Bay Networks Forecasts Revenue Drop

Bay Networks Inc. said fiscal third-quarter revenue will fall below the previous quarter’s, hurt by price cuts on key networking products and weaker-than-expected sales. The No. 3 computer-networking company said revenue in the quarter ending in March will be 10% less than the $645 million it reported in the quarter ended in December. Bay has cut prices on its switches that use so-called fast Ethernet technology amid increasing competition from larger rivals Cisco Systems Inc. and 3Com Corp. At the same time, sales of Bay’s new, faster switches haven’t yet taken off. “Orders for the new products are not ramping as quickly as they expected,” said Martin Pyykkonen, an analyst at CIBC Oppenheimer, who lowered his third-quarter revenue estimate to $630 million from $670 million. The company said it expects profit to be less than in the previous quarter and gross margin to be narrower than that quarter’s 51.5%. Bay was expected to earn 28 cents a share in the third quarter. The Santa Clara-based company also said it will take a third-quarter charge of $154 million, or 67 cents a share, to write down research and development for recent acquisitions. Bay shares fell $2.69 to close at $24 on the New York Stock Exchange.