Updated from 1:45 p.m. EDT

SAN FRANCISCO -- Shares of authentication company

Vasco Data Security

(VDSI)

plunged Thursday after the authentication company missed analysts' expectations for the third quarter.

Shares of Vasco closed down $13.43, or 33.9%, to $26.13 Thursday. The stock had touched it 52-week high of $44.25 last Wednesday.

The company, which competes with

EMC's

(EMC)

security division RSA, makes hardware and software tokens that help businesses manage and control access to their networks, has seen its shares soar nearly 240% this year, mainly based on its robust outlook and its ability to beat quarterly expectations by a wide margin.

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Vasco's net income for the third quarter rose 79% to $5.9 million, or 15 cents a share, from $3.3 million, or 9 cents a share, in the year-ago quarter. Analysts had expected 17 cents a share.

Revenue increased 60% to $30 million from $18.7 million a year ago. That missed analysts' expectations of $31.29 million.

Third-quarter operating expenses, which included $600,000 worth of stock-based incentives, reached $11.7 million compared to $7.8 million in the same quarter a year ago.

Vasco won 608 new customers in the third quarter, including 106 banks and 502 enterprise security customers.

The failure to meet revenue expectations for the third-quarter revenue miss along with such "disappointing" indicators as the $33.4 million in backlog orders versus analyst estimates of $35 million and fewer-than-expected banks signed as customers could be signs of a slowdown in the business, says Robert Breza, an analyst with RBC Capital in his research note.

"It could lead bulls to question the growth story in the face of a deteriorating industry backdrop," said Breza.

"VDSI entered Q3 with $27.1 million in backlog and effectively managed to generate an additional 10% of business in the last two months of the quarter which should indicate to investors that deals are getting delayed and pushed," he said. RBC Capital makes a market in Vasco shares.

For fiscal 2007, Vasco reaffirmed its guidance and projected revenue growth at 55% to 65% over fiscal 2006. That would put revenue in the range of $117.89 million to $125.49 million. Analysts are expecting revenue of $125.24 million.

Still, investors are unlikely to forgive the third-quarter earnings miss, says Daniel Ives, an analyst with Friedman, Billings, Ramsey.

"VDSI will be in the investor penalty box for a few quarters until the Street can get comfort that another negative earnings surprise is not on the horizon," Ives said in his note.