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Updated from 2:01 p.m. EDT

Investors fled from

Veeco Instruments

(VECO) - Get Veeco Instruments Inc. Report

Friday, sending its shares plunging more than 30%, after the company warned that its earnings would be sharply below forecasts because of an $11 million shortfall in sales.

In addition, five months after merging her data storage business with rival Veeco in a $420 million stock swap, Christine B. Whitman, 49, stepped down as president and chief operating officer, ending a 22-year career.

The announcements came late Thursday night, and by Friday's close Veeco's stock finished down $34.97, or 34%, at $67.56, after falling as low as $58.50. Late last month, Veeco's shares were trading close to their 52-week high of $122.50, which was reached in March.

The Plainview, N.Y.-based company said sales for the third quarter were approximately $93 million, 7% better than in the comparable quarter last year but below Veeco's previous predictions of $104 million. It predicted earnings of 18 to 22 cents a share, well below the consensus estimate of analysts polled by

First Call/Thomson Financial

, who had predicted earnings of 40 cents a share.

The company primarily blamed a $7 million sales shortfall at


, a division consisting of the company formerly headed by Whitman, that cost 15 cents a share.

Whitman joined CVC, founded in 1934 as a division of Rochester-based

Eastman Kodak


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, in 1978. She rose through the ranks to become vice president of sales and marketing by the late 1980s, when the company fought with government regulators over shipments of vacuum pumps to Iraq.

In that contentious time, Whitman raised capital and bought out the company, eventually taking it public last year with help from

Lehman Brothers


Just months after completing the public offering, Whitman sold her company to Veeco, taking the job of president and chief operating officer at the combined company.

In May, with the merger complete, Veeco began implementing a two-tiered plan: The company would expand its optical networking business while shrinking CVC's drive business in hopes that it could run profitably at the level of around $90 million in revenue. The CVC unit, which had expanded from 100 to 400 employees under Whitman's reign, laid off 180 workers, most of them at a plant in Virginia, last year.

Delayed orders and shipments, a slowdown for demand in the disk drive business, and a lower-than-expected amount of so-called turns business -- orders that come in and go out in one quarter -- caused the unit's sales to shrink more than the company had planned.

"Their forecasting was a little aggressive, even after they merged with Veeco," said Byron N. Walker, analyst for

UBS Warburg

. He lowered his rating to hold Friday, and his firm has not done investment banking business for Veeco. "She's done a great job of building that company, but it sells into a very difficult market."

Since the merger, CVC executives have quietly slipped out the door. Emilio O. Dicatlado, who served as chief financial officer of CVC, departed during the quarter, and Mehrdad M. Moslehi, the chief technical officer, submitted his resignation during the past month, according to Debra Wasser, a company spokeswoman. Giovanni Nocerino, another executive of CVC, left during the merger.

Though Veeco highlighted CVC's problems and issued a separate statement detailing Whitman's departure, the unit's $7 million sales shortfall made up only part of Veeco's $11 million disappointment. The Ion Tech subsidiary, which makes optical networking products, missed shipments as customers took longer than the company had expected to test the product, an optical measurement system known as Spector IBD.

Those missed shipments will cost 5 cents a share in the quarter, the company said.

"I know it doesn't make people feel any better, but in downturns, people miss numbers all the time," said Eric M. Ross, analyst for

Thomas Weisel Partners

. "They had very good technology, but it wasn't as good operations-wise as some other companies." Ross rates the stock strong buy, and his firm has not done underwriting for Veeco and did not advise either merger partner.