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Decked by Wall Street, Foundry Inks Resale Deal with Lucent

After a severe market beating late Tuesday, switch and router specialist Foundry Networks Inc. secured a breather Wednesday when it signed on Lucent Technologies Inc. to resell its entire family of ServerIron Web switches.

Financial terms were not made public.

In the co-branding deal, Lucent's Internet Content Delivery and Distribution (iCDD) division will man the helm, selling the switches through Lucent's sales force.

Lucent's integration and consulting divisions will offer ServerIron switches as part of their Internet traffic and content management solutions, spanning server load balancing, firewall load balancing, global server load balancing and content-aware cache switching.

Amid praise for Lucent, Foundry President and Chief Executive Officer Bobby Johnson said the deal will help Foundry boost its leadership in the switching arena, bringing in new customers.

After yesterday's market beating, Foundry needs a pick-me-up.

The firm announced late Tuesday that it expects fourth-quarter revenue ranging from $100 million to $110 million, which is below the $128 million that some analysts had predicted. The network competitor that had successfully battled Cisco Systems Inc. and Extreme Networks showed a dent in its armor with earnings of 11 to 14 cents per share, a far cry from what many analysts figured would be 24 cents.

With that news, Foundry's shares dropped $13.75 to $16.88 at the market's close and were even lower in morning trading at $15.38.

In a company statement, Foundry reasoned that the slowdown in spending on personal computers and their components had spread to the networking business. Merrill Lynch analyst Michael Ching said it was the first time capital spending issues were impacting the switching solutions sector.

SunTrust analyst Eric Hindin was surprised by the warning. Hindin said despite capital expenditure problems among Internet service providers, Foundry should recover with its smaller enterprise agreements in the long run.

While no one is doubting the need for switches to speed up audio and video content over the Internet -- ISPs such as America Online Inc., EarthLink Inc. and AT&T WorldNet use Foundry's products -- Foundry could use the help of Lucent's brand in light of its stock woes, making Wednesday's deal a sound one.

The company could also seek out more customers in the enterprise and entertainment arena, signing deals akin to the ones it signed with Novell Inc., LucasFilm and Yahoo Inc.