CISCO DOWN ON INVENTORY
WORRIES
NEW YORK (Dow Jones)--Concerns that
finished-goods inventories climbed last quarter pushed
shares of Cisco Systems Inc. (CSCO) down 6% Friday
in heavy trading.
The inventory concerns stem from the company's 10Q
filing with the Securities and Exchange Commission
earlier this week. Since the filing on Tuesday, Cisco's
shares have been weak, falling from Monday's close of
89 3/4 to 76 9/16.
Compounding today's losses were SEC reports that
several Cisco officers had sold shares in the company
during November, analysts and investors said.
In the 10Q filing, Cisco reported that finished-goods
inventory rose to $69.7 million in the quarter ended
Oct. 25, from $21.7 million in the preceding quarter.
While higher inventory can indicate slowing sales,
analysts by and large did not see signs that end-demand
is softening.
Instead, they said, much of the inventory buildup was
probably of lower-end products designed for use by
small and medium-sized businesses.
Cisco sells these products through distributors and has
been filling the distribution channel to meet growing
end-demand. The inventory numbers reported in the
10Q may simply reflect this buildup as well as Cisco's
policy of not recording revenue until products sell
through to users, analysts said.
Still, coming just a week after networking giants
3Com Corp. (COMS) and Cabletron Systems Inc. (CS)
warned that they would miss estimates for their
November quarters, the Cisco filing unnerved
investors.
One analyst also suggested that investors may be
concerned because the company cautioned in the SEC
filing that corporate spending on technology could be
shifted from networking equipment to solutions to the
Year 2000 problem. The analyst added, however, that
this is nothing new and that the company has warned
about it in past SEC filings. Cisco's shares also seem
to be suffering from general market worries about
business in Southeast Asia.
Finally, the shares were also down after SEC filings
revealed that several Cisco officers sold company stock
in November. These include Chief Financial Officer
Larry R. Carter, Senior Vice President Gary J.
Daichendt and Chief Technology Officer Edward R.
Kozel.
Cisco's shares were recently down 6 1/8, or 7.4%, at
76 9/16, on Nasdaq volume of 26.7 million shares,
compared with average daily volume of 8.6 million.
Earlier, the shares traded as low as 76. |
