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When John Chambers talks, you better damn listen

Cisco's CEO cautioned that demand was likely to be "lumpy" for the technology sector during his recent press tour following the company's latest earnings report.

Late in 1999, in a filing with the Securities and Exchange commission that sales were slowing. A financial analyst quoted at the time downplayed Cisco's comments on future growth. "This is not news," said Bill Meehan, who followed the stock for Cantor Fitzgerald.

Well, with the benefit of 20/20 hindsight, we now know that Cisco's warning turned out to be news. It turned out to be quite prophetic news and the technology business soon found itself smack in the midst of an ugly recession that shuttered companies and led to the evaporation of billions of dollars in investor equity.

I was thinking about that episode recently after John Chambers did the press tour following Cisco's latest quarterly earnings report. The numbers were pretty good but Chambers, maybe the best CEO in the technology business, wasn't out to snow anybody.

Demand, he said, was likely to be "lumpy." Translation: the tech bloom is about to fade.

With the subprime mess spilling over into the financial sector, banks and brokerages aren't going to buy as much new hardware and software as they did a year earlier--not until the current crisis subsides. And depending upon which talking head you believe, this is rapidly shaping up into the mother of all financial crises. (A recent U.S. Senate report said the cost to the U.S. economy ultimately would be $2.3 trillion.)

And because Cisco's infrastructure plays so central a part in the global Internet economy, Chambers is in a particularly good position to make the call. Of course, he was ultracareful in his post-earnings interviews not to trigger a panic. And truth be told, it's too early to say with clarity whether this is the start of another huge drop in technology spending. Until now, in fact, the shares of many bellwether Nasdaq companies have weathered previous market corrections and gone on to set new highs. Google, Apple, Research In Motion, and Amazon--Jim Cramer's famous "Four Horsemen"--were on one of the most remarkable runs in recent stock history.

That all came to an abrupt end last Thursday. The big question on the lips of a lot of executives today is whether the frenzied selling since then is just another typical--albeit painful pullback--or a harbinger of another tech wreck. While I'm hoping it's the former, I've got a haunting feeling it easily could become the latter.