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.
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.
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.