By the end of last week, investors had decided that bad news from WorldCom Inc. and International Business Machines Corp. overshadowed Cisco's cautiously optimistic view for sales growth, analysts said.

The result was a nasty reversal for the American Stock Exchange Networking Index(.NWX), which dropped back on Thursday and Friday as attention returned to the capital spending crunch that has dragged down shares of many once high-flying network gear makers, analysts said.

"We may not get back to record lows, but we still have to work our way through some quarterly reports that will be tough and where expectations will have to be scaled back," said William Becklean, a Commerce Capital Markets analyst.

"Service providers and enterprises have ended up with overcapacity and their earnings are under pressure so they're not spending unless they have to spend," Becklean said. "I don't think we'll see a pick up in capital spending until sometime next year."

Investors Skeptical of Recovery for Networkers