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Applied Micro shares tumble after revenue warning

The optical network chipmaker's stock falls 9 percent after it discloses that sales to main customer Nortel will rise at a lower-than-expected rate in its first fiscal quarter.

Shares of Applied Micro Circuits are working overtime.

The San Diego-based company fell $9.94, or 9.3 percent, to $96.88 on heavy volume today after the company disclosed to analysts that sales to Nortel Networks, its main customer, would rise at a lower-than-expected rate in its first fiscal quarter.

Volume topped 25 million shares, dwarfing the stock's average daily volume of 4 million and ranking it as one of the most active stocks on the Nasdaq, surpassing such tech giants as Microsoft and Cisco Systems at one point.

Management disclosed to analysts yesterday that sales to Nortel would only grow in the 9 to 10 percent range this quarter from the previous quarter, compared to the initial expectation of growth in the midteens.

The company did not revise earnings expectations and is still sticking to its forecast of 20 percent revenue growth from the previous quarter.

"We feel very comfortable with the revenue and earnings estimates that are out there for us on the Street," Applied CFO Bill Bendush said in an interview.

Nortel comprises about 40 percent of the company's total revenue, but the maker of chips for optical networks maintains confidence in its non-Nortel business sales, which should help the company meet expectations for the quarter.

Bendush said that the company should grow its non-Nortel revenue by at least 30 percent from the previous quarter, compared with the 15 percent sequential growth the company has generated in each of the past two quarters.

The news has not rattled analysts. Credit Suisse First Boston and Frost Securities both reiterated their "strong buy" rating on the stock, which has ranged from $158.87 to $14.06 over the past year.

In the previous quarter, Applied Micro posted net income of $20.6 million, or 16 cents a share, compared with the quarterly revenue a year earlier of $3.4 million, or a split-adjusted 3 cents. Revenue rose to $57 million from $28.7 million.

Analysts surveyed by First Call/Thomson Financial expected the company to make 14 cents. For the June quarter, analysts predict the company will post earnings of 17 cents a share.