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Foundry Slammed After Warning

Light Reading
News Analysis
Light Reading
12/19/2000

Bad news from the Fed, coupled with an earnings warning, spelled disaster for networking switch vendor Foundry Networks Inc. (Nasdaq: FDRY).

Shares of the company plunged 46 percent to trade at $16.75 a share in after-hours trading, according to Island ECN. The free-fall began just after the company announced that it expects to miss its quarterly targets for its fourth quarter, which will be announced in January.

In its warning, Foundry reported that it expects fourth-quarter earnings of 11 cents to 14 cents a share on revenue of $100 million to $110 million. This is far off analysts’ expectations, which called for earnings of 24 cents a share on revenue of $129 million, according to First Call estimates.

The company cited a reduction in capital spending over the last few weeks as the primary reason for lowering expectations. Foundry makes Layer 2 and Layer 3 Ethernet switches that are used in Internet Service Provider (ISP) networks to load-balance traffic and provide Ethernet data services.

That makes for a string of bad news for the company. Foundry is currently facing a multimillion-dollar sexual harassment lawsuit brought by the company’s former VP of Marketing (see Ex Foundry VP Sues Company, CEO).

--Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

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