Black Box Shares Plunged: What You Need to Know

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 network infrastructure installer Black Box (NAS: BBOX) look more red than black today, falling as much as 15.8% on heavy volume and nosing at even lower lows as I write this.

So what: In the just published first-quarter report, Black Box saw sales rising 2% year-over-year to $268 million, while earnings slipped 29% to $0.53 per share. Management pinned the performance on "strategic pricing initiatives," designed to boost future results at the cost of short-term profit pain.

Now what: You say "strategic pricing;" I say "fire sale." Not quite as catchy as the tomato-tomahto thing, but that's what this is; management doesn't expect its wounded gross margins to recover in the newborn fiscal year of 2012. As an installer of telecom equipment from Alcatel-Lucent (NYS: ALU) , Polycom (NAS: PLCM) , and Cisco Systems (NAS: CSCO) among many others, Black Box describes itself as the one-stop shop for network installation and maintenance needs -- but that competitive advantage wasn't enough to win fresh contracts in this market. Is a low-cost strategy viable in the long term when much of the competition comes from internal installation teams of end-market customers such as AT&T (NYS: T) and Verizon (NYS: VZ) ? I'm not so sure. Read this free report for a telecom infrastructure play that actually makes sense.

Interested in more info on Black Box? Add it to your watchlist.

At the time thisarticle was published Fool contributor Anders Bylund holds no position in any of the companies discussed here. 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 AT&T, Polycom, and Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.

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