Cisco Bounces Back After Stock Declines

Cisco Systems Inc. on Monday rebounded from early declines as investors concluded that rising inventory didn’t signal deeper problems at the world’s biggest maker of computer networking equipment.

Cisco shares rose 94 cents to close at $77.50 in Nasdaq trading.

The San Jose-based networking company’s stock fell 7.4% Friday and dropped further during much of Monday before reversing direction amid a flurry of positive recommendations. Analysts said that an increase in inventory disclosed in a quarterly earnings report last week was nothing to worry about.

Paul Weinstein with PaineWebber attributed the heavy trading to the inventory report, which showed Cisco’s level of finished goods tripled from the preceding quarter as the company built products to meet increased demand.

“There’s nothing else that’s new,” at Cisco, said Weinstein, who reiterated his “buy” rating Monday morning.

Randall Yuen, an analyst with CIBC Oppenheimer, also reiterated his “strong buy” rating and analysts at Volpe, Brown Whelan & Co., Gerard Klauer Mattison & Co. and Bear, Stearns & Co. also recommended purchase of the stock.

Rising inventory levels often represent trouble at makers of computers and computer-related equipment because falling component prices and the rapid pace of technological change mean that inventory can become obsolete or overpriced in a matter of weeks.

Cisco’s fiscal first-quarter 10-Q report filed last Tuesday showed that finished goods more than tripled to $69.8 million from the fiscal fourth quarter, although total inventory declined 5.3% to $241 million.

Cisco, with $6.44 billion in revenue last year, makes equipment that routes high-speed data through computer networks.