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FalconStor shares rise, on hopes legal woes may lift

Melville-based FalconStor, which has yet to settle a

Melville-based FalconStor, which has yet to settle a federal probe into alleged actions by an ex-chief executive, said Tuesday that it had hired three executives to focus on international sales and cost-cutting. (Nov. 8, 2011) Photo Credit: Steve Pfost

FalconStor Software, of Melville, on Tuesday filed its annual report for 2011 disclosing that it lost $22.2 million for the year, with nearly half that amount going toward the costs of government investigations.

The company also disclosed that it lost $6.5 million in the fourth quarter on revenues of $25.4 million.

Despite the loss, however, shares of FalconStor, a data storage firm, rose on hopes the company has begun to emerge from its legal difficulties.

Brian Freed, an equity research analyst with Wunderlich Securities in Memphis, Tenn., said investors were encouraged to view FalconStor's prospects favorably due to several factors in the results. A primary factor, he said, was that excluding one-time charges, the company earned 3 cents a share in the quarter, while analysts had expected a loss of 2 cents.

Its shares Wednesday rose 17 cents to $3.46 on a day when stocks generally were flat.

FalconStor's results come against the backdrop of a Securities and Exchange Commission investigation and the death of its founder, ReiJane Huai, who killed himself in September. Federal authorities said Huai's death came the day before he was to plead guilty in a scheme in which he allegedly paid bribes in return for $11.3 million in software contracts during 2008 and 2009.

Photo shows FalconStor's office building in Melville.

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