Goldman Upbeat on Cisco, but Not Juniper

An incoming analyst at Goldman Sachs cleaned house on communications technology stocks Thursday, lowering the firm's view of the industry to neutral from attractive due to softening near-term fundamentals.

Goldman said in a note it was moving coverage of the communications sector to Simona Jankowski, and that led to the revision of estimates and price targets for Cisco (CSCO Quote) and Juniper Networks (JNPR Quote).

The firm's downgrade of the communications technology sector cites further downside risks due to many of the companies' significant enterprise and consumer exposure. Jankowski points to declining U.S. communications equipment orders growth, a potential pause in network upgrades, as well as potential pressure on margins as companies compete more aggressively for scarcer revenue opportunities.

Despite the downgrade of the sector, Jankowski said the firm's top choices in the sector are Qualcomm (QCOM Quote), Research In Motion (RIMM Quote) and Cisco.

Jankowski added Cisco's buy-rated stock to Goldman's conviction buy list and said the firm expects a sustainable long-term growth rate of 15% for both the top and bottom lines. Jankowski upped the firm's fiscal third-quarter estimate, excluding items, to 37 cents a share. That's a penny higher than the Thomson First Call average estimate. The expectation that Cisco will post full-year earnings of $1.55 a share is also a penny ahead of Wall Street's target.

On the negative side, Jankowski cut Juniper Networks to a neutral rating from the firm's previous buy rating, citing decelerating enterprise demand and increasing weakness in the service provider segment. Jankowski slashed the firm's expectations for first-quarter revenue and earnings to below the Thomson First Call average estimates.

Cisco was off 26 cents, or 1.1%, at $24.52. Juniper was losing 32 cents, or 1.2%, to $25.88.

Among other individual companies named in the transition of coverage, Goldman said it has a neutral rating for Acme Packet (APKT Quote), Netgear (NTGR Quote), Powerwave (PWAV Quote) and Starent Networks (STAR Quote).

Additionally, Goldman analyst Thomas Lee assumed coverage of Aruba Networks (ARUN Quote) and cut the firm's rating to sell from neutral, citing considerable risks the company faces during an economic downturn.