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CacheFlow battered on worries about outlook

Even after beating analyst expectations for the second quarter, CacheFlow (Nasdaq: CFLO) lost almost 30 percent Wednesday.

Shares of the vendor of network caching devices and technology dropped 22.81 to 54.

After market close Tuesday, CacheFlow reported a fiscal second quarter loss of $3.1 million, or 9 cents per share, excluding special charges. The loss was 2 cents less than the First Call consensus estimate.

Revenue in the quarter rose 573 percent year-over-year and 45 percent sequentially to $32.5 million.

The numbers, however, were not good enough for investors as shares of the company took a big hit in after-hours trading yesterday and early action Wednesday.

According to Bear Stearns analyst Robert Fagin, three concerns affect the company's outlook. In a research note, Fagin highlighted a 13 percent sequential decline in dollar sales, management's unchanged guidance for fiscal 2001 on an absolute dollar basis, and overly aggressive guidance for growth in fiscal 2002.

Accordingly, he cut CacheFlow's numbers for revenue to $155.6 million and earnings to a 23 cent loss for fiscal 2001. For fiscal 2002, Fagin raised revenue estimates to $373.5 million while lowering earnings per share to 52 cents.

Analyst Christopher Stix at Morgan Stanley saw the drop in share value as a reaction to the deceleration in sequential growth and a failure to raise guidance for the second half of 2001. Stix said he remains confident in CacheFlow's long-term business prospects but noted that the stock is likely to be volatile over the next several months.

Dain Rauscher Wessels raised its loss per share estimate for the company to 25 cents for fiscal 2001 but reiterated a "strong buy-aggressive" rating with a price target of $150.