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Cisco's Long-Term Outlook Worries Investors

Stocks in this article: CSCO

Chambers, however, still put a positive spin on the company's numbers, pointing to strength in areas such as switching, routing and the UCS server business, which grew 550% year-over-year. "We think that this is not an elbow towards a downturn, we think this is a bump in 2 or 3 areas of our business," he explained, adding that Cisco still has aspirations of long-term growth between 12% and 17%.

Laura DiDio, principal with research firm ITIC, said that Chambers' comments are in line with what's being seen with the broader economic recovery. "Cisco is a very healthy, robust company. All Chambers is saying is more modest growth -- that's reflective of the fact that it's going to take the economy longer than expected to turn around," she said. "I wouldn't get panicked over this one. We'll want to see what they're going to issue for Q3 and Q4, though -- it's when there's three things in a row that you start to get nervous."

Cisco's gross margin of 64.3% was also slightly up on the firm's guidance of 64%, and its enterprise business was healthy, with orders up 16% year-over-year.

"We think it's a couple of quarter phenomenon, we're going to power right through it," Chambers told CNBC in a televised interview before market open on Thursday. "What we're asking investors to do is to have confidence in what Cisco has traditionally done -- our track record at getting market transitions right has been very good."

The company's stock, however, has been relatively listless for the last three months, and any hopes of a post-earnings boost are now fading.

"We don't expect much from the stock near term as guidance implies a back-end loaded fiscal 2011," noted Jayson Noland, an analyst at Robert W. Baird in a note released on Thursday. Noland added that Cisco's plunging share price may offer good entry point into the company's stock, but said that he is removing Cisco as a "best idea" for investors due to increased uncertainty surrounding the company.

Cisco shares were trading down about 15.68% shortly after market open Thursday, at $20.65.

--Written by James Rogers in New York.

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