Sector Snap: Telecom suppliers downgraded

Credit Suisse took a global look at carrier spending, and concluded that at least one major operator will reduce its planned capital expenditures for the rest of the year. Analyst Paul Silverstein is most concerned about AT&T Inc., which accounts for 28 percent of U.S. telecom capital spending and 7 percent globally.

"Virtually every supplier to carriers of communications equipment has exposure to AT&T," Silverstein wrote in a note to clients.

Credit Suisse downgraded equipment suppliers Cisco Systems Inc., Ciena Corp., Adtran Inc., ADC Telecommunications Inc., and Optium Corp.

Cisco was cut to "Neutral" from "Outperform", and its price target was slashed to from $31 to $24, based on Credit Suisse's new annual pro-forma profit estimate of $1.59 per share, down from $1.72.

AT&T contributes more than $500 million, and perhaps as much as $1 billion, to Cisco's annual revenue, Silverstein wrote. Nevertheless, he still considers Cisco "best in class" and a good value for long-term investors.

Cisco shares fell 6 cents to $20.98 in morning trading, earlier reaching a new low of $20.56.

Shares of Ciena Corp., a maker of optical networking gear, fell 12 cents to $20.29 and hit a new low of $19.30, after Credit Suisse cut its rating to "Underperfom" from "Outperform."

The smaller companies encompassed by the downgrade were harder hit. Adtran shares fell $1.68, or 7 percent, to $22.31. ADC Telecommunications fell 79 cents, or 6 percent, to $12.49. Optium Corp. bucked the trend, edging up 9 cnets to $7.60.

Credit Suisse maintained its "Neutral" rating on Nortel Networks Corp., but trimmed its price target to $7 from $8, based on a pro-forma annual profit estimate of 43 cents per share, down from 47 cents per share. Nortel shares were unchanged at $6.43.