Companies' stocks often overreact to disappointing quarterly results, which is why it's wise to check back and see if the lower-than-expected revenues or income was really a sign of things to come or just a blip.

But with six months of hindsight, it's now clear that was no blip last October when Swedish telecommunications equipment maker LM Ericsson [ERIC] cut its third-quarter forecasts in a surprise announcement that sent its stock plunging almost 24% in a single day. Since that day of turmoil last fall, which led to the resignation of Ericsson's chief financial officer, and later, an aggressive round of layoffs, the company's stock has lost another third of its value. The stock's sub-$20 share price is less than half its 52-week high of $43.41.

Zacks Investment Research says the worst is probably yet to come for Ericsson. In a research report on Seeking Alpha, Zacks notes that the company, until recently one of the sector's strongest players, now faces a shaky outlook. While Ericsson recently forecast an improved 2008 in the wake of disappointing fourth-quarter 2007 earnings, Zachs says: "We remain concerned that this was not a one-off delay in orders but a larger trend of more competitive pricing by the equipment vendors." --Andrea Orr

See April 14 post from Seeking Alpha
See Oct. 16 post from Tech Confidential