Bay Networks also said it expects net operating income to be less than the second quarter's, but still expects to report a profit for the third quarter. As a result, gross margins will be below the 51.5 per cent reported in the second quarter.
In addition the company said it expects to take a charge of about $154 million (£95m), or 67 cents a share, for the recent acquisitions of New Oak Communications and Netstation - transactions that were completed in the third quarter.
Bay did not specify why product demand was lower than expected but said "several technology shifts" in the market were factors.
Despite this quarter's shortfall, Bay still expects June quarter's revenue to be above the December quarter.
At close of play yesterday, Bay's stock had dropped 6 cents to $26.50 (£16.35) a share.