Rosetta Stone Shines in IPO

Language Company's Debut Breaks Dry Spell for Local Firms

Rosetta Stone, the Arlington-based language instruction company, saw its share prices soar yesterday in its debut on the New York Stock Exchange, one of the few bright spots in what has been a slow period for initial public offerings.

The company, known for its bright yellow kiosks in many of the nation's airports, sold 6,250,000 shares at an initial public offering price of $18 and watched the stock trade as high as $26.27 before closing at $25.12. The company had projected, in papers filed with the Securities and Exchange Commission, that its stock would open in the $15 to $17 range. The offering raised $112.5 million.

Rosetta chief executive Tom Adams said that the company decided to proceed with its initial public offering despite the troubled economy. "It's always a consideration, whether to go or not go, but when we looked at our business and our performance, we thought it looked good," he said.

Adams praised his company's latest software for its success. Rosetta launched a new version of instructional language software in 2007, and that "really took things to the next level," he said. Revenue increased from $137.3 million to $209.4 million last year, and profit increased from $2.58 million to $13.9 million.

Adams credited the "intuitive, easy-to-use" new software for last year's 63 percent increase in retail sales. The company's corporate and institutional sales also went up 38 percent.

The company plans to use some of the cash it has raised to expand its business overseas. Rosetta recently opened an office in Tokyo and is looking to expand into Europe. In its SEC filing, the company also described plans to introduce new types of Web-based language instruction and to offer industry-specific language instruction services.

Rosetta is one of a small handful of companies recently breaking what has been a very dry spell for public offerings; it had been a year since a Washington area firm had gone public.

"The IPO market has been abysmal, absolutely abysmal," said Scott Sweet, senior managing partner and principal researcher at IPO Boutique, a research firm. "[But] Rosetta has been doing exceptionally well. Their growth has been exponential."

Sweet said he believes that Rosetta's strong showing so far may encourage other companies to move forward with plans to go public. He rates the stock a "strong buy," though he said it is tough to predict Rosetta's stock performance as it is the first company in its sector to go public.

Major Rosetta customers include the U.S. Army, Department of Homeland Security and the State Department's Foreign Service Institute in Arlington. "Having many federal agencies a stone's throw away is great," Adams said of his company's Washington area home.

Rosetta makes its products available through retailers such as Apple, Barnes & Noble and Borders bookstores, as well as through direct-to-consumer channels such as airport kiosks. The company's offerings range from online subscriptions for $199 to deluxe software packages for $549.

Founded in 1992 as Fairfield Language Technologies, Rosetta offers instruction in 31 languages, from Arabic to Welsh. Adams took over the company in 2003, after its founder passed away.