The San Jose, Calif., company said Tuesday it expects revenue for the quarter to be between $56 million and $57 million. That represents a drop of between 16 percent and 17 percent compared with the $67.7 million the company recorded in this year's third quarter.

William Blair analyst Anil Doradla said in a research note the company's previous guidance had called for a decline of between 8 percent and 10 percent.

Analysts surveyed by FactSet expect, on average, revenue of $59.3 million for the quarter.

Cavium said revenue has been weaker than expected across its enterprise and service provider segments, a problem compounded by a larger-than-expected impact from an inventory hub transition at one of its major customers, which Doradla identified as Cisco.

Doradla said in a Wednesday morning research note he did not expect investors to be surprised by Cavium's guidance reduction.

"Cavium, like several of its peers, is witnessing the impact of inventory destocking across its customers, combined with softness in demand," the analyst wrote.

Doradla said service provider demand could continue to be weak in the first quarter, but he expects the company's enterprise segment to revert to sequential growth. The analyst said he was maintaining an "outperform" rating on the company's stock and would see any weakness in the shares as a buying opportunity.

"We believe 2012 will be a good year for Cavium, with growth significantly outpacing both its customers and its competitors in 2012," Doradla wrote.

William Blair owns Cavium stock.

Company shares fell more than 7 percent, or $2.03, to $26.45 in pre-market trading Wednesday. That pushed the stock down nearly 30 percent so far this year from its 2010 closing price of $37.68.