Talk about a miss -- a really big miss. Sierra Wireless (NASDAQ:SWIR) chopped its guidance for first quarter 2005 revenue expectations by as much as 67% yesterday, forcing the wireless modem and handset maker's stock to sink in trading by more than 38%.

You can't blame investors for cutting and running. Whereas analysts were expecting a $0.20-per-share profit on revenue of $54 million in the upcoming first quarter, Sierra Wireless projected a loss of $0.35 to $0.38 per share on revenue of about $19 million.

Besides, Sierra missed on its fourth-quarter numbers too. The company earned $7.3 million, up from $1.9 million a year ago but a penny under the Wall Street estimate. Revenue for the quarter rose from $35 million to $59 million, yet again falling short of the $63 million consensus.

Gross margins were 38.8%, down from 41% and below the company's guidance range of 39% to 40%. The company blamed the shortfall on an inventory buildup of new products that is already sufficient to meet short-term customer demands on new products and on delayed purchasing decisions.

The huge reduction in guidance, however, suggests that it's more than a glitch or a short-term setback that plagues Sierra. Back in October, I warned that Sierra was a risky play. The company faces ever-stiffening competition from Kyocera and Novotel in the modem card business. It still doesn't have a WCDMA (wideband code-division multiple access) product available to address both Cingular and European wireless carriers' 3G networks. The Voq smartphone -- Sierra's costly answer to Research in Motion's (NASDAQ:RIMM) Blackberry and palmOne's (NASDAQ:PLMO) Treo -- has gained little market traction.

Numbers so far off the mark will surely dent Sierra's credibility with investors. At $8.47, the shares have lost 80% of their value this year. With plenty more R&D and marketing dollars required to fend off the competition and deliver new products, Sierra's got a big hole to dig itself out from. Even at the much-reduced price, Sierra stock is not worth the risk.

Fool contributor Ben McClure doesn't own shares of any companies mentioned in this article.