Updated from 10:25 a.m. EST

Juniper

(JNPR) - Get Report

slashed its first-quarter sales guidance by 13% amid a steep spending slowdown by phone companies, sending its shares diving Friday.

The Sunnyvale, Calif., networking gearmaker expects sales for the March quarter to be flat to down from year-ago levels putting the target at about $815 million, well below the $883.6 million analysts had expected.

"Certainly the macroeconomic conditions in the fourth quarter were challenging and we expect these economic conditions to continue into 2009," CEO Kevin Johnson said on an earnings conference call late Thursday.

Juniper shares fell 16.6% to $14.16 early Friday.

The dreary forecast underscores the rising concerns around tech spending amid a slumping economy. Juniper's is one of the first by a networker this year and is likely to color investor opinion about the rest of the sector, particularly outfits including

Cisco

(CSCO) - Get Report

Ciena

(CIEN) - Get Report

,

Ericsson

(ERIC) - Get Report

and

Alcatel-Lucent

(ALU)

.

JPMorgan analyst Ehud Gelblum, who had earlier this week lowered his first-quarter revenue expectations, predicting a 7% sequential sales drop, called Juniper's guidance "atrocious."

The company

posted earnings

, excluding one-time items, of 32 cents a share, up from an adjusted profit of 27 cents a share in the year-ago quarter and in-line with analysts' estimates.

Sales for the quarter ended last month were $932.5 million, up 14% from $809 million in revenue last year. Analysts had been looking for sales of $936 million.

For the full year, Juniper posted pro forma earnings of $1.18 a share, up from 87 cents in 2007 and in line with analysts' estimates. Sale for 2008 were $3.57 billion, a 26% increase over the top line of $2.84 billion in 2007, and slightly below the $3.59 billion analyst target.

When asked on the conference call about the source of the expected first-quarter sales shortfall, the executives pointed to the phone companies.

As suspected

, spending cuts earlier this week by

Verizon

(VZ) - Get Report

and

AT&T

(T) - Get Report

helped set the tone.

On Tuesday,

Verizon

said, "as a precautionary measure" it would start the year spending at a lower rate than last year. Though the company did not provide a specific target, Verizon executives said capital spending would be lower than the $17.2 billion total last year.

On Wednesday,

AT&T

took a more specific cut to its 2009 budget, calling for a 10% to 15% reduction, roughly $2 billion to $3 billion less than the $20 billion spent in 2008.

Investors now turn their attention to Cisco, which reports earnings Wednesday.