Kintera Bleeding Signals Exit Strategy?

11:30 AM Aug 17, 2005

Kintera finally went public with the gory details, raising their projection of 2005 losses from $0.93-$0.99 per share to $1.15-$1.24 while lowering revenue forecasts from $50-55 million to $42-45 million and pushing projected profitability back from Q1 to Q4 of 2006. The market promptly battered share prices down to $2.85, nearly a third off its price just two weeks ago. If you've got the best part of an hour to kill, you can tune into their shareholder call here, or read all about it here.

What's most interesting on the call, however, is not the litter of statistics only an analyst could love, but the sketch of what looks like a business strategy that would see the Sphere's shadow in e-advocacy significantly reduced.

CFO Richard Davidson, who took over for James Rotherman last week and started laying off staff, pledged to rein in marketing investment "in some areas where we really historically have not had product success." Citing competitive interest, he declined to elaborate the meaning of this phrase, but there's good reason to think advocacy-oriented nonprofits are one of those unsuccessful areas. Kintera's ruthless business strategies -- which have included suing nonprofits, patenting business methods and gobbling up software vendors to upsell their client lists -- have not played well in the soft-hearted NGO world. Add the declining price and increasing availability of tools in the sector, and Kintera has the look of a dinosaur among activist-oriented groups. In cases where we at DIA answer formal bid proposals, it's less and less common to see Kintera win the bid, or even among the finalists.

That's not to say there isn't a place for Kintera. They'll even tell you what that place is: Davidson pledged to focus efforts on "education, health [and] faith-based" organizations -- like the University of Virginia, who they inked last week.

All well and good, but such a chasm separates universities and hospitals from the likes of Greenpeace or Tikkun that deciding the former is their audience probably amounts to pulling up stakes with respect to the latter. It makes plenty of sense from the company's point of view: they need big contracts with entities that will be amenable to the other strategies laid out on the call, selling consulting and fastidiously billing client support.

No doubt the pullback will be gradual and partial rather than precipitous. But don't be surprised if that Gold Sponsor line on the program book cover of your favorite nonprofit tech event has a different occupant next time around.

Update: The Motley Fool's Tom Taulli is not impressed. Remember, all of the above is Kintera's current best-case scenario.

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