What happened

Shares of Inphi Corp. (NYSE:IPHI) dropped on Thursday after the high-speed data interconnect vendor reported mixed fourth-quarter results and provided weak guidance. Revenue grew more slowly than analysts expected, while the bottom line beat expectations. The stock was down about 16% at 1 p.m. EST.

So what

Inphi reported fourth-quarter revenue of $85.7 million, up 6% year over year and about $0.4 million higher than the average analyst estimate. The company pointed to increased demand for its COLORZ data center interconnection solutions and products from the acquisition of ClariPhy as the main drivers behind the revenue growth. These areas of strength offset weak demand for linear transimpedance amplifiers and linear driver products.

A slumping stock chart.

Image source: Getty Images.

Non-GAAP earnings per share came in at $0.37, down from $0.47 in the prior-year period but $0.02 better than analysts were expecting. Non-GAAP gross margin slumped 3 percentage points year over year due to changes in product mix, while investments in developing new Coherent DSP components raised costs and knocked down the bottom line.

CEO Ford Tamer expects business to pick up starting in the second quarter of 2018:

As we previously reported over the past few months, we continue to experience customer inventory burn and slow demand in the China long-haul and metro markets. While visibility remains limited, we have recently received positive requests from some of our customers for increased demand starting in Q2. So, we believe that Q1, 2018, will be the bottom and we can resume growth starting in Q2.

Now what

Inphi expects to produce first-quarter revenue between $58 million and $62 million, down from $94 million in the prior-year period. The company also expects to produce a non-GAAP net loss between $0.04 and $0.06 per share. This will bring Inphi's revenue down to 2016 levels.

With first-quarter guidance calling for a steep revenue decline and a loss, there wasn't much to like about Inphi's report.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.