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Cisco Systems, Inc. (CSCO), Juniper Networks, Inc. (JNPR): This Just In: Upgrades and Downgrades

The out-and-out disasters
Another thing to keep in mind when deciding how to play this trend is staying power. If there’s a price war afoot in high-tech routers and switches, Cisco Systems, Inc. (NASDAQ:CSCO), with its beefy 22.7% operating margin, is much better positioned to depressed profit margin losses and survive, than is Juniper Networks, Inc. (NYSE:JNPR) and its modest 9.4% margin.

Rivals farther down the profitability ladder could be in for an even worse ride. Here you need to keep your eye on Alcatel Lucent SA (ADR) (NYSE:ALU), which currently ekes out a living on a 0.9% operating margin (and even that may be overstating the case, because Alcatel is currently free cash flow-negative), and on Ciena Corporation (NASDAQ:CIEN) as well. In addition to burning cash, Ciena also sports negative operating margins.

Foolish takeaway
When you get right down to it, I kind of suspect that FBR’s fears about Cisco Systems, Inc. (NASDAQ:CSCO) are overblown. With strong free cash flow and a deep cash cushion — $30 billion net of debt — Cisco is a corporate fortress, and probably able to handle whatever troubles Mr. Market sends at it. Juniper, Alcatel, and Ciena, on the other hand … well, let’s just say I’m less confident in their chances, and leave it at that.

The article This Just In: Upgrades and Downgrades originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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