It's been a rough couple of months for investors in Ultralife Batteries (NASDAQ:ULBI), which makes lithium batteries for consumers as well as military and industrial customers. Yesterday things got a bit rougher: Following the company's announcement of a scaled-back outlook for the second half of the year, shares fell more than 30% on extremely heavy volume. (It was the second-highest percentage loser on the Nasdaq.)

At the core of Ultralife's problems -- its shares also fell sharply in late June following a similar warning -- is a contract with the U.S. Army it reported back in February. The Army is a regular user of its BA-5390 batteries, a longer-lasting alternative to the BA-5590 used in radios (among other gear), and has regularly reordered the battery in recent months. In February, it placed a $12 million order. (For context's sake, Ultralife had about $79 million in total 2003 revenues.)

That's been good business for Ultralife, but lately less so. In July, the company hinted at "the possibility of military demand leveling in the second half of the year," as it stressed its efforts to increase commercial business. And yesterday it said that barring new orders or pricing concessions for the BA-5390, 2004 revenue and operating income were seen at a minimum of $7.4 million and $97 million, respectively. As many as 250 jobs, meanwhile, might be endangered as production is scaled back.

Those numbers would be better than last year's $79 million and $6 million figures, but investors were looking for more. Reuters' data points to a five-analyst mean revenue estimate of $107 million that, assuming last year's margins, would have led to operating income a shade more than $8 million. Both figures would be substantial disappointments, and investors are clearly growing increasingly cautious with this company's tumultuous shares. This sometime highflier needs a recharge.

Fool contributor Dave Marino-Nachison doesn't own shares of Ultralife.