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Vicinity boosts marketing expenses, shares crumble

Vicinity (Nasdaq: VCNT) tumbled Thursday and got a downgrade from Bear Stearns after it said losses and marketing expenses would increase over the next nine months. The company's fourth quarter results met analysts' estimates.

Shares were down 2 to 11 7/8, or 14 percent, in early trading.

Bear Stearns lowered its investment rating on the stock to "attractive" from "buy" following the news. Bear Stearns also lowered its fiscal 2001 revenue estimate to $38.4 million from $39.7 million, and fiscal 2001 earnings estimates were lowered to a loss of 66 cents per share from a loss of 19 cents per share.

The company said Wednesday that in its fourth quarter, loss was $4.5 million, or 17 cents a share, in line with First Call's consensus. It also boasted several deals with big names such as Verizon (NYSE: VZ) and AT&T (NYSE: T) to provide its Vicinity BrandFinder on mobile phones.

But the company also said it would increase spending on advertising and marketing to $10 million to $12 million over the next nine months. Company officials revealed in a conference call that revenue from its deals wouldn't kick in until 2002, and higher losses lie ahead for the first nine months of 2001. Vicinity said it still plans to meet revenue targets for the period, and achieve profitability on schedule, in the fourth quarter of 2001.

Howard Bain, the company's CFO, also said gross margins would see only restrained growth. "Though we expect gross margins to continue to improve, the rate of growth is held back somewhat as lower margin service revenues continue still represent the majority of services and transactions revenue," Bain said on the call. Gross profits were 43 percent for the quarter, up slightly over 41 percent in the third quarter.