Updated from Oct. 25

Shares of

Flextronics

(FLEX) - Get Report

plunged after the company narrowly missed Wall Street's sales expectations for its second quarter and issued tepid guidance for the next two quarters.

In early Tuesday trading, shares were off $1.40, or 11.2%, to $11.14.

The major cause of the light guidance given Monday was the already-announced delay in the ramp of a $2.5 billion

outsourcing deal with

Nortel

( NT), which would have added $100 million to the December quarter.

Moreover, some Wall Streeters who attended the company's recent analyst day thought the restrained outlook was out of sync with the company's extremely bullish tone last month. "Is Wall Street being too harsh?" asked one sell-side analyst who couldn't be named ahead of publishing his formal note. "Not at all -- they were light this quarter

when Nortel was not expected to contribute and even without the deal, why aren't other acquisitions they've made producing more?"

Even so, the report had a number of positive indications, not the least of which was the swing to a profit after a big loss last year.

The giant electronics contract manufacturer said after the bell Monday that it earned a net income of $92.6 million, or 16 cents a share, compared with last year's loss of $100.1 million, or 19 cents a diluted share, according to generally accepted accounting principles.

Excluding various items, the company earned $98.5 million, or 17 cents a share, on sales of $4.14 billion, an increase of 18%. Analysts polled by Thomson First Call were expecting a profit of 17 cents a share in the second quarter with sales of $4.2 billion. The company would have earned $47.5 million, or 9-cents a share, last year, without heavy charges for restructuring and other items.

Gross margins increased by 130 basis points in the September quarter, and operating margins were up 110 basis points year over year.

"We are really starting to earn some money from our business," CEO Michael Marks said during a subsequent Monday conference call. Marks repeated a point he has made frequently in the last few quarters, reminding analysts that the company will not sacrifice profitability for top-line growth. "We're driving margins and cash flow," he said.

Looking forward, the company said it expects to earn 18 cents to 21 cents a share before items in the third quarter, on sales of $4.1 billion to $4.4 billion. Wall Street was expecting a 22-cent-a-share profit and revenue of $4.62 billion.

For the fourth quarter, the company expects to earn 15 cents to 18 cents a share on sales of $3.8 billion to $4.2 billion. Analysts were projecting a 17-cent profit on sales of $4.25 billion. Although the Nortel deal will begin to contribute in March, the slow start will cost the company about a penny a share in the quarter, Marks said.

In addition to the Nortel problem, Marks said end-demand in some consumer and communications segments was not as robust as expected. But, he quickly added, "This may be a result of some inventory reductions or it could be nothing more than some caution based on oil prices, the election and so on. In either case, we see that as not that big a deal, at least for Flextronics."

Marks has been critical of some Wall Street analysts, implying that they don't really understand the company's business model. He said that expectations for a $1-a-share profit for fiscal 2006 "are not reasonable." The company, he said, can not continue to grow its net that quickly. The consensus estimate for the year ending in March 2006 is for a profit of 97 cents a share.

He forecast net income growth of 20% to 30% for the next few years.