(IPAS) - Get Report

plunged 20% late Wednesday after the mobile networking company warned of a sharp second-quarter shortfall.

The Redwood Shores, Calif., company forecast second-quarter earnings of 5 to 6 cents a share, or 6 to 7 cents on a so-called non-GAAP basis that excludes certain costs. Wall Street analysts had expected the software and services provider to earn 9 cents.

The company also projected second-quarter revenue of around $40.25 million, up from $33.1 million a year earlier but down from the prior quarter's $40.7 million. Analysts surveyed by Thomson First Call had forecast revenue of $43.8 million.

iPass also called for a sequential revenue increase of 3%-6% in the third quarter over reduced second-quarter levels. That would put third-quarter revenue in the neighborhood of $42 million, well short of Wall Street's $47 million estimate.

The company wasn't terribly clear about what caused the shortfall. Investors punished the stock accordingly, knocking it down $2.09 in postclose trading to $8.50.

"While we are disappointed in this quarter's revenues, we believe that they result primarily from a one-time operational decision which has now been reversed, and the fundamental demand for our offerings remains strong," said CEO Ken Denman.

"Our business continues to demonstrate strong growth characteristics. Specifically, we are still experiencing significant new customer acquisitions, adding approximately the same number of new customers as we did in the first quarter. We are also seeing very good progress on the broadband front, including adding 3,000 broadband access points in the quarter, while at the same time generating strong free cash flow," he added.