What happened

Shares of Ceragon Networks (CRNT 2.90%) fell as much as 35.1% on Monday morning, tripped up by a disappointing earnings report. By 11:40 a.m., EST, the long-distance wireless networking specialist had recovered somewhat to a 31% drop.

So what

Ceragon's third-quarter sales fell 17% year over year to $72.2 million. Adjusted earnings dropped from $0.07 to $0.01 per share. Your average analyst had been expecting earnings near $0.04 per share on revenues near $85 million, so this was a weak quarter across the board for Ceragon.

Against a sky full of storm clouds, a hand holds up a smartphone showing No Signal in red on an otherwise white screen.

Image source: Getty Images.

Now what

Management said that demand for Ceragon's microwave backhaul solutions was solid in many markets, led by the closing of one large contract in Latin America. The company always anticipated weak orders from India in this quarter due to a 5G spectrum auction in that massive country with excessive minimum prices. Some of the largest telecoms in India simply won't participate in this auction, which probably will result in a modest demand for telecom-grade networking equipment over the next couple of years.

Even so, the resulting slowdown appears to run deeper than expected, and India is by far the largest target market in Ceragon's geographical portfolio. Despite weak sales to that region in the third quarter, India still constituted the largest market at 29% of total revenues.

Ceragon is now trading at a very reasonable valuation of 15.7 times trailing earnings. It's an attractive discount if you expect the Indian telecom industry to come to its senses. If not, Ceragon's weakness might be here to stay.