Cisco Router Does Little for Rating

SAN JOSE, Calif. ( TheStreet) -- Hyperbole isn't usually associated with Cisco Systems ( CSCO), the maker of networking gear.

The company took a page out of Donald Trump's book for its most recent product announcement. While the introduction of the CRS-3 Carrier Routing System -- not something the kids will be talking about -- represents a step forward, Cisco's claim that the technology represents a "game changer" is off the mark.

Cisco's new technology is a welcome tool for systems that are being stretched to capacity. People are increasingly using video content and other tasks that demand bandwidth like never before. AT&T ( T), an early tester of the new technology, is willing to pursue any advantage it can find to improve its service for Apple ( AAPL) iPhone users, whose devices have pushed AT&T's network to its limits. Still, bigger bandwidth is simply an evolution.

Early headlines today had many investors swimming with possibilities. Could the Cisco announcement entail some sort of a wireless signal transmitter that would make traditional wire service obsolete? Or perhaps a new method for packing data that could make old systems faster without the need for costly and time-consuming systems upgrades?

In reality, the news of the router, which Cisco claims is 12 times faster than its nearest rival and costs $90,000, was much more linear than many hoped. That said, the technology will dovetail nicely with advancements promised by Google ( GOOG) in addition to other companies betting on faster Internet speeds.

Cramer: Cisco's Target Price

Cisco's stock price reflects the disappointment. In early trading, Cisco was up about 0.5%. After the underwhelming announcement, the shares dropped about 1% and now are trading close to their opening price. Ratings has Cisco rated as a "buy," and today's announcement only strengthens that outlook.

Service providers, AT&T in particular, clearly need to improve their content-delivery abilities, but the Cisco CRS-3 doesn't by itself make Cisco a "buy." Pick up the stock based on the company's solid fundamentals and great prospects, but not on hype.

-- Reported by David MacDougall in Boston.
Prior to joining Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.