Cisco's

(CSCO) - Get Report

earnings and outlook carried many sectors down today, including the semiconductor makers. The

Philadelphia Stock Exchange Semiconductor Index

, or the SOX, dropped about 2% by midday, as a warning from

National Semiconductor

(NSM)

did nothing to brighten the mood of chip investors.

"This National Semiconductor story is a problem" for the chipmakers today, said Scott Curtis, a trader at

Kaufman Brothers

. But "most of them are selling off on the Cisco story too," he added.

The

Dow Jones U.S. Semiconductor Index

fell 2.4% in recent trading. Chip-producing powerhouse

Intel

(INTC) - Get Report

slipped 4.1% to $30.20 in the wake of the Cisco and National Semi double-team.

Applied Micro Circuits

(AMCC)

fell 4.6% to $27.04, while

PMC-Sierra

(PMCS)

dropped 7% to $41.

In a research note by Mark Lipacis and Joe Osha of

Merrill Lynch

this morning, the analysts wrote that "Cisco management indicated that it believed that there would be little to no market for its excess inventory in secondary market because there is already an oversupply of components. This supports our earlier conclusion that inventory levels in the communications equipment supply chain are still at an all-time high."

National Semiconductor warned after the bell yesterday that fourth-quarter sales and earnings would be lower than expected. The company also disclosed plans to terminate 1,100 workers, or about 10% of its workforce, as part of its cost-cutting efforts.

Merrill's Osha wrote in a separate note on National Semi that last night's comments "suggest that evidence of an upturn

in the semiconductor industry remains thin." At the end of the same note, Osha painted a bleak picture, saying, "we think that the potential return associated with owning semiconductor stocks for the next 4 - 5 months is outweighed by potential downside."

Additionally, this morning, analysts at

Robertson Stephens

cut National Semi's 2002 earnings estimates to 18 cents a share, less than one-third of the previous estimate of 60 cents a share.

The SOX has clawed its way back up 38.2% since April 4, the day the

Nasdaq hit 1638.80, and is now only down 3.6% for the last six months. Still, the index is off almost 52% from its peak in March 2000. The Dow Jones U.S. Semiconductor Index is up 47.4% in the same time frame as the recent rise of the SOX, but also remains far off of its highs.

The bleak outlook from Cisco "puts a lot of pressure on the rest of

the chipmakers," Curtis said.

Vitesse Semiconductor

(VTSS)

certainly felt the pressure today, losing 5.9% to $34.22.

Advanced Micro Devices

(AMD) - Get Report

was also in the red, losing 3% to $28.87.

Texas Instruments

(TXN) - Get Report

slid 3.2% to $37.90.