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Wireless Facilities Learns a Hard Lesson

"Theoretically, if revenue grew 10% next year, EPS could grow 15%," said DeMarco. "If we made an acquisition or two, 20% EPS growth is doable for us. That's very achievable."

That bullish comment seemed to strike a nerve with some on the conference call. "You've missed earnings and revenue projections for three quarters now," said Tim Hasara, a portfolio manager at Kennedy Capital. "Can't you refrain from optimistic forecasts you can't meet?"

"Being 14 months out from the end of 2006," DeMarco replied, "it's hard to give guidance."

"But you did," Hasara shot back. "Saying 15% growth -- that's guidance."

And therein lies a lesson that many tech companies, not just WFI, have had to learn the hard way. Investors can forgive an earnings miss if a series of devastating storms drive up costs. They'll even cut some slack as you find your footing in a foreign market. But if, after hitting a bunch of speed bumps, you don't have the sense to hit the brakes on your guidance, heaven help you.

Companies like Microsoft (MSFT), Cisco (CSCO) and eBay (EBAY) long ago learned this trick: In growing but uncertain markets, conservative estimates are safest. With tech stocks in particular, that's the way that you do it.

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