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Networking shortfalls hit Wind River

Slowing spending among network equipment makers hits Wind River Systems, forcing it to cut executive salaries, mandate a week of vacation, and lay off about 300 employees.

Slowing spending among network equipment makers has hit Wind River Systems, forcing the company to cut executive salaries, mandate a week of vacation, and lay off about 300 of its 2,000 employees because of lower-than-expected revenue.

The Alameda, Calif., company, whose operating systems power network equipment and numerous other non-PC computing devices, said Thursday that revenue growth projections of 27 percent for the fiscal quarter ended April 30 will instead be 18 percent to 20 percent. The company doesn't know if it will be able to meet First Call's earnings projection of 6 cents per share.

To cut expenses, executives will take a 10 percent pay cut, the company said. Wind River will require its employees in North America to take a mandatory week of vacation in the first week of July--the same week server maker Sun Microsystems will do the same.

The revenue shortfall came during the last month of the quarter, when revenue dropped from customers such as Lucent Technologies, Nortel Networks, and Cisco Systems, which use Wind River software in their networking equipment. These networking companies have been hammered by slowed computing equipment spending.

As recently as two weeks ago, Wind River had stood by its earlier guidance. Then the April financial results showed the decreased revenue from the networking companies.

About 60 percent of Wind River's revenue comes from telecommunications companies. The company, the dominant seller of embedded software, faces competition from Red Hat and other Linux companies as well as from established companies such as QNX.

"For the first time, we are seeing customers postpone investments for new projects, which brings down their short-term spending in research and development," Wind River Chief Executive Tom St. Dennis said in a statement.

The company, which reports full results May 17, gave no estimates for future quarters. "Our ability to forecast has been reduced by substantial changes in the way our customers are making purchasing decisions," St. Dennis said.