Cisco Drops as FBR Cuts Rating Because of Weakening Demand

Cisco Systems Inc., the world’s biggest maker of computer networking equipment, fell the most in almost eight months after FBR & Co. lowered its rating on the stock, citing reduced demand for the company’s components.

The shares slid 3.8 percent to $20.84 at the close in New York for their biggest drop since July 24. Cisco had gained 10 percent this year through yesterday as the Standard & Poor’s 500 Index rose 9.3 percent.

Demand for network switches and routers is weakening as innovations “blur the lines” between those components and servers, Scott Thompson, an FBR analyst in New York, said in a report today. He changed his rating on the San Jose, California-based company’s shares to underperform from market perform and lowered his price target to $17 from $22.

“Cisco will become increasingly more challenged to offset weaker-than-expected routing and switching demand as it works to transition to a more software and service centric business model,” Thompson said.

Thompson made the same rating change for Juniper Networks Inc., another maker of networking equipment. The shares of the Sunnyvale, California-based company fell 2.2 percent to $18.89.