Shares in networks software supplier Legato nosedived as the company announced a sharp loss in its fiscal first quarter.
Legato was forced twice to delay the release of its first quarter earnings and restate all its 1999 financial results because of improperly recorded sales.
For the period ending 31 March, Legato reported a loss of $9.99m or 12 cents a share compared with a profit of $2.76m or three cents a share in the same period last year. Analysts surveyed by researcher First Call had predicted a profit of six cents a share.
However, Legato's first quarter revenue rose from $43.9m in 1999 to $60.5m, an increase of 38 per cent.
The company blamed the shortfall on the unexpectedly large number of resignations from its sales force and the distraction caused by accounting problems discovered near the end of the quarter.
About 25 per cent of Legato's sales force has left the company in part because of an investigation into improper recording of some revenue last year as a result of unauthorised side agreements.
The company also filed its delayed 10-K annual report with the US Securities and Exchange Commission, which includes restated results for fiscal 1999. The company said net income for 1999 was $2.7m, not the $19.9m it reported in January. Nasdaq also threatened to delist Legato because of delays to the annual report.
Louis Cole, Legato's chairman and president, said the company expects no increase in revenue and that it will break even in the second half of 2000. Revenue and profit will rise "modestly", he said.
"We expect recent disruptions to limit revenue growth for this year to the 10 per cent range compared with 1999, but we would expect more rapid growth in 2001 since our market demand appears to be strong and we enjoy a leading competitive position," he added.
Meanwhile, investment bank SG Cowen cut its 2000 earnings estimate for the vendor to from 60 cents a share to four cents a share following the company's announcement.
Shares in Legato have fallen by 83 per cent this year.
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