Networking component maker Mindspeed Technologies (Nasdaq: MSPD) is taking a nosedive into reinforced concrete today, falling as far as 24% below Monday's closing price after an uninspiring earnings report.

More specifically, it was the near-term outlook that failed to inspire investors. Fourth-quarter product sales of $44.8 million fell comfortably within management's guidance, even a bit on the high side. The company likes to report revenue without patent license sales included (with patent sales, revenue was $57.6 million), because those payments are lumpy and unpredictable. Excluding patent sales makes for a smoother and more predictable measure of operating performance.

Net income more than doubled from $0.15 to $0.38 per diluted share. CEO Raouf Halim noted that this was the sixth consecutive quarter of rising sales, and he called it "another great quarter of execution for Mindspeed." No argument there, as the numbers looked terrific.

But unless the company manages to surprise itself, that winning streak is about to snap. Citing "a one to two quarter kind of pause" in the WAN networking product category, Mindspeed management gave guidance for the next quarter that was down by 8% to 10% in terms of sales, and also noted that gross margins are under pressure. That's never a tasty combination, and the stock is getting punished as a result.

The market is not taking this as an industrywide panic signal but only as a severe strike against Mindspeed itself: Larger competitors Maxim Integrated Products (Nasdaq: MXIM), Texas Instruments (NYSE: TXN), and PMC-Sierra (Nasdaq: PMCS) are all trading up today, and Mindspeed's remaining rivals are at least staying close to last night's closing lines.

Does this mean that Mindspeed is doomed to irrelevance and that you should sell, shred, or burn your shares? Not hardly.

Mindspeed depends to a large extent on telecom networks building out their next-generation wireless backhauls and other fiber-optic networks, because the company designs a lot of chips and components for exactly that type of infrastructure machinery. We've seen reports of a slowdown in that sector from many other players in the picture, so that trend really should have been expected before Mindspeed voiced it.

I can't imagine those builds stopping or slowing permanently, which makes this a short-term concern. Mindspeed's management agrees: "Based on our channel partners and our customers current forecasts, we anticipate that the impact on our business will last roughly one to two quarters," Halim says.

The stock may have been a bit overheated earlier in the year when it traded for as much as 193 times trailing earnings and nearly 14 times book value. Today, Mindspeed is available for 12.4 times trailing earnings and little more than three times book value. Strong results and eminently reasonable multiples combined with an obvious knee-jerk overreaction combine to tell me that this is a terrific buy-in point if you believe in optical networking at all.

I'm a believer, so this stock goes right in my all-star Motley Fool CAPS portfolio as an outperform pick. You can follow my lead in just a couple of clicks.

Fool contributor Anders Bylund doesn't hold a position in any of the companies discussed here. The Fool owns shares of Texas Instruments. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.