As the hot public offerings from the likes of athenahealth (NASDAQ:ATHN) and Constant Contact (NASDAQ:CTCT) indicate, Wall Street loves Web-based on-demand software. Now, even traditional software players are moving into the on-demand realm. Saba (NASDAQ:SABA) is one of them. But it's not having an easy time. According to its fiscal-first-quarter report late last week, revenues came in at $25.5 million, up 10% from the same period a year ago, but it also suffered a net loss of $2.4 million, or $0.08 per share.

Saba develops software to help improve employee productivity and education, and its client list includes such big names as Dell (NASDAQ:DELL) and Home Depot (NYSE:HD). Right now, it's feeling the pain of transitioning to subscription revenue: License revenues plunged 24% to $4.7 million.

Keep in mind that Saba wants to pursue both traditional software solutions and on-demand ones. That might cause complications and confusion, because traversing both routes will necessitate managing different code bases and business models. And for a small company -- Saba has only about $11.8 million in the bank -- it could also mean a drain on precious resources.  

So even though the Street seems to love the on-demand trend, it sees the potential for problems here. Despite the recent tech rally, Saba's stock has fallen by more than 20% since May, and it's unclear when the company will make a turnaround. On the earnings conference call, management indicated that the recovery could take "three to four years." If so, it's probably best to pass on this stock for now.

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