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 (Nasdaq: 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 (NYSE: ALU  ) , Polycom (Nasdaq: PLCM  ) , and Cisco Systems (Nasdaq: 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 (NYSE: T  ) and Verizon (NYSE: VZ  ) ? I'm not so sure. Read this free report for a telecom infrastructure play that actually makes sense.

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