Cisco Shares Fall on Concerns About Reserves

Shares of Cisco Systems Inc., the No. 1 maker of equipment that directs Internet traffic, fell 4.5% after a Merrill Lynch analyst raised concerns about the company’s reserves in case customers do not pay. Cisco shares fell 73 cents, or 4.46%, to $15.65 on Nasdaq.

Also, Dresdner Kleinwort Wasserstein analyst Ariane Mahler downgraded her rating on the stock to “sell” from “hold,” citing questions about Cisco’s gross profit margins, stock option compensation and off-balance sheet commitments.

Merrill Lynch analyst Samuel Wilson raised a “yellow flag” on Cisco’s allowance for doubtful accounts, which has risen to its highest levels ever both in absolute dollars and as a percentage of gross receivables.

Cisco said it has not changed its approach on reserves, which it characterized as conservative.