Digital River Expands Agreement (DRIV) (MSFT)

Digital River, Inc. (DRIV) recently extended its long-standing relationship with 3M Company (3M) and also signed new contracts with Haier America, Toshiba America Information Systems and Wacom Technology Services Corporation.

Using Digital River’s Channel Lead Management solution, these companies will be able to track and manage sales leads and customer purchase data across their branded e-commerce sites, as well as online and offline retailer, reseller, and distributor channels. This solution from Digital River also supports consumer and business-to-business (B2B) buyers, who are browsing and shopping via PCs, tablets or mobile devices.

The solution is empowered to act as a one-stop online shopping portal, enabling buyers to purchase directly from the manufacturer, once integrated into the manufacturer’s online store.

The solution has an embedded geolocation technology, which allows it to generate a list of channel partners in proximity to the buyer and provides store directions, phone numbers and also provides real-time inventory status.

During the third quarter, Digital River signed a number of new deals and expanded agreements. The company extended its relationship with Siemens, Novell, Corel, Individual Software and Grass Valley. The company also signed multi-year extensions with two of its top clients, Trend Micro and Kaspersky. Meanwhile, Microsoft Corporation (MSFT) is the company’s largest customer and continues to be so.

However, earning estimates have gone down significantly after the company reported its third quarter results, which beat estimates marginally.

For 2013, the company will likely face some headwinds due to macroeconomic conditions, client attrition and additional necessary ramp up in investments to ensure an updated technology infrastructure.

Digital River forecasts that overall softness in the economy, especially in Europe, coupled with recent decline in PC sales will hamper revenue growth going forward. The company saw some client attrition in 2012 and expects the same in 2013 along with a decline in supporting business revenue.

We continue to maintain our long-term Neutral recommendation on Digital River. Our recommendation is supported by a Zacks #3 Rank, which translates into a short-term rating of Hold.