Lehman Trims Cisco Estimates

Analyst Tim Luke thinks pricing pressure could keep margins from improving

Lehman Brothers cut estimates on Cisco Systems (CSCO ).

Analyst Tim Luke says following recent checks, he believes some end markets may be continuing to see subdued near-term trends. He says enterprise demand trends remain subdued, notably in the small- to medium-sized enterprises market with visibility in Europe and Japan also uncertain. He adds that pricing issues may also constrain the margin uptick. In the service provider area, he continues to look for an uptick in second-half of calendar 2001.

Luke cut the $0.03 Q4 EPS estimate to $0.02 on a 10% sales decline (vs. previous estimate for a 7% decline), and trimmed the 5% Q1 sales growth estimate to flattish, and cut the $0.34 fiscal 2002 EPS estimate to $0.20 EPS. However, Luke has a positive long-term outlook due to Cisco's strong competitive positioning, and has a $24 target.

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