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Cisco Shares Bounce Back on Optimism Over Earnings


Cisco Systems' shares Thursday staged their biggest rally in two months, helping to lift the Nasdaq composite index, after Wall Street analysts reassured investors about the networking giant's upcoming earnings report.

Cisco (ticker symbol: CSCO) jumped $3.44, or 5.6%, to $64.38 in heavy trading of 61 million shares.

The stock had slid 6.9% over the previous two days--and dropped as low as $58.50 early Thursday--on fears that the company's quarterly earnings report, due on Tuesday, would fall short of expectations.

On Thursday, analysts at CIBC World Markets, Merrill Lynch and ABN Amro published their previews of Cisco's earnings and said the firm, the dominant player in computer networking and Internet infrastructure, is not likely to drop a bomb.

"We anticipate well-balanced growth by products and geography, and no new material negative risk factors being discussed by the company on the conference call," CIBC analyst Martin Pyykkonen wrote in a note to clients.

Merrill Lynch analyst Michael Ching told clients that he expects Cisco's strong growth to continue.

Cisco is expected to earn 15 cents a share in its fiscal fourth quarter, excluding merger costs, according to the average estimate of 33 analysts surveyed by First Call/Thomson Financial.

That would be up 36% from a year ago.

Cisco's shares had tumbled in mid-May after the company warned that parts shortages could hurt its ability to meet profit and sales expectations--a familiar refrain coming from Silicon Valley in recent months.

But on Tuesday Cisco reported that the supply of flash-memory chips and other parts for optical-networking gear had improved this quarter.

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