11:15 AM New York – Rosetta Stone Inc plunges 26% after it canceled secondary offering and lowered quarterly and annual earnings outlook.

Rosetta Stone Inc (RST) lowered its earnings outlook for the quarter ending in September and for the year ending in December and blamed it on rising operating expenses.

“Our revisions are primarily due to greater than expected operating expenses for the quarter ending September 30, 2009,” said Brian Helman, chief financial officer of Rosetta Stone.

Helman added, “During the current quarter, the company has incurred higher sales and marketing costs and higher product development costs than previously anticipated.”

The language course marketing company revised the quarterly earnings to a range of $4.9 million and $5.3 million and earnings per share between 22 cents and 24 cents. The previous earnings estimate was between $4.9 million and $5.3 million or earnings per share between 30 cents and 32 cents.

For the year the new earnings guidance is between $9.7 million and $10.5 million and earnings per share between 48 cents and 52 cents compared to $11.3 million and $12.1 million or 56 cents and 60 cents a share.

The company left the revenues estimate for the quarter and the year unchanged.

Rosetta Stone sold 3.12 million shares at $18 a share in an offering managed by Morgan Stanley and William Blair. The stocks surged to $32 in the early trading in April after it priced its offering on April 15.

Today, the company canceled 4.1 million shares offering that included 4.05 million shares from funds controlled by Norwest Capital and ABS Capital. The company planned to sell 40,000 shares to cover offering expenses.