Shares of Legato Systems Inc. (Nasdaq: LGTO) plunged nearly 50 percent Monday after the company said it would restate its 1999 results.
Legateo it will cut its 1999 results because its sales representatives entered into unauthorized agreements involving about $7 million in revenue.
Investors weren't pleased. Legato was down 22 1/8 to 22 1/2 in early trading. Competitor Veritas (Nasdaq: VRTS) also took a hit, down 9 3/16 to 121 13/16, or 7 percent.
For Legato, Monday's plunge is the second big dip in recent weeks. The enterprise storage management company plunged 42 percent on Jan. 20, after the company missed estimates because it changed its revenue recognition policy at the request of its auditors.
Legato reported that it was unable to file its annual report by March 30 because it discovered problems with certain fourth quarter transactions. The company has asked its independent auditors evaluate these transactions, and now expects to file its annual report on or before April 14.
During its ordinary-course review of collection matters, the company found out that a small number of its sales representatives, acting outside their authority, had entered into side agreements involving about $7 million of fourth quarter revenue.
Outside auditors are currently completing their review of its 1999 financial results, and expect this review to be completed by April 14. The company anticipates that its 1999 revenue as released on Jan. 19 will be reduced.
The company also announced today its preliminary financial results for the first quarter. Revenue is expected to be in the range of $54 million to $56 million. First Call's consensus of 19 analysts has predicted the company will pull in 9 cents a share for its first quarter. Final results will be reported on April 19.
Legato also announced some management changes; Kent Smith, currently executive Vice President for strategic alliances, will expand his role and reassume responsibility for worldwide sales from David Malmstedt, who has left the company.