Cisco's shares sliding, drag down Nasdaq

Dipping shares of Cisco Systems Inc. pushed the U.S. financial markets lower Wednesday as investors reacted to the company's rare miss of earnings expectations on Tuesday.

Following Tuesday's market close, the networking giant reported earnings per share of US$0.18 for its second fiscal quarter. Analysts polled by First Call/Thomson Financial had pegged the vendor to earn $0.19 per share for the period. Cisco had matched or beaten analyst forecasts in every quarter over the past six years. During Wednesday's trading on the Nasdaq exchange, shares of Cisco (CSCO) tumbled to a new 52-week low. At the time of this report, Cisco had dropped over 16 percent to $30 from Tuesday's close. Cisco shares hit a 52-week high of US$82 in March of last year.

Company executives blamed the earnings shortfall on a slowing economy and tightening of capital spending among service providers. The lack of service provider spending began last quarter and then worsened during in the second quarter, John Chambers, chief executive officer and president of Cisco, said in a Tuesday call with press and analysts. Chambers believes the slowdown will continue throughout first half of the year.

Chambers urged financial analysts to adopt a wide range of estimates for Cisco's third and fourth quarters given the current level of economic uncertainty.

Investors have scrambled to unload shares of Cisco throughout Wednesday's trading. Already one of the most widely traded stocks on the Nasdaq, Cisco has almost quadrupled its average volume with over 195 million shares trading hands on Wednesday.

Analysts added to the fire with a slew of downgrades on the day.

Morgan Stanley Dean Witter & Co. lowered its recommendation from "strong buy" to "neutral." SG Cowen Securities Corp. also shifted from "strong buy" to a "buy" rating. Several other major securities companies also downgraded Cisco on Wednesday.

At the time of this report, the tech-heavy Nasdaq had dropped 3.8 percent, to 2563.12, from Tuesday's close.

Cisco, in San Jose, California, can be reached at +1-408-526-4000 or via the Internet at http://www.cisco.com/.

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