Media Wonk

Divx takes a dive - July 24, 2007

Divx Inc.’s successful public offering last September was hailed as the Return of the Dot-Com IPO after the long, post-bubble hangover.

Shares went out at $16 and climbed steadily for three months into the mid-twenties, riding the excitement over Web-embedded video and user-generated content. It gradually gave back some of those gains but popped again in April after a monster first quarter.

Today, it’s looking eerily like yet another technology company having trouble making the transition from entrepreneurial start-up to publicly traded corporation.

On Tuesday the company announced it would split off its online video-sharing site Stage6 to concentrate on its core technology licensing business. As part of the reorganization, co-founder and CEO Jordan Greenhall is stepping down from day-to-day management of the company to “lead the process of separating Stage6.”

Ruh-roh.

Greenhall will remain as executive chairman of Divx, but his day-to-day duties will be assumed by president and now-acting CEO Kevin Hell.

Shares of Divx fell 5% on the news, to $14.13.

The company also had to replace its CFO last month after the first one stepped down for “personal reasons,” but not before he managed to unload 10,000 shares of Divx stock one week before the company lowered its second-quarter forecast, cratering the shares.

Hell also unloaded a big chunk of his IPO shares a week before the Q2 bummer.

Ruh-roh, ruh-roh.

In fairness, both sales had been planned and previously disclosed in filings. But it still looked odd in light of the bad news that followed.

According to company spokesman Tom Huntington the separation of Stage6 will allow the company to concentrate on its core business of technology licensing and focus its message to investors.

So too—although Huntington is too polite to say it—will the sidelining of Greenhall, who I accept is brilliant but whose elaborate exegeses of the “Divx eco-system” could send you into bad college flashbacks of trying to read Being and Nothingness while stoned.

Investors, in turns out, are more interested in predictable earnings and a clear business plan.

Getting Divx back to the basics of licensing its well-regarded tools for creating, sharing and transporting video across multiple devices is a step in the right direction.

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