Sector Watch: Networkers Slip as Lucent Credit Downgrade Weighs on Group

By Yi Ping Ho ,

The networkers were mostly lower in recent market action, a day after telecom equipment maker

Lucent Technologies

(LU)

suffered a credit-rating downgrade.

Shares of Lucent, the third most actively traded stock on the

New York Stock Exchange, recently tumbled 7.4% to $7.36, putting a drag on the

American Stock Exchange Networking Index

, which was off 1.7%.

Networking giant

Cisco Systems

(CSCO) - Get Report

was down 2.1% to $19.95 in recent activity on the

Nasdaq, and

Nortel

(NT)

dropped 2.2% to $11.54.

Ciena

(CIEN) - Get Report

was lower by 2.7% to $51.58, and

Alcatel

(ALA)

, whose talks to merge with Lucent recently fell through, slipped 3.2% to $23.70.

Juniper Networks

(JNPR) - Get Report

, whose earnings warnings last Friday rekindled investors bearishness towards tech stocks, lately climbed 0.1% to $35.66. And

Sycamore Networks

(SCMR)

gained 1.5% to $10.56 and

3Com

(COMS)

was higher by 2.9% to $5.33.

According to Steven Goldman, a stock market strategist at

Weeden

, a trading and research firm in Greenwich, Conn., the performance of telecom stocks reflects overcapacity and high debt, which he described as "lingering" problems in the telecom sector.

John Bollinger, the head of

Bollinger Capital Management

and

Equity Trader.com

, said the "public is becoming disenchanted" with the failure of the networkers to deliver earnings growth. "The problem really, is that investors see these companies as growth stocks," he said. "And in order to be a growth stock one of those things you must do is grow."

Last Friday,

Juniper Networks became the latest networker to wave the warning flag, saying its second-quarter revenue would come in around $200 million to $210 million instead of its previous guidance of $300 million to $330 million. The company also forecast pro forma earnings of 8 cents a share for the quarter, compared with the earnings estimate of 24 cents a share, among analysts polled by earnings tracker

Thomson Financial/First Call

.

"These

networking stocks are likely to suffer until one of two things happen," Bollinger said. "Either their valuations are beaten down to the point where they are taken up by value investors, or they start growing again and justifying the valuations they're supporting."

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