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Nuance Plunges, Icahn Grunges

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Nuance Plunges, Icahn Grunges

As most traders are sitting on the sidelines, and the U.S. broad markets are closed for the holidays, its seems like a good time to review one of the most startling drops so far this week. On Tuesday, Nuance Communications (NASDAQ:NUAN) shares plunged by an astonishing 18 percent after the company issued less than bullish forward guidance. While the quarter itself may have come in well, the street was looking for future performance results as a barometer for company strength.

Nuance reported adjusted quarterly sales of $490.4 million, which translated to adjusted net income of $95.2 million, or $0.30 per diluted share. The street was looking for adjusted earnings of just $0.29 per share on sales of $489.56 million.

However, future guidance came in below analyst estimates for the first quarter of the year. Nuance stated it expects non-GAAP revenue for its fiscal first quarter 2014 to be between $477 million and $487 million, with non-GAAP earnings per share between $0.18 and $0.21. Analysts looking for an adjusted fiscal first-quarter earnings of $0.33 per share on sales of $494.74 million. In fiscal 2014, Nuance expects bookings to increase around 15% to between $2.15 billion and $2.25 billion.

Shares of Nuance jumped in late August when it announced legendary institutional investor Carl Icahn took a larger position within the company. Funds controlled by Icahn, including Icahn Partners LP and Icahn Onshore LP, reported in an updated filing a 16.9 percent stake in Nuance, up from 16.4 percent previously reported to the U.S. Securities and Exchange Commission.

Shares are down significantly since Carl added to his position. At the time of this writing shares trade at $13.40, down from $19 at the time of acquisition. Going into the remainder for the week it is likely we hear commentary from the street as well as turbulence on the trading floor. Many traders we’ve talked to are waiting for things to stabilize before jumping in.

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