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Legg Mason Warns

The asset manager cites a shift to less lucrative fixed income instruments.

Legg Mason (LM) - Get Legg Mason, Inc. Report warned Tuesday of a steep earnings shortfall, citing a weaker-than-expected showing in September.

The Baltimore-based asset manager said it expects to make 96 cents to $1.02 a share, far shy of the $1.16-a-share Thomson Financial consensus estimate.

Legg Mason said revenue fell 1% from second-quarter levels, as the asset mix shifted toward lower revenue-generating fixed income assets. Legg Mason was also hit to the tune of 4 cents a share by what it called "unanticipated mutual fund distribution fee expenses payable by our acquired business to our principal third-party distributor that relate to prior quarters."

Legg Mason estimates that its assets under management as of Sept. 30 were $890 billion (approximately 50% fixed income, 35% equity and 15% liquidity). Assets under management at June 30 were $855 billion.

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The company also confirmed that its integration of the business it acquired in December 2005 remains on schedule, and that it continues to expect to achieve the previously announced cost savings from that integration.