Redback's Spiral

3:35 PM -- Redback Networks Inc. is down even more today, on another downgrade, this time by Miller Johnson Steichen Kinnard Inc.

Shares are down $1.27 (8.9%) to $13.00 at the moment. That puts Redback off 30 percent from its $18.69 level on Sept. 1, the Friday before the slump started.

Part of this is just gravity -- Redback had been around $13 in July before climbing up. Last week's drop seems to be triggered by a reality check about potential contracts, especially one with Verizon Communications Inc. (NYSE: VZ)that investors seemed to be banking on. (See Redback Falls on Verizon Hopes and Redback Gets a Break.)

Beyond that, I still think the company got stung by last week's Cisco Systems Inc. (Nasdaq: CSCO) analyst conference. Most of the analysts covering Redback happened to be there as the stock first started falling. They didn't get notes out about the topic until the next day, which seemed to push Redback shares down even further.

Redback might have gotten a bit overheated, but do they really deserve this much of a death spiral? You'd think all the bad (or more precisely, non-explosively-good) news is baked in by now.

— Craig Matsumoto, Senior Editor, Light Reading