THE BIG PICTURE: The maker of antivirus and security software said last week that its CEO J.R. Smith was resigning after six years at the head of the company. He'll stay on until AVG names a replacement, but isn't leaving the company completely. He will join the company's supervisory board.
AVG, which went public in February 2012, was founded in the Czech Republic in 1991. Last year its profit fell about 30 percent, while revenue rose 31 percent. The company predicts growth for revenue and for earnings per share, excluding one-time items, this year.
THE ANALYSIS: The coming change in AVG's leadership comes as it is moving beyond antivirus software into secure search.
"While Smith will remain involved with AVG as a board member, like all management transitions, this change holds risk, particularly given the evolution under way in the AVG business model," Weiss and Gorham wrote.
AVG's secure search business is key to generating revenue from the people who now use AVG's antivirus software, the analysts said. Growth in that division slowed at the end of last year the company eliminated unprofitable distribution partners, the analysts said. They expect AVG to add more distribution partners and broaden search providers this year.
AVG will need to do well in its secure search business and increase its subscription business revenue to reassure investors that its growth is sustainable, the analysts said.
SHARE ACTION: Shares of AVG Technologies N.V. fell $1.25, or 9.2 percent, to $12.37 in afternoon trading. Shares had lost 14 percent this year through Monday's close. The stock went public at $16.