Salomon Cuts Tyco to 'Neutral'

Analyst Jeffrey Sprague says he can no longer recommend the stock, based on news that chairman and CEO Dennis Kozlowski resigned amid a tax probe report

Salomon Smith Barney downgraded Tyco (TYC ) to neutral from buy.

Dennis Kozlowski resigned as chairman and CEO, amid reports that he's under investigation over New York sales tax. Analyst Jeffrey Sprague says the news is obviously a material piece of new information, and he says he can no longer recommend the stock. The downgrade is driven by numerous concerns in the wake of Kozlowski's departure: jittery suppliers, with customers likely to be further rattled -- raising the risk of additional business disruptions, the potential for other management departures seems likely, and the uncertainty and circumstances around Kozlowski's departure may hinder the company's ability to complete its restructuring plan. Sprague sees $2.60 2002 and 2003 EPS. He cut his $35 target to $26.

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