First Union downgraded its investment recommendation on shares of Cisco Systems (CSCO ) to buy from strong buy and cut estimates.
Analyst Stephen Koffler says that of the major service providers who have already reported, clear trends appear to be emerging: attractive pricing is being offered, and solvency-related issues to large, highly leveraged emerging carriers. Unfortunately, Koffler thinks this means that peak spending has already been seen in Q1 of 2001, and a second-half recovery from the current spending base is unlikely. For Cisco, he thinks this means previous revenue assumptions are no longer realistic.
The analyst lowered his $4.25 billion Q4 revenue forecast to $3.54 billion; and his estimates for fiscal 2002 (July) from $0.25 EPS on $17.9 billion in revenues to $0.23 EPS on $14.9 billion in revenues. He also lowered his price target to $15.