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Optical/IP

Sycamore Suffers Sales Shortfall

Optical switch vendor Sycamore Networks Inc. (Nasdaq: SCMR) says its sales for the fiscal third quarter will be well below expectations, which analysts say could be due to a shortfall in orders from Sprint Corp. (NYSE: S).

The company estimates sales for the quarter will be about $21 million, compared with $43.5 million in last year's fiscal third quarter. Wall Street analysts expected sales of approximately $45.3 million for the quarter. (See Sycamore Reports Prelim Q3.)

The company also says the revenue shortfall could affect its stated objective of meeting or exceeding full-year revenues from last year. Revenue for fiscal 2007 was $156 million.

In a company statement, Sycamore blamed the revenue shortfall on "lower-than-expected orders associated with one of [its] major customers." Sycamore would not comment on which customer that was, but analysts say the most likely culprit is Sprint.

Because the wireless carrier accounted for more than 50 percent of Sycamore's sales last year, one analyst called Sprint the "odds-on favorite" for causing the sales shortfall.

If Sprint is the cause of Sycamore's shortfall, the company is not alone. Sprint's weak spending also affected Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA)'s most recent quarter. (See Wireless Slowdown Hits Tellabs.)

In his company's earnings call, Tellabs CEO Rob Pullen said the wireless carrier was cutting spending as it re-evaluated its strategy. "That carrier has a new CEO, and they're minimizing spending while they figure out their strategy," Pullen said. (See Embarq CEO Resigns to Run Sprint.)

In early afternoon trading, shares of Sycamore were down $0.42 (11.2%) to $3.32.

— Ryan Lawler, Reporter, Light Reading

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