BroadSoft Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of IP-based communications specialist BroadSoft (NAS: BSFT) did a fine impression of a dropped call today by falling as much as 11.7% on very heavy trading.

So what: The company beat earnings and revenue estimates in the just-reported third quarter, and by quite the margin too. Moreover, next-period guidance points to another quarter of strong sales. Impressive as it was, the report still wasn't strong enough to support a stock that had gained 53% over the last three months.

Now what: Networking gear makers have disappointed time and again this earnings season in a building Greek chorus (pun intended) of weak service-provider spending. That gloomy choir includes voices very close to BroadSoft's timbre, such as direct competitors Cisco Systems (NAS: CSCO) and Sonus Networks (NAS: SONS) . But BroadSoft breaks that trend; CFO Jim Tholen says that the strong results "were driven by broad-based demand from our service provider customers." Granted, the company makes big chunks of business abroad, but Verizon (NYS: VZ) is typically its largest customer. Look past the disappointed momentum, traders, and you'll see signs of a recovering sector in this report.

This special report uncovers a networking stock for all seasons. Click here to learn more -- it's totally free.

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At the time this article was published Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Fool owns shares of and has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

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