Cascade sell-off spooks network sector at large
biz.yahoo.com
By Eric Auchard, Monday January 27 5:09 PM EST
NEW YORK, Jan 27 (Reuter) - Networking stocks weathered stiff selling pressure Monday as money managers appeared to be lightening up on the sector following Friday's wild sell-off in the shares of Cascade Communications Corp .
Cascade remained the most active issue Monday, giving up another three points to 38 by late afternoon on volume of more than 11 million shares.
Analysts said other issues tarred by Cascade's mishap appeared to include 3Com Corp , off 3-5/8 to 65-1/8, and Ascend Communications Inc, down 3-1/2 to 74-1/2.
"The whole networking sector is in the toilet today," said one networking analyst. Even Cisco Systems Inc , which clung to positive
territory during most of Monday lost ground shortly before the close to end the day down 1/4 at 68-3/8.
The American Stock Exchange Networking Index .NWX slid 8.39 points Monday to 314.53, a decline of 2.60 percent, continuing a fall back from the 345 level it hit Thursday.
The 3Com decline comes ahead of a series of events the company plans to hold in New York Tuesday, including a joint product annoucement with Cascade and International Business Machines Corp and a briefing for financial analysts.
Industry analysts expect 3Com, Cascade and IBM to announce a new level of compability between products designed to reduce Internet traffic congestion, in a bid to reduce demand for router equipment supplied by Cisco, their mutual adversary.
Comments from Cascade executives about slowing growth in its core business have sent the stock hurtling back from its previously high price-to-earnings multiple. The stock lost 23-1/8 points to end Friday at 41.
"It's a little bit of residual effect from Cascade getting whacked Friday," said Joe Noel. "Fund managers are getting a little nervous
that the sky is falling down."
Noel said the recent fallback in the networking sector reflects a pattern of periodic stampede behavior into and out of the the sector.
Cascade's problems has inspired fears that the sector's growth overall may be slowing, he said.
"But fund managers always come back to the networking sector, because this is where growth is," Noel said. "They may look elsewhere for a little while, but there are few other stocks where they can find 100 percent plus annual growth."
Ascend, increasingly a direct competitor to Cascade, appeared to be dragged down by a more general guilt by association.
Like Cascade, Ascend has seen rocketing sales of its Internet infrastrucure equipment and enjoyed a sky-high valuation to go with that growth.
-- Wall Street bureau, 212-859-1736 |
