Goldman Sachs upgrades Akamai, downgrades Nuance after disappointing quarter

Goldman Sachs upgrades Akamai in place of Nuance

NEW YORK — Shares of Nuance Communications Inc. took a hit Tuesday after the speech-recognition and digital imaging software maker posted disappointing results for its fiscal third quarter and was downgraded by Goldman Sachs.

Meanwhile, analyst Derek R. Bingham upgraded Akamai Technologies Inc. to “Buy” from “Neutral” and said shares of the Web traffic management technology provider present a “better entry point” for investors.

THE SPARK: Nuance late Monday posted adjusted earnings of 30 cents per share and revenue of $273.2 million for the three months ended June 30. Adjusted revenue totaled $293.4 million and included $20.2 million in revenue that was lost due to accounting related to acquisitions.

Analysts were expecting earnings of 29 cents per share on higher revenue of $300.4 million, according to a poll by Thomson Reuters. Bingham cut his rating on Nuance to “Neutral” from “Buy” and said a tough fiscal third quarter “dampens our outlook on catalysts.”

THE ANALYSIS: “We continue to believe Nuance will see stronger quarters from its hosted business in (calendar third quarter) and (calendar fourth quarter), but June’s softness draws into question the strength of this build and its ability to offset a shift away from traditional license revenue,” the analyst wrote.

He thinks Akamai shares provide a better entry point for investors following a pullback in the stock price after the company’s second-quarter earnings report in late July.

SHARE ACTION: Shares of Nuance fell $2.09, or 12 percent, to $15.28 in afternoon trading on much heavier volume than usual. The stock has traded in the 52-week range of $11.80 and $18.55.

Shares of Akamai rose $1.63, or 4 percent, to $42.78. They have traded between $16.76 and $46.72 in the past year.