The linear stability of an extensively modulated cylindrical Couette flow is investigated in the finite-gap range. A closed form analytic solution is obtained for the basic unsteady flow after modulation is introduced through the boundary conditions. The general linear perturbation equations for three-dimensional disturbances are then derived and subsequently solved using the Galerkin method with the stability analysed by the Floquet theory. Modulation is found to destabilize the flow in most cases and results compare very favourably with the ones obtained experimentally. Stabilization is possible only for some cases of outer cylinder modulation.