Turmoil and a significant changing of the guard at mobile data services company Motricity. The company today announced that Ryan Wuerch (pictured), the founder, has left his role as chief executive, effective immediately. Jim Smith, who had been president and COO, has taken over the role on an interim basis.
The loss-making Motricity has been hit hard after failing to make financial targets. Its Q2 earnings failed to meet analyst expectations: on August 9, the company’s Q2 figures revealed that the company’s sales for the quarter were $34.6 million, against estimates of $37.1 million of analysts polled by Thomson Reuters.
Perhaps more damaging was the admission that it was readjusting revenues for the current quarter to $31.5 million – $32.5 million, compared to previous estimates of $45.5 million, citing ongoing competitive pressure in international markets and slowing demand in its home market, North America. This news sent the stock price down by some 60 percent.
The company, which went public in 2010, has also been facing a stream of executive changes. Among those leaving their roles are the CFO Allyn Hebner, and the chief strategy, marketing and development officer, Jim Ryan.
On top of all this, earlier this month, a group of shareholders enlisted legal firm Robbins Umeda LLP to investigate Motricity for “possible breaches of fiduciary duty and other violations of the law by certain officers and directors.” In particular, the shareholders allege that Motricity’s executives, Wuerch in particular, misled investors about the company’s growth, failing to “reflect adverse material facts about the company’s stagnating growth rate, the impact of increased competition from smartphone providers, and declining sales and negative business trends.”
The shareholders also allege that Wuerch and other execs were involved in an insider trading scheme as the stock traded for infated prices. Also at this time, Motricity’s CEO, along with other senior executives, allegedly engaged in a coordinated insider trading scheme to reap over $11 million in illicit proceeds from stock options sold while the company traded at inflated prices. On August 9, 2011, Motricity announced quarterly results that showed the company was performing well below expectations. On this news, shares of Motricity collapsed 50% to open on August 10, 2011, at just $2.26 per share.
The statement released by Motricity today notes that Wuerch has also left the board of directors, and that Motricity has engaged the executive recruitment firm Korn/Ferry to start the search for a new CEO.
Jim Smith, now the interim CEO, has been with Motricity since 2009, and he will be considered for the role, along with outside candidates.
Motricity has a large base of customers, ranging from mobile operators such as AT&T (NYSE: T), Verizon and Vodafone (NYSE: VOD), as well as top brands like Kraft, American Express and Coca Cola, and offers a host of mobile data solutions, ranging from messaging services through to mobile marketing and advertising. While it has retained a strong market position in this field — sales in Q2 were actually up by 14 percent — it has not been nearly as big a jump as previously expected, amidst a worldwide boom in mobile usage.