Sierra Wireless (NASDAQ:SWIR) just announced reasonably decent third-quarter results. But thanks to weakness in one key market, shares of the Internet of Things pure play dove a harrowing 20% in Thursday's after-hours trading. 

Right off the bat, it's apparent the market isn't happy with Sierra Wireless' headline numbers. Quarterly revenue climbed 7.9% year over year to $154.6 million, driven by contributions from acquired businesses and organic growth of 4%. So far this year, that brings Sierra Wireless' organic growth to 12.5% -- still well within Sierra Wireless' stated target of 10% to 15%. On the bottom line, that translated to adjusted earnings of $7.4 million, or $0.23 per share.

By contrast -- and for the first time in the past four quarters -- both figures fell below Sierra Wireless guidance, which called for revenue of $157 million to $160 million, and earnings per share of $0.23 to $0.27. Analysts, for their part, were also modeling higher revenue of $158.7 million, and earnings of $0.25 per share.

Here's what happened
According to Sierra Wireless CEO Jason Cohenour:

While our Q3 results were solid, revenue was slightly below our expectations, as demand for 4G enabled enterprise notebooks encountered temporary headwinds as the industry transitions to a new processor platform. We see the mobile computing segment moving back to normalized demand levels in the coming months. All of our other segments and lines of businesses performed as expected, and we delivered exceptional design win results.

More specifically, revenue from Sierra Wireless' core OEM solutions segment climbed a modest 5.1% year over year to $130.7 million, marking a significant deceleration from last quarter's 18.5% year-over-year growth. According to Cohenour during the subsequent conference call, OEM solutions enjoyed strong demand from automotive, energy, and networking customers, but saw that strength largely offset by delays as some mobile computing customers transitioned products to use Intel's new Skylake processor platform.

On the other hand, revenue from the smaller enterprise solutions segment climbed 26.3% year over year to $23.9 million, representing a solid acceleration from 7.6% year-over-year growth in Q2. To be fair, though, three months ago management did suggest we should expect such an acceleration given both the Enterprise segment's first full-quarter revenue contribution from Accel networks, contributions from Wireless Maingate, and changes to its organizational and management structure designed to foster growth.

Looking forward
Investors are equally unimpressed with Sierra Wireless' guidance. For the current quarter, the company now expects revenue of $148 million to $151 million, and earnings per share of $0.09 to $0.11. Again, analysts' consensus estimates predicted much higher fourth-quarter revenue of $165.2 million, and earnings of $0.29 per share.

Curiously, though, the primary culprit for this sequential decline lies with the timing of orders from a single automotive customer. According to management during the call, this customer took more inventory than required in Q2 in response to previous component shortages but is now adjusting their order cycle to more effectively align it with demand. Also contributing to the light guidance -- albeit to a lesser extent -- is the ongoing Skylake transition.

To be clear, Sierra Wireless believes both these issues should prove temporary. And perhaps more than anything, they appear to be consequences of lumpy revenue in these early stages of Sierra Wireless' growth.

In the meantime, however, it's hard to blame investors for taking a step back as Sierra Wireless fell short of both its own guidance and Wall Street's expectations. But for long-term investors willing to take advantage of this volatility and watch Sierra Wireless' growth story play out over time, this could prove a perfect opportunity to open or add to a position.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.