Sector Watch: Juniper Warning Leads Networkers Lower

By Yi Ping Ho ,

Networkers were in the doldrums this morning after a

preopen earnings confession from

Juniper Networks

(JNPR) - Get Report

, whose stock was lately one of the biggest losers on the

Nasdaq.

The

American Stock Exchange Networking Index

recently dropped 4.1%, while Juniper tumbled 18% to $38.27. The company became the latest to

forecast poorer results, saying this morning it sees sharply lower-than-expected revenue in the second quarter.

J.P. Morgan

analyst Greg Geiling recently cut his rating on the company to market performer from long-term buy. The analyst said he believes the service provider capital expenditure environment is unlikely to improve in the second half of the year and will therefore "continue to plague" Juniper's results over the next few quarters.

"In broad terms

Juniper's warning is causing further concern today for other investors as it's a warning by a key company," said Dan Ament, associate vice president and investment executive at

Dain Rauscher

. "I would say in general the market appears to be working through many markdowns and warnings, and it's something we can overcome."

The contagion was lately spreading to other networkers, including those who recently issued their own profit warnings.

Cisco Systems

(CSCO) - Get Report

was off 5% to $20.76.

3Com

(COMS)

recently fell 2.5% to $5.52. After Thursday's closing bell, 3Com lowered its fourth-quarter revenue guidance, citing worsening business conditions. The company also said it plans to discontinue its line of consumer cable and DSL modems in a bid to reach profitability.

Nortel

(NT)

, which earlier today touched a 52-week low, recently dropped 4.6% to $12.53.

Redback Networks

(RBAK)

and

Sycamore Networks

(SCMR)

also lost ground, while

Ciena

(CIEN) - Get Report

fell 8.6% to $56.60.

Tellabs

(TLAB)

lately gave up 5.6% to $31.

"What's most important to me is how the market reacts to news," said Mike Hurley, technical analyst at

Wit Soundview

. "It's a little bit too early to tell right now.

The sector has been trying to stabilize and how it handles the current news over the next few days will be an important window."

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