Yet another sign that insanity has gripped the markets: the "whisper number" rears its ugly head after three-plus years of silence.

Foundry Networks (NASDAQ:FDRY), a communications network gear manufacturer, shed nearly 25% of its market value this morning after the company released its earnings after the market close yesterday of $0.17 per share. This topped analyst expectations by a penny (yeah, "beat by a penny" is back, too) but failed to match the higher earnings unofficially expected by many after rival Juniper's (NASDAQ:JNPR) extremely strong quarterly results came in last week.

Foundry's CEO Bobby Johnson also stated that he foresaw a "more competitive environment" in 2004 than what existed in 2003. This tells me much of what I need to know about this sector -- it still has way too much capacity for any reasonable demand expectations. Last year's total revenues for Foundry ended up just a hair below $400 million, which was about 25% higher than total revenues for 2002, but barely above 2000's numbers. Total earnings for 2003 was $75 million, $24 million of which came in the fourth quarter. Free cash flow -- a better measure of economic generation in general, but especially so with many stock-option-happy tech companies -- for 2003 came in at $95 million.

And for this the stock market valued the company at $4 billion as of yesterday's close. That's assuming enormous growth, which at least for the short term company management has said is unrealistic. After a singe year of rebound, they're seeing a more competitive environment. Kudos for the frank assessment, but you've really got to wonder whether investors in Foundry have stopped to think what expectations are baked into the company's share price right now. The return of the whisper number and the mauling the company is taking today tells me one thing -- many haven't.

Some investors are counting on the company basking in the residual glory of Cisco (NASDAQ:CSCO) when it reports next week. One message board poster intoned that John Chambers, Cisco's CEO, is "always optimistic." With apologies to Uncle Louis from Christmas Vacation, Chambers' assertions in early 2001 that things never looked better when in actuality the technology market was collapsing all around him ought to be proof positive that he couldn't hear a dump truck if it drove through a nitroglycerin plant. Positive vibes cannot rescue you from stark business realities, especially when you're talking about extraordinarily richly priced stocks.

Counting on whisper numbers and happy-happy thoughts to keep your investment intact? At a minimum the folks at Foundry should get credit for giving a frank assessment of the environment, but that's still cold comfort for folks who are speculating that the technology market will continue to boom. That the environment looks tighter to Foundry after only a few months of increased spending does not inspire confidence that this is a reasonable expectation. That whisper may actually be a scream.