Rakon has issued its second profit warning in as many months, prompting its stock to plunge by nearly a third.
The technology company is predicting gross earnings of $5 - $7 million for the year to March compared with $8 - $12 million it forecast in December.
It had predicted gross earnings of $14 - $16 million last August.
Rakon is blaming the decline on smartphone component suppliers demanding sharp price reductions.
Managing director Brent Robinson says the directors are disappointed by the downgrade and reiterated that the company's plans to cut costs by $10 million a year by shifting production to China remains on track.
About 70% of those savings will be in place by the end of March.
Mr Robinson says Rakon is compliant with its banking commitments, its net assets stand at $189 million and its net tangible assets are 80 cents a share.
Rakon could be poised for another capital raising
Craigs Investment Partners analyst Mark Lister says Rakon has issued numerous profit warnings over the last few years, which results in a low level of confidence in the ability of the management team and board to see how the company is going.
Mr Lister says that, reading between the lines, it appears the company is looking at its balance sheet to see how well funded it is.
"They might be considering whether they need to raise more capital as well, which could just be another cause for the share price to gap down a bit more if they have to offer that new equity at a reduced price to convince people to put more into the company."
Rakon reported a $3.9 million loss in the six months to the end of September.
Rakon's shares fell by 12 cents to 26 cents on Wednesday.