Profit warning stings Network Peripherals

Network Peripherals (Nasdaq: NPIX) plunged 2 7/16, or 15 percent, to 14 1/16 Tuesday after it warned that it would miss analysts' sales and earnings estimates in its second quarter.

The maker of high-speed switches said it now expects second-quarter sales to come in below $1 million this quarter, well short of analysts' estimates of $5.6 million.

First Call Corp. consensus expected Network Peripherals to lose 17 cents a share in the quarter.

On Tuesday, Prudential Securities cut the stock from an "accumulate" rating to a "hold."

"Early in the quarter, new advanced software features were incorporated into the company's then current software release," the company said in a prepared release. "This new software release over time proved to be unstable in certain environments and this affected the "sales out" of the company's OEM and, to a lesser degree, channel partners in the form of sharply reduced re-stocking orders.

It went on to say the software instability issue caused it to delay shipment to a large Asian customer for its acceptance testing.

Network Peripherals said it has identified and addressed these software instability issues and believes that it has resolved them.

"While we are clearly very disappointed with the financial expectations for the current quarter, we believe these are short term timing issues," said CEO Bill Rosenberger. "We believe these technical issues have been resolved although too late in the quarter to mitigate the revenue shortfall. Shipments have resumed, and acceptance testing, according to our Asian customer, is proceeding well and is expected to be complete in July."

Last quarter, Network Peripherals lost $3.8 million, or 28 cents a share, on sales of $3.3 million.

Its shares surged to a 52-week high of 79 in February after falling to a low of 15 5/16 in September.

Four of the five analysts following the stock rate it either a "buy" or "strong buy."