UPDATE 3-Sierra Wireless shares sag in wake of weak outlook

(Adds CEO comments; in U.S. dollars unless noted)

By Wojtek Dabrowski

TORONTO, July 23 (Reuters) - Wireless modem maker Sierra Wireless Inc (SW.TO: Quote, Profile, Research) (SWIR.O: Quote, Profile, Research) warned of "macroeconomic uncertainty" in key markets and an erosion in some of its sales on Wednesday, sending its shares plunging more than 20 percent in after-hours trading.

Sierra, which makes the AirCard and Compass lines of wireless modems, said it earned $11 million, or 35 cents a share in the three months ended June 30. That was up from a profit of $6.7 million, or 25 cents a share, a year earlier. The results were in line with analysts' estimates.

However, the company said it was keeping a "cautious" short-term view, given the economic concerns. As well, it expects an erosion in sales of its embedded modules to personal computer makers.

"With respect to the rest of our business, we feel good about the strength of our product cycle, we feel good about our channel position, but we are just not expecting the same level of sell-through growth in (the third quarter) that we've seen in quarters past," Chief Executive Jason Cohenour told analysts in a conference call.

Its shares dropped to $12.50 in electronic after-hours trading, down $3.57 or 22 percent from their regular-session close of $16.07 on Nasdaq.

For the third quarter, Sierra said it expects revenues of $140 million, and diluted earnings of 27 cents per share.

Nick Agostino, an analyst at Research Capital, said he expected the company would provide a weak topline outlook for the third quarter.