Cisco Spins Its Wheels in Slowdown

To some observers, that indicates customers are starting to get the upper hand. Gelblum sees Cisco's wide 68% gross margins as one of the areas likely to suffer from a buyer revolt.

"If revenue was moving up sharply with a new product cycle, what happens on the balance sheet and behind the scenes wouldn't matter so much, in the near term," says Gelblum.

Analysts are big fans of spread sheets, and the numbers they've plugged in speak to some disheartening trends. One troubling development is that Cisco's costs are rising even as projected sales flatten.

In his downgrade of Cisco Wednesday, UBS analyst Nikos Theodosopoulos says sequential quarterly top-line growth will slow from a recent 7% to about 3% over the next four quarters.

Meanwhile, Theodosopoulos notes, the company expects operating expenses to increase about 3% sequentially in the current quarter, due to rising inventory and the hiring of 1,000 workers this year.

"We find the increasing level of operating expenses relative to revenue growth as a risk given the company's slightly reduced enthusiasm on corporate spending on the conference call," Theodosopoulos writes in a research note.

But not every spread sheet tells the same story. Some Wall Streeters still see plenty of upside.

"A small increase in IT spending combined with further market share gains, more service provider spending on IP, and Cisco's advanced growth initiatives should hopefully be enough to deliver low double-digit revenue growth for Cisco," CIBC World Markets analyst Steve Kamman writes in a note Wednesday.

Like many fans, Kamman sees Cisco as a well-oiled machine poised to hit the accelerator when the green flag waves over IT budgets.

But others, like Gelblum, are beginning to fear that Cisco is stuck in neutral until it can find a hot new product cycle.

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