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(Reuters) - Shares of network gear maker F5 Networks Inc (FFIV.O) fell as much as 20 percent and dragged down others in the sector after the company estimated second-quarter results way below analysts' expectations.
More than a dozen brokerages cut their price targets on F5's stock after the company said adjusted earnings were likely to be $1.06 to $1.07 per share, compared with the $1.23 analysts were expecting.
"Outside of the financial crisis, this quarter (second quarter) was one of the worst in F5's history," BMO Capital Markets analyst Tim Long said.
The bleak results showed that U.S. federal budget cuts, coupled with weak spending by telecom companies, are starting to hit network equipment makers.
F5 shares fell to a year-and-a-half low of $71.95 on the Nasdaq in regular trading.
Rival Radware Ltd (RDWR.O) also estimated weak first-quarter results on Friday, sending its shares down 24 percent to $28.62. About 3.6 million Radware shares changed hands -- 27 times their 10-day moving average volume.
The estimates stoked investor fears of a slowdown in the sector.
Cisco Systems Inc (CSCO.O) shares closed down 2 percent at $20.61, while Juniper Networks Inc's (JNPR.N) stock closed 3 percent lower at $17.55. Shares of Citrix Systems Inc (CTXS.O), Fortinet Inc (FTNT.O) and Aruba Networks Inc ARUN.O also ended lower.
F5 said on Thursday government sales were down in the quarter ended March 31 from last year, partly due to sequestration -- a series of automatic spending cuts that came into effect in March after Congress failed to find an alternative budget plan.
A wide array of companies ranging from Delta Air Lines Inc (DAL.N) and US Airways Group LCC.N to Britain's Smiths Group Plc (SMIN.L) have warned of lower revenue due to government spending cuts in the United States.
"While some impact from sequestration was expected, the impact on the telco vertical is probably more surprising," BMO Capital's Long said.
F5's estimated revenue of $350.2 million for the second quarter was below the average analyst expectation of $375.8 million, according to Thomson Reuters I/B/E/S.
Though F5 attributed most of the revenue miss to a delay in orders from its customers, some analysts said the company was losing market share to rivals such as Citrix.
F5's share of the application delivery controllers (ADC) market fell to 55.6 percent in 2012 from 58.1 percent in 2011, while Citrix's rose to 19 percent from 17.3 percent, according to a Piper Jaffray note.
ADCs -- used in data centre applications to improve the performance of Web-based applications -- accounted for about 59 percent of F5's total 2012 revenue of $1.38 billion.
The ADC market, which saw double-digit growth last year, may grow only by 2 percent in the first quarter, FBN Securities analyst Shebly Seyrafi told Reuters.
William Blair analyst Jason Ader said the application delivery networking market has become somewhat saturated, with less low-hanging fruits remaining, and competitive pressure has begun to have a material impact. He cut his rating on the F5 stock to "market perform."
Reporting by Sruthi Ramakrishnan and Chandni Doulatramani in Bangalore; Editing by Joyjeet Das, Maju Samuel