Shares of Guitar Center Inc. dropped nearly 17 percent Wednesday after investors punished the musical instrument retailer for reporting net income and revenue that came in under Wall Street estimates.

For the third quarter ended Sept. 30, Wall Street analysts had pegged the Westlake Village-based company’s net income at 52 cents per diluted share. Late Tuesday, the company announced net income a penny below that estimate.

Analysts had expected Guitar Center’s third quarter revenues to be $428.67 million. The company reported revenues that were off from the estimate by nearly 2 percent, at $421.1 million.

On the news, Guitar Center stock was down over $10 on the day to close at $50.92.

The third quarter saw weakness in Guitar Center’s direct-response music unit, called Musician’s Friend, with gross margin for the unit dipping to 29.1 percent from 31.3 percent in the like period a year ago. The company attributed the dip to reduced shipping and handling revenue as a result of growing competition.

Despite Musician’s Friend’s weakness, Mitchell Kaiser, an analyst with Piper Jaffray & Co., retained an “outperform” rating for Guitar Center. In a research note, he wrote the company posted good quarterly results “based on the strong performance of their Guitar Center stores which represents 75 percent of the business.”

However, for fiscal year 2005, Piper Jaffray did reduce its earnings estimate 2 cents to $2.78 per share. Its estimate for the fourth quarter stayed the same at $1.19 a share, in the range of Guitar Center’s guidance of $1.16 to $1.23 per share for the quarter.