Riverstone Networks, spun-out from Cabletron Systems last year, has warned it will miss fourth-quarter estimates, hit by decreased spending from US and European service providers.
The company also said it will cut staff in a bid to reduce costs.
Fourth quarter revenues at the company are now expected to be between $50m and $54m.
Those figures are much lower than earlier Wall Street estimates of $64.7m in revenue, and a profit of 4 cents per share, according to First Call.
Some analysts maintained that the earnings shortfall was part of the wider economic situation and not a reflection of Riverstone's potential.
Reacting to the lower revenues in its fourth quarter, Riverstone said it would act to cut costs by about 10 per cent in the first quarter starting next month through a series of measures including layoffs.
It would not say how many employees would be affected or where those employees are located.
Riverstone did confirm that it would take charges of between $26m and $30m in its fourth quarter as a result of costs associated with the layoffs.
Some analysts were unsurprised by the announcement and believed it said little about the prospects for the company.
"I don't think they have done anything terribly wrong. Nothing fundamental has changed. It's just the market they are in right now," said Dave Dunphy, principal analyst, optical infrastructure, at CurrentAnalysis.
According to Dunphy, service providers in Europe and the US are focusing on upgrades to existing infrastructure such as next generation Sonet rather than investing in Riverstone's newer optical Ethernet offerings.
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