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Capital Business
Posted at 04:24 PM ET, 02/23/2012

Language software firm Rosetta Stone names new CEO

Stephen M. Swad has been named the president and chief executive of language software firm Rosetta Stone effective immediately, the
Stephen M. Swad has been named the president and chief executive of Rosetta Stone. (Courtesy of Rosetta Stone)
company announced Thursday.

Swad has served as Rosetta Stone’s chief financial officer since November 2010, when he joined the company from software and services provider Comverse Technology. He previously served as CFO of Fannie Mae and AOL.

Swad said in an interview Thursday that he will continue to prioritize Rosetta Stone’s expansion into foreign markets, particularly Asia and South America, where the company has seen significant uptake among consumers looking to learn English.

“A company that does that successfully is going to be impactful. . . especially in countries where learning English changes their lives,” Swad said. “I think that’s going to be a big driver of this company’s future.”

Rosetta Stone will also become more open to corporate partnerships, joint ventures and acquisitions than in the past, when much of its software development was done in house, Swad said.

“In Steve we have found a leader who has the right mix of vision and strategy, as well as a strong background in operational execution, which will allow Rosetta Stone to pursue its growth plans,” Chairman Laurence Franklin said in a statement.

The company announced last fall that it would begin the search for a replacement for chief executive Tom Adams, who has served in the role since 2001. He will become non-executive chairman, replacing Franklin.

Adams oversaw the company’s initial public offering in 2009 and grew its annual revenue from $10 million to $250 million, the statement said. He also expanded the firm’s international footprint to include markets in Europe, Asia and South America

“It felt like, at this time, if we bring on a very strong executive, that executive can take ownership over this next phase of life with the company,” Adams said in an interview last October.

Arlington-based Rosetta Stone is known for the canary-yellow boxes of software that teach languages as varied as Spanish and Japanese.

The boxed software has long been priced at a premium, typically costing $179 for just the first level of a language. But as household budgets have tightened in a sluggish economy, discretionary expenses, including language software, have suffered.

The company posted a net loss of $1.2 million for the third fiscal quarter, which ended Sept. 30, compared to a net loss of $385,000 during the same period in 2010. That decline came even as total revenue climbed 5 percent to $64.2 million for the quarter.

Rosetta Stone faces changing user expectations. More consumers today want software that’s delivered via the Internet, rather than on disks, because it can be automatically upgraded without purchasing the latest version.

While the company has debuted Internet-based products over the past 18 months that include interactive features, such as live chats and games, its brand is still tied tightly to the boxes you find on shopping mall kiosks.

“The problem is one of communication. People really associate us with the physical box and so what we’re working on now is how to shift . . . toward a future that will be in line with what users are doing,” Adams said in October. “We actually have what people want to use today, they just have to understand it.”

Swad said Thursday that a marketing and price modification effort that the company launched last year to better promote its Internet-based software has helped stem some of the loses in its U.S. consumer business and he expects that trend will continue.

Follow Steven Overly on Twitter: @StevenOverly

By  |  04:24 PM ET, 02/23/2012

 
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