SAN FRANCISCO, Aug. 2 -- Analysts are raising concerns over inventory levels at electronics manufacturers, which have risen three straight quarters. A leading tech analyst today forecast production rates at producers of communications gear would slip in coming quarters as firms looked to shed excess product.

In the second quarter communications saw the greatest inventory build, while IT hardware inventory levels are stable, wrote Deutsche Bank in a research note. The increases are helping EMS firms, said a DB analyst.

In an Aug. 2 note, DB analyst Chris Whitmore wrote, "We believe this build at communications OEMs is benefiting reported revenue for both component manufacturers and EMS vendors. In fact, EMS production of communications gear has increased by more than 15% since the seasonally strong Nov./Dec. quarter (normally flat to down 10%).

"While OEMs' inventory levels are not excessive, we do expect production rates in the communications equipment supply chain to decelerate as some of this build is worked down in ensuing quarters," Whitemore said.

Whitemore believes Cisco's inventory levels will come under scrutiny when the networking OEM reports earnings next week.

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