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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Orhan Birol who wrote (10764)	12/12/1997 1:05:00 PM
From: John Wu	Read Replies (3) \| Respond to of 77399

Here's the reason for the drop: Midday Musings: Bad Tidings for Cisco, Microsoft Put More Pressure on Tech By John J. Edwards III Senior Markets Writer 12/12/97 12:46 PM ET The big-cap stocks that have been the darlings of the autumn recovery are trying to bounce back from their recent tumble, but tech stocks remain weighted down by continuing nervousness and a brand-new disastre du jour. Some of the nervousness is focused on networking bellwether Cisco (CSCO:Nasdaq), which around 12:20 p.m. EST was down 5 7/16 to 77 3/8 on active volume. Both Merrill Lynch analyst Joseph Bellace and Donaldson Lufkin & Jenrette analyst Stephen Koffler, although still bulls on the stock, pointed out a potential red flag in Cisco's 10Q report, filed Tuesday with the Securities and Exchange Commission. Koffler confirmed he made the comments; Bellace didn't immediately return a call for comment. The 10Q states that Cisco's finished goods swelled as a portion of inventories, from 8.5% in the July quarter to 28.9% in the October quarter. Total inventories decreased sequentially, but if more finished products are gathering dust on the shelves, market demand might be slackening. One trader pointed out that this morning Cisco broke a crucial technical support level of 80 -- roughly the 100-day moving average. "It was a killer," the trader said. And Asia still looms. One money manager, who asked not to be named, said his fund has trimmed its Cisco position recently to guard against potential Asian fallout. The manager doesn't expect Cisco to preannounce before the New Year, but he isn't taking chances. While pro investors are selling Cisco pre-emptively, plenty of sell-side bulls are unshaken. For some time the First Call consensus estimate has stayed at $2.61 per share for the fiscal year ending July 1998, up from $1.52 in fiscal 1997. By 12:20 p.m. EST, the tech-stacked Nasdaq Composite Index was down 18 to 1540. Is Cisco the leading influence? "I think that doesn't help," said Warren Epstein, head trader at Richard A. Rosenblatt. "Cisco had looked good this morning. It's that plus Microsoft. The judge's decision seems to have put a lid on that stock. The only stocks that look good today are the box makers, like Dell, Hewlett, Compaq." Alas, Epstein spoke a little too soon. While Compaq (CPQ:NYSE) continued to hang onto an advance of 3/4 to 56 3/4, Dell (DELL:Nasdaq) was down 15/16 to 88 1/8 and Hewlett-Packard (HWP:NYSE) was down 1/2 to 60 9/16. Microsoft (MSFT:Nasdaq) was down 2 9/16 to 136 1/2 after a federal judge late yesterday ruled that Mister Softee mustn't require PC makers who license Windows 95 to take its Internet Explorer browser as well. In the zero-sum browser game, of course, Microsoft's loss is Netscape's (NSCP:Nasdaq) gain -- to the tune of a rise of 1 1/16 to 27 3/8. And the disaster of the day? Electronics For Imaging (EFII:Nasdaq). The stock has crashed 22 1/2, or 57.9%, to 16 3/8 -- having traded as low as 14 1/2 -- after the company's warning of a huge fourth-quarter shortfall. TheStreet.com looked at funds that held the stock in an earlier story. The overall tech slide has lasted nearly a full trading week, but Epstein thinks the worst is over. "The market has done quite a bit of correcting already in some of these tech names," he said. "It doesn't mean it can't continue, but unless something really big happens, I kind of think we rally from here." Away from tech, the Dow Jones Industrial Average and other major indices have surrendered their tepid early gains and are floating just underwater. The Dow was down 14 to 7834, the broad S&P 500 was down 3 to 952 and the small-cap Russell 2000 was down 1 to 423. The momentous move of the benchmark 30-year Treasury bond's yield firmly below 6% seems to be garnering little attention in the equity markets. The bond was up 25/32 to 102 14/32 in price, the yield easing to a remarkable 5.95%. Staff reporter Kevin Petrie contributed to this story. c 1997 TheStreet.com, All Rights Reserved. WHO WE ARE \| MEMBER SERVICES \| HOME \| TOP OF PAGE See Also MIDDAY MUSINGS ARCHIVE BREAKING BUSINESS NEWS, NOW