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Advanced Switching plunges to all-time low

The switch maker's shares drop 46 percent after it warns it will post a wider-than-expected loss in its second quarter and lay off 20 percent of its staff.

Advanced Switching Communications shares plunged 46 percent Monday after the switch maker warned it will post a wider-than-expected loss in its second quarter and lay off 20 percent of its staff.

Shares dropped $1.33, or 46 percent, to close at $1.57, after hitting an all-time low of $1.50 earlier Monday.

Company executives told shareholders that because it failed to "reach agreement with a major customer on a large purchase order," it will post a loss between 20 cents and 21 cents a share on sales of only $1 million.

The First Call consensus pegged the Vienna, Va.-based company for a loss of only 5 cents a share in the quarter on sales of $13.5 million.

Last quarter, Advanced Switching posted a loss of $1.3 million, or 3 cents a share, on sales of $13.5 million.

The company added that second-quarter sales were also hampered by the continuing weakness in the global telecommunications equipment market.

"We are deeply disappointed in our performance for the quarter," Chief Executive Asghar Mostafa said in a statement. "We are taking immediate steps to restructure our operations, reduce costs and address the concentration of our customer base. The near-term environment for our sector will continue to be very challenging."

The company will lay off roughly 30 employees and take a one-time restructuring charge of $1.3 million in the third quarter. It will take a one-time charge of $7 million in the second quarter to cover the costs of writing off excess inventory.

Despite the gloomy outlook and precipitous drop in the company's stock price, JP Morgan H&Q analyst Michael Neiberg reiterated his long-term "buy" recommendation on the stock Monday.

"The drastic revenue shortfall was primarily the result of the company's failure to close a large individual purchase order during the quarter, exacerbated by other customer order deferrals and continued slowdown in the overall communications equipment industry," Neiberg wrote in a research note. "With over $90 million in cash and an expected cash burn of between $6 million and $7 million this quarter, we do not expect liquidity to be a major concern."

Mpower Communications, Qwest and Broadview Networks are among its largest customers.

Advanced Switching shares rallied up to a 52-week high of $22.01 shortly after its initial public offering in October.

Two of the three analysts tracking the stock rate it a "buy."