Turnstone cuts 4Q expectations again

Turnstone Systems (Nasdaq: TSTN) expects to report fourth quarter results even worse than expected.

After market close Tuesday, the maker of systems for providing DSL service said it sees an operating profit of $2 million to $3 million, excluding special charges, on revenue of $26 million to $28 million. That means Turnstone expects sales to be slightly less than half of revenue in the third quarter, when the company earned $12.8 million, or 19 cents per share, on revenue of $56.2 million.

First Call consensus predicted a fourth quarter profit of 8 cents per share, on revenue of $41.7 million.

Shares of Turnstone fell to 4.4375 in afterhours activity on the Island electronic communications network, following the warning. Turnstone fell 0.875 to 6.5625 in Tuesday's regular trading ahead of the preannouncement.

Tuesday's announcement marks Turnstone's second fourth quarter warning in two months. The company in November lowered expectations because of a weak field for competitive local exchange carriers that buy Turnstone's equipment.

Turnstone plans to record one-time charges of $13 million to $15.5 million to cover inventory and bad debt. Some customers recently canceled or delayed orders, said Rick Tinsley, president and CEO.

"At this time we expect to see continued weakness among our CLEC customers, therefore our outlook for the next several quarters remains cautious," Tinsley said. "However, our long-term strategy has not changed and we continue to focus on diversifying our customer base and expanding our international presence.">