Applied Biosystems

(ABI)

has run into a

Cisco

(CSCO) - Get Report

problem.

The maker of machines used in genetic research said Thursday that the souring economy has forced some of its customers to pull back on orders, which will put a big dent in sales and growth over the next several quarters. Executives said they think their competitors will feel the same pain of slowing sales soon. So did investors, who busily took down the shares of Applied and its rivals.

If this sounds familiar, it should. Applied Biosystems -- the big kahuna of genetic equipment makers -- is falling victim to the same trap as networking equipment giants like Cisco and

Lucent

(LU)

, which have stumbled badly because their key customers put a clamp on spending.

And like Cisco, Applied Biosystems' stock is getting whacked. Late Wednesday night, the company warned that sales growth for the next several quarters would be between 10% and 13%, instead of the expected 20%. On Thursday afternoon, the stock was off $13, or 38%, to $21.40. Earlier in the day, the stock was down more than 50%.

The sharp reaction to the equipment maker's warning was amplified by the fact that the biotech industry -- especially companies devoted to deciphering the genetic code -- was supposed to be largely immune to an economic slowdown and sinking stock prices. Analysts rushed out notes Thursday defending financial projections of rival companies. And at least one competitor,

Waters Corp.

(WAT) - Get Report

, went to the trouble of repeating its growth and earnings estimates for the quarter.

But in a Thursday morning conference call, Applied Biosystems CEO Mike Hunkapillar offered the first evidence that even well-funded biotech firms are worried about paying for big capital equipment purchases.

"Biotechs can't go back to the equity markets right now, and securing deals with pharmaceutical firms

to help pay for equipment is a slow process, so until they can see how funding issues will sort out, biotechs are nervous about committing to orders they've already placed," he says.

The question this raises is whether the woes befalling Applied Biosystems will hit other biotech equipment makers, none of which have yet signaled slowing sales.

"At this point, I think this is affecting Applied Biosystems specifically and not anyone else," says Scott Greenhouse, an analyst with

Thomas Weisel Partners

. "We've called about 10 other companies in Applied BioSystems' peer group and they all disagree that customers are holding back." (Greenhouse lowered his rating on Applied Biosystems to market outperform from strong buy and his firm has not done underwriting for the company.)

Applied Biosystems controls about 75% of the market for machines that help biotech firms and research labs figure out, or sequence, the structure of genes. This is a business that's maturing.

"Genomics companies with significant sequencing efforts already in place are seeking to add to their research capacity by using their current equipment more efficiently," says David Zimbalist, an analyst with

Morgan Stanley Dean Witter

, in a morning research note. "Net, net -- genomics research efforts are continuing to grow rapidly." (Zimbalist has lowered earnings estimates on Applied Biosystems and put his outperform rating under review. His house has not performed underwriting for the company.)

But this rosy assessment doesn't seem to be reaching investors today, as other biotech equipment makers take the fall. In recent trading,

Bruker Daltonics

(BDAL)

is off 34% to $9.88;

Molecular Devices

(MDCC)

has lost 14% to $34.69;

Invitrogen

(IVGN)

is off 11% to $44.31; and Waters was chopped by 26% to $11.50.

Applied Biosystems' Hunkapillar, apparently sensing the reaction to his company's vulnerable position in the gene sequencing business, insisted that the firm is not a one-trick pony. On the conference call, Hunkapillar said demand for new product lines, some of which pushes it into new and lucrative areas of research around genes and protein function, is strong. He also emphasized that many of the company's customers are government-sponsored research labs that are not affected by the funding concerns.

"While we're being conservative today, we still believe that 20% to 25%, long-term growth rates for both the top and bottom lines are reasonable," he says.

But today, investors were looking at short-term growth rates of 10% to 13% and clicking the sell button.