When Rob LoCascio stopped by the Nasdaq stock exchange last week to mark the 15th anniversary of his company, LivePerson, going public, he hoped to see the shares flash green as he rang the opening bell.
No such luck. The stock was in the red, as it has been for much of this year. Wall Street hasn't taken kindly to LoCascio's investment plan, begun in 2012, to remake the New York-based company. LivePerson sells software to corporations that allows customers to chat on the web, with the goal of displacing traditional 1-800-service calls. The overhaul, which extends web-chatting ability to mobile devices, has ended up with LivePerson's earnings and market capitalization roughly cut in half.
LoCascio, the 47-year-old founder and chief executive officer, is undaunted. While some analysts remain skeptical, he insists LivePerson has reached an inflection point, and will start growing profits again next year. He's convinced his company will take market share from larger companies that provide call-center software, such as Cisco Systems, Genesys and Avaya.
"It hasn't been pleasant for three years, but so what?" he said in an interview after the ceremony at the Nasdaq in New York. "If I kill the 800 number, I'm a hero." But until that happens, "You're a goat."
LoCascio took LivePerson public on the eve of the dotcom bust and watched the stock plummet from its $8 initial offering price to as low as 10 cents the year after. Last week it fell 5.6 percent to close at $7.70, and down 60 percent from its peak of $19.49 in July 2012. LivePerson acquired an Israeli company years ago and is also traded in Tel Aviv. Those shares were little changed as of 2:07 p.m. local time.
LoCascio's 2012 plan was to turn LivePerson into a mobile platform -- or, as he puts it, "the Whatsapp" of consumer communication. He's been rolling out the new platform to existing customers, which include companies like International Business Machines and Royal Bank of Scotland Group.
He's redesigned the chat software for mobile phones and made it part of a broader platform called LiveEngage. The software uses data analytics so companies can monitor customers' online activity and tailor interactions accordingly, like showing them coupons related to their browsing. He's also revamped pricing so that clients get access to all services upfront rather than signing up for individual features; the hope is that easier access will get them hooked and willing to pay for more use.
The redesign has been costly. Investments in the new platform will contribute to a 35 percent drop in adjusted net income to $7.42 million in 2015, the fourth straight year of declines, according to the average estimate of six analysts surveyed by Bloomberg. Revenue has continued to grow in that time, and is forecast to rise 17 percent this year to $245 million.
"It's a big bet on the LiveEngage platform, and if it's successful, the stock should really work," said Glenn Mattson, an analyst with Ladenburg Thalmann in New York who recommends LivePerson shares.
LoCascio's strategy will face an uphill battle because of increasing commoditization among web chat services, said Mark Schappel, an analyst with Benchmark in New York, who has a neutral rating on the shares.
"Spending more and more to get less and less growth -- that is the definition of a commoditized software product," he said.
While LoCascio talks like an innovator, he's actually playing catch up with industry peers, said Brian Manusama, a research director with Gartner in Amsterdam.
"Now it starts to be a little bit of 'me too,' instead of a competitive advantage," Manusama said. "They can recover, because they have a large customer base. But they need to do something."
LivePerson's beaten up stock has fueled speculation that the company could become a buyout target, but LoCascio, who is also among the largest shareholders, says the company is not for sale.
"If we're sitting here three years from now and we haven't done anything, OK," he said. "If we execute, the shareholders will benefit."