Cowen Rates Cisco Neutral - Cites Weakening Demand, Greater Competition

Cisco (CSCO) shares are coming under pressure today after Cowen’s John Anthony launched coverage of the company with a Neutral rating and a highly cautionary research note.

Cisco tonight reports results for its fiscal first quarter ending October; the stock has been on the rise in recent sessions, powered by a steady drumbeat of bullish commentary from the Street. Anthony says he, too, thinks the company will report solid results for the quarter. But he is more cautious on the outlook from here.

“We are concerned that its ability to grow in the near-term will be challenged by a broad slowing of demand and intensifying competition,” Anthony writes. “Given these dynamics and given the lofty expectations surrounding Cisco’s near-term prospects, we believe that it is prudent for investors to remain on the sidelines until a clearer picture of end-demand emerges.”

Anthony says that he is seeing evidence “throughout the supply chain” that Cisco is seeing “a broad slowdown of demand.” Ergo, he notes that his EPS estimates are below the consensus: he sees $1.54 for the July 2008 year, and $1.70 for FY ‘09; the Street sees $1.57 and $1.84.

“Cisco has a well-established track record of soundly beating its competitors,” he writes. “Having said that, we believe the competitive landscape will become more challenging for Cisco next year as Juniper (JNPR) steps up its efforts in the enterprise arena and as other companies pursue the networking infrastructure markets.”

Cisco Wednesday is down 50 cents, or 1.5%, at $33.58.