Updated from 10:42 a.m. EDT

With sales still in steep decline and no sign of recovery on the horizon, Cisco ( CSCO) is expected to make a massive staff cut.

An avid optimist, CEO John Chambers has resisted the idea of a severe cut, but the darkening sales picture may force the company to take more drastic action.

"We expect Cisco to guide fiscal fourth quarter revenue down 17%-22% year-over-year, as demand continues to deteriorate," JPMorgan analyst Ehud Gelblum wrote in a research report Tuesday. Cisco didn't provided guidance for its the fiscal fourth quarter ending in July, but analysts expect a 20% decline from year-ago levels, according to Yahoo! Finance.

"We believe Cisco could also announce a 10% headcount reduction, which we calculate could save $900M annually," Gelblum added.

Tech watchers will not see this as anything but bad news for the sector. Networking gear rivals Juniper ( JNPR) and F5 ( FFIV) both recently slashed sales projections as telcos and businesses trim budgets.

A Cisco representative said the company doesn't comment on market rumors. Cisco had about 66,000 employees at the end of 2008.

Throughout the tech spending downturn, Cisco, and particularly Chambers, had been stubbornly holding out hope that a recovery was just around the corner. Despite near-term forecasts calling for quarterly sales declines, Cisco until recently had maintained a long-range revenue growth target range of between 12% to 17%.

But in February, Chambers called the still-accelerating economic downturn "the biggest challenge of our lifetime." Cisco already had started down the cost-cutting path, with a prior target to reduce about $1 billion in expenses this year.

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