Windows 8 continues to bite Synacor Inc. more than a year after the operating system hit the market.
Synacor posted its second straight quarterly loss during the summer as changes incorporated into Microsoft Corp.’s flagship operating system continued to cut into the revenues the Buffalo Internet content provider generates from advertising and search queries.
Microsoft’s Window’s 8 automatically sets its own home page ahead of those pages that Synacor designs and maintains for its clients.
And the weakness is likely to continue into the current quarter, with Synacor executives forecasting that the company’s sales will drop by about 11 percent during the final three months of this year.
Synacor lost $832,000, or 3 cents per share, during the third quarter, compared with a profit of $652,000, or 2 cents per share, a year ago, before Windows 8 was introduced. Even so, the profits were a penny better than analysts were expecting.
The company’s sales weakened by 7 percent, to $26.6 million, from $28.3 million, although that was about 4 percent stronger than the Synacor had forecast in early August.
“We continue to feel the effects of Windows 8 on PCs,” William J. Stuart, Synacor’s chief financial officer, said during a conference call.
Synacor executives continued to characterize 2013 as a transitional year for the company, one where revenues are being hurt by the Windows 8 changes while the company is investing heavily in new products for smartphones, tablets and personal computers that are expected to bring in new streams of revenue once they are introduced late this year or early next year.
To expand its market, Synacor said that it has acquired Teknision, an Ontario company that develops products for Android devices. “Teknision will accelerate our efforts to give consumers a single point of access for all of their media, whether TV, movies, books, music or games,” said Ronald N. Frankel, Synacor’s president and CEO. “Whether the media is accessed from a tablet, laptop, smartphone or television, we intend to provide the intelligent home screen for all of them.”
During the third quarter, the revenue that Synacor raises from search-engine advertising fell by 10 percent, to $20.9 million, from $23.33 million a year ago, because of changes in Windows 8 that made Microsoft’s Bing search engine the default search provider and set its MSN site as the home page on computers using the operating system.
That change relegated the start pages that Synacor designs for its customers, such as computer-makers Toshiba and Lenovo, along with a handful of cable TV providers, to a secondary tab on those computers’ Internet browsers. That hurts Synacor because the company generates revenue every time a subscriber uses the Google search box on the start pages that it designs, while a reduction in page views also hurts Synacor’s advertising sales on those start pages.
Subscription revenues grew by 10 percent, to $5.6 million, compared with $5.1 million a year earlier.
Synacor said it expects its revenues during the fourth quarter to range between $28 million and $29 million, which is in line with analyst forecasts. Revenues for all of 2013 are expected to be between $110.4 million and $111.4 million, down by about 9 percent from $122 million last year but at the high end of its August forecast.
The company’s shares rose by 26 cents, or 10.79 percent, to $2.71 on Wednesday.