Gadzoox Networks sees 2Q shortfall

Gadzoox Networks shares slipped to $7 a share in after-hours trading Thursday after warning that its second-quarter sales will be 15 percent to 25 percent lower than the $9 million most analysts were expecting.

It also said it will provide a one-time reserve of between $9 million and $11 million for production cancellation penalties and excess inventory that was manufactured in reliance on the company's earlier internal forecasts.

Gadzoox (Nasdaq: ZOOX) shares closed up 3/16 to 10 5/16 ahead of the news before slipping as low as 7 in after-hours trading.

Company officials said part of the shortfall is due to sluggish sales of its new Capellix family of switches.

"We are in a transition period, and the new executive team is taking the necessary steps to market and support Capellix," said CEO Michael Parides in a prepared release. "We believe that we have all the ingredients to execute, and I am confident in our ability to deliver on our current plans."

Gadzoox missed analysts' estimates in its first quarter, posting a loss of $9.4 million, or 35 cents a share, on sales of $9 million.

First Call Corp. consensus was expecting it to post a loss of 30 cents a share in its second quarter and $1.16 a share in the fiscal year.

The stock surged to a 52-week high of 98 last September before falling to a low of 7 5/8 in August.

Seven of the eight analysts following the stock rate it a "hold."