Legg Mason Inc's quarterly loss widened as it pared toxic assets from its books and cut its quarterly dividend 88 percent to 3 cents per share, sending the money manager's shares down 14 percent.

It reported a net loss of $325.1 million, or $2.29 per share, for its fiscal fourth quarter to March 31, compared with a loss of $255.5 million, or $1.81 per share, in the year-earlier quarter.

Analysts surveyed by Reuters Estimates were expecting the Baltimore company to lose $2.33 per share. Revenues fell 42 percent to $617.2 million, against the average analysts' forecast of $611.5 million.

The company's shares were down $3.26 to $19.27 on the New York Stock Exchange.

Although the results were close to expectations, the sharp dividend cut seemed to be driving down the stock, said Morningstar analyst Alan Rambaldini. The dividend cut is weighing on the share price. I didn't see that coming at all. It will not be for another year that they would be able to raise it again, He said.

Speaking on a conference call with analysts, Legg Mason chief executive Mark R. Fetting said that Our shareholders deserve better results and we are determined to pick up the pace of our own recovery, he said.

In early March, Legg Mason sold $1.8 billion worth of structured investment vehicles from its money market funds. It said on Tuesday the sale resulted in losses totaling $367.4 million after taxes and operating expenses, or $2.59 per share.

One of the largest publicly traded U.S. money managers and home to once-vaunted stock picker Bill Miller, Legg Mason sold the assets for 25 cents on the dollar.

The company said assets under management stood at $632.4 billion as of March 31, down 9 percent from $698.2 billion at December 31, mainly due to net outflows of $43.5 billion. It had about $640 billion under management at the end of April, executives said on a conference call this morning.

Like other asset managers, Legg Mason had seen sharp outflows as markets declined and on concerns over the money market funds.

However, the outflows were lower than the total outflows of $77 billion Legg reported in its December quarter.

Jefferies & Co. analyst Dan Fannon said Monday he expected outflows of around $40 billion for the fourth fiscal quarter, a rough consensus, because of improved stock markets and seasonal habits of investors. The flows number the company reports will likely have a impact on the stock price, he added.

Legg Mason shares closed at $22.53 on Monday, nearly a third of their value a year ago when they closed at $64.26 on May 5, 2008. However, shares have recovered from a low of $10.37 on March 9 after the structured investment vehicle sales.

(Additional reporting by Christopher Kaufman and Svea Herbst-Bayliss; editing by Dave Zimmerman and Derek Caney)