SAN FRANCISCO,  Nov. 9 -- Cisco Systems, one of the largest customers of EMS services, warned today of lower second quarter sales, adding credence to concerns that the market for communications infrastructure will sag in the coming year. Chris Whitmore, an analyst with Deutsche Bank, said in a research report today, that market softness and inventory reductions by end-customers will hurt Cisco's sales in early 2005 and, by extension, those of its EMS suppliers.

If accurate, the EMS firms most likely to suffer would be Celestica (>10% of revenue comes from Cisco), Solectron (16%) and Jabil (15%).

Cisco forecast Q2 sales of $6.03 billion to $6.15 billion, lower than the Wall Street consensus of $6.21 billion.

Cisco's finished goods inventory increased during the last quarter to $714 million from $656 million. The company's book-to-bill is below 1.0, the mark of future expansion, Whitmore reported.

"[W]e expect soft trends in the communications infrastructure end market (for EMS vendors) to extend well into 2005. As such, we remain cautious on those EMS vendors with significant exposure to this end market," Whitmore said. 

Solectron appears "most vulnerable" to softness at Cisco, Whitmore said.

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