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Powerwave Continues to Ebb

The wireless-network component maker warns of another shortfall, sinking its shares.

Powerwave (PWAV) saw its shares crushed anew by Cingular's stinginess.

The Santa Ana, Calif., wireless-network component maker warned Monday of a 23% sales shortfall in the third quarter. Powerwave cut its revenue guidance to about $157 million from $205 million and earned a swift downgrade to neutral from JPMorgan.

The company blamed most of the weakness on its own operational snags, such as a bungled software upgrade and a production-flubbing factory shift. Powerwave also says it saw a slowdown in orders, which came as a slight surprise to some observers.

JPMorgan analyst Kim Anderson wrote in a research note that it appears "demand for wireless infrastructure is worse than we thought. We had been expecting demand to bounce back in the fourth quarter."

Powerwave fell $1.31, or 16.8%, to $6.49 in afternoon trading.

A big part of the problem appears to be Cingular again, say analysts. In July, the wireless venture co-owned by

AT&T

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and

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cut its planned 2007 spending by 20%, a reduction that punished outfits like Powerwave, one of the telecom gear suppliers to the nation's No.1 wireless shop.

When Powerwave

missed its second-quarter revenue target, it blamed a lack of spending from big U.S. customers. Prior to that, in April, Powerwave pointed to sluggish demand from customers like Cingular when it

cut is first-quarter sales forecast 20%.

"While we are extremely disappointed with the preliminary results for the third quarter, we do believe the long-term outlook for our business remains strong, and we continue to believe that we are well positioned with our products and customers," CEO Ron Buschur said in a press release.

This third shortfall in as many quarters has some Powerwave watchers concerned that a pending acquisition of closely held Filtronic's infrastructure business could get killed.

"While we continue to believe the Filtronic business is a good strategic fit for Powerwave, we believe there's a risk Filtronic could back out and pay the $3 million breakup fee," Anderson writes in her report.

Last month, Powerwave had to adjust the terms of the pending deal by offering more in cash and less in stock to reflect its falling share price. The stock is down 58% from its March high.