Legato Systems missed analysts' estimates in its third quarter Wednesday, posting a loss of $1.1 million, or 1 cent a share, on sales of $54.2 million.
First Call Corp. consensus expected the provider of storage management software to break even in the quarter.
Ahead of the earnings report, Legato (Nasdaq: LGTO) closed off 64 cents to $11.80.
In the year-ago quarter, it returned a profit of $1.4 million, or 2 cents a share, on sales of $67.9 million.
"The new licensing terms introduced at the beginning of the third quarter were very successfully received," said CEO Louis Cole in a prepared release. "The result is a more rapid movement toward a recurring revenue model than we had expected."
Last quarter, Legato topped analysts' estimates when it reported a profit of $1.1 million, or 1 cent a share, on sales of $58.3 million.
Legato shares moved up to a 52-week high of $82.50 in December before falling to a low of $8.13 in August.
Fifteen of the 18 analysts tracking the stock rate it a "hold."
Analysts are forecasting a profit of 2 cents a share in the fiscal year.