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Networkers get dose of holiday cheer

Shares in Cisco, 3Com, and others climb, spurred on by bullish industry expectations and a dose of overall good cheer on Wall Street.

2 min read
Networking stocks climbed today, spurred on by bullish industry expectations and a dose of overall good cheer on Wall Street.

Stocks of various data networking firms were pumped up by a Wall Street report that said Cisco Systems' current stock price is undervalued. Additionally, stocks rose on expectations that 3Com will report favorable earnings later this week, analysts said.

Shares in Ascend Communications today jumped 8 percent while Cisco, Lucent, Xylan, Tellabs, and 3Com shares each rose about 5 percent.

Cabletron Systems was one of the few networking companies to come up empty on an upside day, in part due to third quarter results that fell below its revised estimates. Nortel Networks also slipped slightly on the day.

In a report published today, analyst Stephen Koffler of Donaldson, Lufkin & Jenrette said Cisco was priced too low, compared to more obvious Internet-related companies, such as Amazon.com and Yahoo.

The Internet's explosive growth and the demand to create more bandwidth means higher sales and profit for Cisco, the report said.

With the boost, Cisco hit a new 52-week high.

Michael Davies, an analyst with Punk Ziegel, agreed with the report and said it helped networking stocks soar today. "A lot of these stocks deserve some attention," he said. "If you look at the evaluations in the e-commerce arena, the Amazon.com's and eBay's, one has to realize all this e-commerce has to be supported with the infrastructure and has to grow accordingly with e-commerce traffic.

"I believe those [Internet company] evaluations should come back to reflect equipment players," he said.

Analyst C.B. Lee of Sutro & Co. believes networking stocks rose on anticipation of 3Com earnings, expected tomorrow. "3Com is widely expected to have a good number, and as a result, the networking stocks are running ahead of that," he said.

3Com is expected to post earnings of 31 cents a share, according to consensus estimates compiled by First Call.

But other analysts, however, said networking stocks were simply rising today with the rest of the technology stocks. "The networking stocks appear to be going up with the rest of the market," said Scott Heritage, analyst for Warburg Dillon Read. "There's nothing specific regarding the group."

CNET News.com's Ben Heskett and Bloomberg contributed to this report.