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CSFB cuts Cisco’s earnings estimates

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CIOL Bureau
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NEW YORK: Credit Suisse First Boston cuts earnings estimates for networking

giant Cisco Systems Inc. on Monday because of the ongoing poor technology

spending environment, pricing pressure and currency issues.

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CSFB in a research report said it is lowering its per-share earnings estimate

for the July quarter to 2 cents from 3 cents, in line with consensus. It also

cut its revenue estimate for the quarter to a 10-per cent sequential decline

from a 4.5-per cent decrease.

It also forecast a 1.5-per cent decline in revenues in the October quarter

compared to its previous estimate of a 3.8-per cent increase, and more modest

sequential growth thereafter.

CSFB also cut its per-share earnings estimate for fiscal 2002 by 5 cents to

20 cents and its revenue estimate by $1.7 billion to $18.2 billion. For 2003, it

left its earnings estimate unchanged at 45 cents a share, but reduced its

revenue forecast by $2.3 billion to $21.2 billion. But CSFB maintained a ‘buy’

rating on Cisco.

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This apart, on Monday, SG Cowen maintained its buy rating on Cisco. While

concerns remain about further erosion in the telecommunications industry's

spending and the spread of the economic slowdown overseas, Cisco has addressed

many of the tactical issues it faces.

SG Cowen said it remains bullish on Cisco long term because of the San Jose,

California-based firm's ability to quickly react to changing market conditions,

target strong growth markets, generate cash and be successful in ranking at the

top or at least second in every market segment it targets.

CSFB said Cisco's gross margins are an unknown and it will maintain them for

now. The company can lift operating margins through continued modest cost cuts,

including voluntary and involuntary job attrition, and CSFB said it is

forecasting incremental savings of $30 million a quarter throughout its forecast

period.

Cisco's lack of a product cycle near term makes the stock a trading vehicle,

CSFB said. It's at the low end of its trading range and it should move up to the

higher end of this range on better macroeconomic news. Cisco will report its

fiscal fourth-quarter results on Aug. 7.

(C) Reuters Limited 2001.

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