Officials at Cisco Systems thought they had seen better days than the one early last month when they had to announce their earnings would miss analysts’ expectations for the first time in years. But it was nothing like the day Camarillo-based Power-One Inc. would have shortly thereafter. Cisco Systems is far and away the biggest customer of Power-One, a distributor of power supplies for electronic equipment manufacturers. So, a few days after Cisco Systems’ announcement, when Power-One had to announce its own “revision” of expectations on Feb. 9, its stock immediately dropped almost three dollars to $28.75 and the fallout still hasn’t stopped. “In the December quarter, 36 percent of Power-One’s revenue came from Cisco,” said analyst James Savage of Thomas Weisel Partners. “It has been the virtual driver of Power-One’s growth for the last two quarters.” That growth has come to a halt, at least for the time being, with Cisco’s announcement that a slowdown in business means it’s got more of Power-One products than it needs for the moment. In fact, Cisco has $40 million worth of Power-One inventory on hand, or about 12 to 13 weeks worth of gear to work off. Savage said that, while Cisco will buy $50 million worth of products from Power-One in the first quarter of this year, it will get by on less than $10 million worth in the second quarter. “And $40 million in a quarter takes a huge chunk out of revenues,” Savage said. As a result, Power-One lowered expectations for revenue growth in the 2001 fiscal year to 35 to 40 percent, still a healthy increase, and to $1 to $1.05 in earnings per share. The company has beefed up its European sales force, already responsible for 15 percent of the company’s revenue, and expects its sales there to grow by more than 40 percent this year over last year. Power-One anticipates revenue for the quarter ending March 31 to be in the range of $172 million to $176 million, then to drop down to the $140 million-to-$150 million range in the second quarter. Nevertheless, Ed Schnopp, Power-One’s chief financial officer, said it’s hard to blame everything on Cisco Systems. “Blame it on the telecom industry as a whole,” he said. “This goes back to October and Nortel’s announcement.” Indeed, Nortel Networks Corp. beat Cisco with news of an inventory backlog by about four months. And it was late October when telecommunications companies including Power-One began their descent in stock price. On Oct. 23, Power-One closed at $87.37. It’s 52-week high was $89.81 on Sept. 8. Last Friday, it traded at $18.13. Power-One makes power supplies that include AC/DC converters and voltage power switchers for use in communications, automatic testing, medical, industrial, and other electronic equipment. Besides Cisco Systems, Power-One’s major customers are General Electric Co., Hewlett-Packard Co., Siemens NA, Teradyne, Inc. and Texas Instruments. Power-One isn’t the only one hurt by the inventory buildup in the telecommunications industry. In fact, compared to some of its competitors, the stock market has been gentle. In late October, semiconductor maker PMC-Sierra Inc.’s stock was trading at $210.50. By Feb. 26, it was at $44.56. On Oct. 23, Applied Micro Circuits Corp. was at $209.19; it closed Feb. 26 at $35.06. None of this marks the end of the world though, according to both Schnopp and analysts. Schnopp noted that Cisco has led the industry in converting to direct current power, so it has had a greater need sooner for Power-One’s equipment. “We expect their competitors to accelerate their conversions too,” he said. Savage agreed. “It really is just an inventory problem,” Savage said. “We think it will recover by the end of the year.” Todd Cooper, an analyst with Stephens Inc., said, “Now they can focus their attention in other places.”