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Proxim to widely miss earnings estimates

The wireless network equipment maker slashes second-quarter revenue estimates because of a lurching business climate.

Wireless network equipment maker Proxim slashed second-quarter revenue estimates Thursday because of a lurching business climate.

The Sunnyvale, Calif.-based company said it expects revenue between $23 million and $26 million and pro forma earnings between 3 cents and 7 cents a share. Executives also hinted that the company might consider future layoffs.

Analysts surveyed by First Call expected the company to generate revenue of $32.6 million and earnings of 16 cents a share for the quarter. Proxim posted revenue of $29.5 million and pro forma earnings of 14 cents a share in the first quarter.

"The telecom equipment industry slowdown has finally reached the wireless LAN (local area networks) side," said Colin McCardle, an analyst with investment bank Bear Sterns.

Proxim still expressed faith in the long-term demand for wireless technology but blamed the expected earnings miss on the broad slowdown currently raising havoc in the tech sector.

The company also said that it will take a charge in the quarter to account for excess and outdated inventory as well as a restructuring charge.

"A lot of purchase commitments and decisions have been deferred or just pushed out indefinitely until people get a clear idea of what their spending budgets will look like," Proxim Chief Executive David King said in a conference call.

King also said the company misjudged the significance of the slowdown in sales of older equipment and hinted that future layoffs are a possibility. "We will be looking to cut discretionary spending and even looking at some restructuring actions on the headcount side coming out of this weak (second quarter)."

Proxim makes equipment that runs on a networking standard called HomeRF, technology that wirelessly links computers and laptops together so they can swap data and share a Net connection. Companies like Motorola, Siemens and Compaq Computer make equipment that use the standard.

However, Proxim is getting heat from another protocol, 802.11B, also known as Wi-Fi, which has received support from tech giants like Intel, Lucent Technologies, Cisco Systems, 3Com and Apple Computer, leading some analysts to believe that HomeRF is on its way out the door.

Proxim's King admitted in the conference call that Wi-Fi has a large advantage in the business market, but also believes that HomeRF still fights a "pitched battle" for supremacy in the home market.

On the bright side, analysts expressed optimism over Proxim's new product line called Harmony, which is designed for businesses and can run on a variety of standards, which will make the current conflict less of an issue.

The company will release earnings for the second quarter on July 17.