buy" Monday and said competitor OpenTV--up $0.38, to $17.88, Monday--has better software for existing set-top boxes.
The analyst didn't change his estimates, since the company's deferred revenues, international business, and limited U.S. trials should generate enough revenue to meet targets. However, he added that he does not expect any events that could spark improvements and said the company isn't expected to reach profitability until late 2002 or 2003. The company is expected to lose 12 cents a share in its upcoming third quarter, according to First Call.
U.S. cable deployment of interactive TV now looks unlikely in 2001, and the delay will hurt Liberate more than other interactive TV companies, Ausnit said in a research note.
Most cable TV operators plan to deploy video on demand and interactive program guides during 2001. While these are interactive applications, they don't need the kind of software Liberate provides.
Ausnit also said Liberate looks bad compared with competitor OpenTV, which is expected to reach profitability during calendar 2001. Excluding cash, Liberate trades at 12 times Ausnit's $81.5 million calendar 2002 revenue estimate, a 100 percent premium to OpenTV.
Ausnit rates OpenTV a "buy" and said moves from EchoStar and others could benefit the company. EchoStar is the only major U.S. video provider that plans to offer advanced interactive services in volume during 2001, and it will use OpenTV's software. USA Media also plans to launch a set-top box within the next two months that may push larger cable operators to adopt OpenTV's technology.
Six analysts continue to rate Liberate a "strong buy," and six others rate it a "moderate buy," according to Zach's Investment Research.