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Cisco: Don't panic but it's awful and getting worse

CEO John Chambers says his company is hunkering down to deal with an increasingly volatile global economy.

Cisco Systems' John Chambers may not be the top manager in techdom, but he's right at the top of anyone's short list of the best and the brightest. That's why when he says it's hairy out there, pay attention.

So it was that about a year ago, while the bozos inhabiting Cramerica were yammering about the Dow soaring past 15,000, Chambers was one of the first big-time CEOs to warn of cracks in the edifice. (At the time he described demand as "lumpy." That turned out to be the mother of all understatements.)

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After listening to Chambers' conference call Wednesday afternoon discussing Cisco's first-quarter earnings, it's clear that those cracks are widening fast.

Even though Cisco's revenue in the quarter slightly topped estimates, the company plans to chop about $1 billion in expenses this fiscal year to compensate for slowing customer demand. At the same time, Chambers forecast sales would decline 5 percent to 10 percent in the current quarter.

The damage from this fall's financial meltdown has moved from the U.S. to other markets in Asia and Europe, according to Chambers, who said the slowdown now has spread from the financial and auto markets to other industries. If you want to take the glass half full approach, then consider that Chambers still believes Cisco can deliver on its long-term goal of delivering revenue growth between 12 percent and 17 percent.

However, it's unclear--even for as finely honed a forecasting machine as Cisco--exactly how the near-term is going to shape up. Chambers acknowledged that demand fell apart in October, and he described the current environment as one of the most difficult to forecast in his professional career.

"It would not be a big surprise to be on the positive side of that projection or the negative side of that projection," he said, adding that while Cisco felt it was "in uncharted waters," he would have a better idea in about 45 days.

But the conference call was vintage Chambers being Chambers. He runs a company with the size and resources that let him take a long-term perspective and pick off smaller acquisitions, biding time until the economy works through its current bout of dyspepsia (if that's what we can call it). At several points in his remarks, Chambers talked about going back to a now dogeared playbook that served Cisco well during previous slowdowns.

"We've been through this four or five times," he said. "So it's a team that knows how to handle this very effectively...This is a chance for us to break away from our peers, and we really intend to do that."

Comforting news if you're a Cisco shareholder but hardly much solace for tech start-ups facing an increasingly turbulent future.