SystemSoft's shares closed at 9 1/16, down more than 25 percent from yesterday's close of 12-3/16.
Oppenheimer cut its recommendation for SystemSoft to a "perform" from a "buy," a market source said.
SystemSoft reported net income of $749,000, or 3 cents per share, down from $1.5 million, or 6 cents per share, for the second quarter of last year. Revenues rose to $12.9 million, up 39 percent from $9.3 million a year ago.
Wall Street was expecting SystemSoft to earn 11 cents per share, according to FirstCall.
SystemSoft blamed the weak earnings on its SystemWizard software pilot program. The software, which automatically diagnoses common computer problems, aiming to prevent costly technical support calls to computer makers, is in use under the pilot program by companies including Acer, Dell, Fujitsu, and Hitachi. SystemSoft is not receiving significant revenue under the pilot program, according to a company spokesperson.
The company warned that the pilot programs, which are from two to six months in duration, will continue to depress earnings for the next two quarters.
Despite the drop in earnings, SystemSoft president Robert Angelo defended his company's strategy.
"SystemSoft will continue with the pilot program strategy in an effort to position the technology and the company for its greatest long-term potential," he said in a statement.
SystemSoft said it posted strong sales with its other product lines, which include PC card software, BIOS, and notebook battery power management software.
"Our core business is solid," said vice president of corporate marketing Paul Sereiko. "And our platfrom business is still the substantial revenue producer for the company."
Reuters contributed to this report