Router maker Netgear ( NTGR) reported a third-quarter profit, but its shares fell 7% after the company posted soft sales and said margins would be pinched in the fourth period.

The Santa Clara, Calif., maker of Internet traffic-sorting devices made $8.6 million, or 25 cents a share, for the third quarter ended Oct. 2. That's up from the year-ago $5.9 million, or 18 cents a share. Revenue rose to $111 million from $101 million a year earlier. Excluding certain costs, latest-quarter earnings were 27 cents a share. Analysts surveyed by Thomson First Call had forecast a 27-cent profit on sales of $116 million.

Non-GAAP operating margin was 12.7% in the third quarter of 2005, as compared to 9.8% in the third quarter of 2004 and 12.5% in the second quarter of 2005.

"Demand for certain of our consumer products during the latter part of the quarter actually outstripped our forecasted supply levels," finance chief Jonathan Mather said. "In addition, shipment delays increased our deferred revenue from $2.7 million as of the end of the prior quarter to $4.7 million as of the end of this quarter.

"Given the new products introduced in the third quarter and further planned introductions in the fourth quarter, we look forward to a seasonally strong fourth quarter," he said. "We believe net revenue for the fourth quarter 2005 will be approximately $124 million to $130 million, with non-GAAP operating margin in the range of 12.0% to 12.5%. Finally, we expect our non-GAAP effective tax rate to be approximately 39%."

Late Wednesday, Netgear dropped $1.48 to $19.50.