Update from 4:35 p.m. EDT

Investors pounded RightNow Technologies ( RNOW) after the business-software vendor swung to a second-quarter loss and issued disappointing guidance for the third quarter and the rest of the year.

Shares were recently off $3.13, or 20.7%, to $11.98 in after-hours trading on Instinet.

The Bozeman, Mont., company posted a loss in the quarter of $1.8 million, or 5 cents a share, compared with a profit of $1.6 million, or 5 cents a share, in the year-ago quarter. Revenue, though, grew by 28% year over year to $26.9 million.

Two cents of the loss was related to the post-acquisition performance of Salesnet, which was acquired during the quarter, the company said.

Excluding a 5-cent-a-share charge for the expense of stock options, RightNow broke even on a non-GAAP basis. On the same basis, analysts polled by Thomson First Call were expecting a profit of 2 cents a share on sales of $26.6 million.

RightNow competes in the growing market for on-demand, customer-relationship management software, which is led by Salesforce.com ( CRM). Other vendors, including Oracle ( ORCL), SAP ( SAP) and most recently Microsoft ( MSFT) have entered the market.

Speaking during a conference call with financial analysts, RightNow CEO Greg Gianforte was dismissive of Microsoft's efforts, saying, "Anyone who has watched this movie before, knows it the efforts by the larger vendors is a recipe for failure."

Looking to the third quarter, the company expects revenue to range from $28 million to $29 million. Excluding stock-option expenses, the company expects EPS to range from breakeven to 3 cents. Wall Street was looking for a 5-cent-a-share profit on revenue of $31.4 million.

For the full year, revenue will likely range from $111 million to $114 million, with non-GAAP EPS ranging from 4 cents to 9 cents. Analysts were looking for a 17-cent profit on sales of $117.7 million.

During the call, and later in an interview, Gianforte expressed some frustration with Wall Street's harsh reaction to the quarter. Asked by an analyst if he managed the company for "revenue and earnings" or "bookings and cash flow," he chose the later.

On that basis, the results look somewhat different. For the year to date, bookings totaled $71 million, while cash from operations was $13 million, for growth, respectively, of 49% and 123%.

Moreover, the company's business model is shifting from the classic perpetual software license to a subscription model. License revenue and expenses incurred in selling licenses hit the income statement at the same time. But subscription revenue is recognized ratably over a period of time and goes first to the balance sheet, while incurred expenses are recognized immediately.

Why then did the company take annual guidance down from a range of $115 to $120 million in the April call to a range of $111 million to $114 million in the June call? "We didn't have enough information in April to call it the shift to subscriptions a trend," Gianforte said in the interview. "Now we do."

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