Cisco Vs. Netgear: Price War in Home Networking?

Cisco (CSCO) has decided to use price as a competitive weapon in the market for residential and small office/home office networking hardware, RBC Capital’s Mark Sue asserts this morning. And he thinks that’s causing some problems for Netgear (NTGR).

“Unit growth for wireless [802.11]N devices, residential routers and other SOHO networking gear remains strong,” Sue writes.

But the pricing action led by Cisco means Netgear has to match and often beat the lowered prices to remain competitive. And with indications showing that prices have fallen even further in recent weeks, we’re not sure Netgear will see a quick rebound to its margins any time soon.”

Sue today cut his price target on NTGR to $19 from $22 due to the pricing issues. He says the stock “is cheap” at 10 times estimated 2008 EPS, but nonetheless says that “considering the new competitive dynamics, we’re not expecting revenue or margin upside anytime soon.”

He maintains his Sector Perform rating on the stock.