Shares of mobile computing products maker Mobility Electronics (NASDAQ:MOBE) fell sharply this morning on heavy volume on news that disappointing power products sales in one of its key channels will lead to a substantial fourth-quarter shortfall. The news underscores the importance of understanding sales channels, particularly when dealing with small companies in competitive markets.

The company, which makes peripherals like chargers, presentation devices, port replicators, and monitor stands, expected significant sales to Fellowes, a consumer electronics and office products company. As it turns out, Fellowes ordered a bit less than expected during the quarter, and now Mobility is terminating the relationship. The near-term revenue impact is estimated at $1 million to $1.3 million -- Mobility had previously aimed for total sales of $15 million.

So now, Mobility doesn't expect to earn the slim net income -- between breakeven and $0.01 per share -- it was shooting for. (Earnings that would have pleased investors looking forward to a break in the company's long run of unprofitable quarters and years).

Now, they'll have to wait a little longer. All the same, fourth-quarter sales to other distribution partners, which include IBM (NYSE:IBM) and RadioShack (NYSE:RSH), came in at or above expectations. (Rick Aristotle Munarriz takes a look at RadioShack in a column today.) And looking ahead, new -- and significant -- channel partners may be added soon.

For 2004, Mobility expects revenues to grow at least 50% over 2003, and the company's abilities to expand its revenue base will make or break that number. Mobility has minimal capital requirements and, should it start turning a profit, the potential to generate solid cash flows.

All of which makes Mobility a company worth watching -- all the more so after today's sell off.

Think Mobility can make it to the big time? Share your views on our Mobility Electronics discussion board. Dave Marino-Nachison can be reached at dmarnach@fool.com.