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CoSine points at low industry spending

The emerging equipment provider announces that it expects less revenue and greater losses during the first quarter because of slower industry spending.

Emerging equipment provider CoSine Communications announced that it expects less revenue and greater losses during the first quarter because of slower spending in the telecommunications industry.

Shares of CoSine fell $1.50, or 27 percent, to $4 in after-hours trading. During the day, the stock edged down 31 cents to $5.50

CoSine is just the latest network equipment provider to warn of slowing sales amid a gloomy environment for the entire market. Others, such as Nortel Networks, Cisco Systems and Copper Mountain Networks, among others, have been hit hard by a downturn in spending among network operators and a cloudy economic outlook in the United States.

Although phone service carriers are slowing spending, which creates problems for every company in the market, one analyst thinks that CoSine's problems are unique.

"In tough economic times, it's hard to convince carriers to try something new to make money," said Eric Hindin, an analyst at SunTrust Equitable Securities, the equity investment and research arm of SunTrust Banks.

"What they're selling is something that's new and innovative to carriers, and products like that are more susceptible to tentativeness" on the part of customers, he said.

The Redwood City, Calif.-based company said after the markets closed on Wednesday that it has lowered first-quarter revenue expectations to between $6 million and $8 million. The company also expects second-quarter revenue to increase 15 percent to 20 percent from the first quarter. CoSine reported revenue of $17.3 million for the fourth quarter.

As a result, the maker of Internet switches and software expects to report a loss in a range of 28 cents to 30 cents a share. Wall Street forecasted a loss of 23 cents a share, the consensus estimate of six analysts surveyed by First Call.

"The slowdown in telecommunications spending has negatively impacted the ability of service providers to rapidly commit to new technologies," CoSine CEO Dean Hamilton said in a statement.

Hamilton also mentioned that CoSine is focusing on markets where it is possible to reach profitability in 2002, and that the company has $280 million in cash and short-term investments.

Cosine makes a set of networking equipment that allows a network operator to offer Internet-based services such as secure connections, or virtual private networks (VPN). CoSine went public in September of last year.