Investors pinning their hopes for a market turnaround on Cisco ( CSCO) shouldn't hold their breath.

Though stocks plunged yet again Monday -- the Nasdaq returning to five-year lows -- enthusiasm for the nation's leading maker of Internet gear hasn't been similarly affected. Many on Wall Street continue to hope that the company, due to report fourth-quarter earnings after the close Tuesday, will make bullish comments that could suggest a tech turnaround is in the offing.

But with many other tech outfits making dour forecasts and Cisco locked in a long flat trend after years of growth, the hope that CEO John Chambers will signal a breakout seems almost far-fetched. A look back at last quarter's events highlights the sense that, beyond hitting its expectations -- for earnings of 12 cents a share on revenue of $4.9 billion -- Cisco shouldn't be counted on for much this time around.

Rose-Colored

It's not that Chambers wouldn't want to help out. Far from it -- the executive has long been known for his relentlessly upbeat take on the tech world, regardless of what's really going on. Along those lines, a Chambers reference (during Cisco's fiscal third-quarter earnings call May 8) to "order momentum" set off a raucous tech rally that saw Cisco shares rocket higher by 20%.

Of course, the good spirits didn't last. Since then stocks have fallen across the board. Cisco itself has dropped 30% since May 8, approaching a 52-week low Monday. And if anything, the pressure on the company is growing.

Though Cisco has a solid balance sheet and a market-leading position, its stock continues to be pressured by rumors. Last week, the favorite rumor had CFO Larry Carter refusing to comply with Securities and Exchange Commission edicts requiring executives to provide sworn statements certifying their company's accounting. Additional speculation had Carter, 59, announcing his retirement soon.

Carter, like most folks facing 60, probably has some long-range retirement plan, but no one is expecting a sudden departure. And as for the vouching for the books, Cisco has until October, after it files its annual report, to make its formal declarations.

Anxieties also have run high surrounding the potential impact of expensing employee stock options. In a note Monday, Lehman Brothers analyst Tim Luke estimated that if Cisco were to expense its options, it likely would knock about 10 cents off the year's 36-cent EPS forecast. Coincidentally, Luke and Lehman changed their rating and hung a neutral on Cisco. The previous rating was strong buy. The downgrade may have helped feed into some of the pre-earnings uncertainty.

Big Picture

To be sure, the big problem for bulls is that Cisco sells networking gear to a host of cash-strapped customers, many of which have enough equipment to outlast the telecom recession. And until health returns to its customers, Cisco is not likely to break free of the slow-spending doldrums.

Yet as Cisco defenders are quick to point out, the gearmaker has a $21 billion cash hoard at its disposal, and is quite capable of breezing through the liquidity crunch that has gripped many of the other tech vendors.

On the tech edge, Cisco may be feeling the hot breath of rival Juniper Networks ( JNPR). Cisco was able to break away from the No. 2 router shop over the past year with the help of a new product. But in recent months, Juniper has introduced two core routers that at least rival Cisco's in speed and capacity. Routers sort and deliver huge volumes of network data traffic to addressed destinations.

Though there hasn't been a market-share tally yet, some observers expect Juniper to regain a few of the points it lost this year. That probably means Cisco won't be able to boast about big jumps in gross margin. And as CIBC World Markets analyst Steve Kamman predicts, Cisco is likely to be working on its own answer to Juniper's big box, previously known as Gibson .

With so much selling ahead of Cisco's earnings, the company almost would have to announce a major shortfall or departure to bring the pessimism into being. Then again, the stock is trading at 25 times 2002 earnings. That is a bit cheaper than in previous eras but hardly a bargain in these upside-deprived times.

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