Cisco's stock dropped $4.94, or 13 percent, to $33.31, despite executives' previous announcements that the company expects strong financial quarterly results for the current quarter and the rest of the year. Cisco's share price has been cut by about 60 percent since reaching $82 in late March.
Some analysts reiterated Tuesday that they believe Cisco will post strong earnings, despite the recent spate of profit warnings by tech companies. The network equipment sector has not been immune to financial woes, with 3Com, Lucent Technologies and Foundry Networks announcing earnings warnings last month.
Cisco's share drop Tuesday came on a dismal day for the stock market as the tech-heavy Nasdaq plummeted to 2,291.86, its lowest close since March 1999.
Many of Cisco's rivals in the network equipment market were also hit hard Tuesday. Extreme Networks shares fell 29 percent, or $11.50, to $27.63, while Juniper Networks shares dropped 19 percent, or $23.50, to $102.56. Redback Networks plunged 17 percent, or $6.94, to $34.06.
"Everyone thinks everything has gone to hell in a handbasket," said Salomon Smith Barney analyst B. Alexander Henderson, who maintains a "buy" rating for Cisco's stock. "People are shooting first and asking questions later with a presumption of guilt before the evidence is computed."
3Com, Lucent and Foundry have cited slower sales to telecommunications service providers as the main culprit to lower earnings. After Foundry announced its earnings warning two weeks ago, Merrill Lynch analyst Michael Ching downgraded Cisco's stock from "buy" to "accumulate," saying Cisco cannot be immune to the slowdown forever. Ching said Cisco was being downgraded for "guilt by association."
But other analysts on Tuesday said Cisco historically has met its financial forecasts. While more of Foundry's overall revenue relies on its service provider sales, Cisco is equally strong in sales of equipment to both service providers and corporations, protecting the company from a downturn in telecommunications sales, said Chase Hambrecht & Quist analyst Erik Suppiger.
"The service providers are certainly cutting back spending (on networking equipment), and the dot-com market is showing some serious cracks, but networking sales in established corporate accounts seem to be intact," Suppiger said.
Cisco representatives could not be reached for immediate comment.
Cisco in November upped its sales forecasts for its current second quarter and the 2001 fiscal year. Sequential growth will hit single or low double digits, while revenue for the fiscal year is expected to grow between 50 percent and 60 percent.