After the Bell: Cisco Rocks Techs

It may not be as bad as you think. It may be worse.

Tech stocks were shocked after hours by an earnings warning from router maker Cisco Systems. Its stock was down 8.66 percent to $15.71 in late trading. Shares fell 4.34 percent Monday. The 52-week low of $13.19 was reached April 4.

Cisco announced that third-quarter revenues (ending April 30) would be down 30 percent from its second-quarter total of $6.7 billion. Pro-forma earnings per share are expected to be in "the very low, single-digit range." Analysts were calling for 8 cents. The company will take a restructuring charge of $800 million to $1.2 billion in the third quarter for departmental restructuring, consolidation and asset impairment. Cisco will also take an additional charge of $2.5 billion for excess inventory. The company also predicts that the fourth quarter will be flat to down 10 percent sequentially. Cisco cited international weakness as one of the main contributors to its revised outlook.

Finisar, also a player in high-speed data networking, updated its fourth-quarter (ending April 30) outlook. The company expects revenue of $50 million to $55 million, down from analyst expectations of $66 million. It's weighing in for pro forma earnings of 1 cent per share, 3 pennies below estimates. The company also reduced 2002 estimates. Finisar was down 16.3 percent to $11.29.

Vitesse Semiconductor, which makes integrated circuits for communications systems, reported second-quarter pro-forma earnings of 10 cents per share on $121.8 million in revenue. Vitesse was down 8.5 percent to $22. "For the first time in over 8 years, we experienced a sequential decline in revenues due to a dramatic reduction in demand from our communications and data-storage customers," said Vitesse President and CEO Lou Tomasetta in a statement.

Other networking companies were falling after hours. Juniper Networks, which reported a decent quarter last week and revised downward somewhat less than expected, was down 3.7 percent to $46.60. Optical networking equipment makers Ciena and JDS Uniphase were also weak. Ciena lost 5.1 percent to $48.91. JDS Uniphase was down 4.77 percent to $18.95. Network computing leader Sun Microsystems was off 3.7 percent to $15.74.

Intel was also off 2.3 percent to $25.70, while Dell and Microsoft were relatively spared, down less than 1 percent. This follows a Monday morning report out of Morgan Stanley that said companies in the semiconductor sector were still vulnerable. Salomon Smith Barney issued a contrary report last week.

Applied Micro Circuits was off 5.9 percent to $18.80. Foundry Networks was down 6.9 percent to $8.60. Broadcom was down 3.9 percent to $29.90.

Nortel Networks was down 4.6 percent to $14.55. Micron Technology was down 2.7 percent to $43.26. Corning was down 4 percent to $21.50. Texas Instruments, Lucent, and Motorola were also down slightly.

Expect both network and chip stocks to be weak Tuesday. Sprint and Sprint PCS report quarterly earnings before the bell, and Intel, Texas Instruments and Veritas will have their way with the after-hours markets. The March Consumer Price Index will also be released Tuesday morning and will shed more light on Thursday's Producer Price Index. The PPI core, excluding food and energy, showed a 0.1 percent rise in producer prices. A rise in the core CPI will show to what extent those wholesale prices were passed on to consumers.