Cisco Systems Inc’s shares fell as much as 13 percent on Thursday after the network equipment maker forecast a steep drop in revenue for the current quarter, prompting at least 17 brokerages to cut price targets on its stock and two to downgrade their ratings.<\/p>\n
Cisco said on Wednesday it expected an 8-10 percent drop in revenue in the current quarter after lower sales to telecom and cable service providers and in emerging markets hurt its results in the quarter ended October 26.<\/p>\n
Analysts cut their price targets on Cisco’s stock by as much as $6 to a low of $20.<\/p>\n
Cisco shares were trading at $21.00 in late morning trading on the Nasdaq. About 140 million shares had traded by 11:13 a.m. ET.<\/p>\n
Goldman Sachs was among the brokerages that cut its target price, to $25 from $30.<\/p>\n
Goldman also removed the stock from its Conviction List of top picks, citing “reduced confidence in the near-term trajectory”, but Goldman analysts maintained their “buy” rating.<\/p>\n
Cisco’s revenue warning comes after former U.S. spy agency contractor Edward Snowden exposed widespread surveillance by the National Security Agency through internet data, much of which is transmitted via Cisco’s equipment.<\/p>\n
Cisco’s chief financial officer, Frank Calderoni, told analysts the company had been affected by a political backlash in China, but said it was difficult to quantify how much of its revenue shortfall was a result of this.<\/p>\n
In a note titled “An outlook to make even mom look twice”, RBC Capital Markets analyst Mark Sue said the China issue might linger for a while. Sue cut his price target on the stock to $22 from $24, maintaining a rating of “outperform”.<\/p>\n
“While our checks noted emerging markets weakness, we were clearly wrong on magnitude of the order weakness,” Deutsche Bank analyst Brian Modoff said in a note.<\/p>\n
Modoff downgraded Cisco’s stock to “hold” from “buy”, and cut his price target to $25 from $28.<\/p>\n
Analysts said Cisco faced stiff competition from companies such as Aruba Networks Inc, Alcatel-Lucent SA, Brocade Communications Systems Inc, Ciena Corp, F5 Networks Inc, Riverbed Technology Inc and Juniper Networks Inc.<\/p>\n
However, shares of these companies also fell on Thursday, along with those of optical component makers JDS Uniphase Corp and Finisar Corp, which supply Cisco.<\/p>\n
Credit Suisse analyst Kulbinder Garcha said Cisco looked increasingly vulnerable to technological innovations and competitive pressures. Garcha cut his price target to $20.<\/p>\n
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