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When the selling gets tough, the tough buy back their stock.

Some observers see


(CSCO) - Get Cisco Systems, Inc. Report

decision to

expand its stock buyback program by $7 billion Tuesday as another sign that networking gear isn't about to start flying off the shelves.

"It plays into a theme that started a couple years ago," says Legg Mason's Timm Bechter, referring to a time when Cisco, like nearly all tech shops, saw an era of double-digit sales growth turn to stagnation and decline as demand dropped off.

"You could look at it as a way of treading water," says Bechter, who has a neutral rating on the stock. On Wednesday, Cisco fell 56 cents to $20.59.

Cisco is at a rather uncomfortable crossroads after a brilliant decade or so. Its big corporate customers haven't started buying again, leaving the San Jose-based networker to seek other means to reprime the growth machine. Meanwhile, there's no shortage of competitors eager to drain Cisco's opportunity.

Other cash-rich, growth-light shops like


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(QCOM) - Get Qualcomm Inc Report

have heeded Wall Street's demand to see the money. Both those tech giants have opted to return cash to shareholders in two ways -- via dividends as well as share buybacks. Cisco, on the other hand, has remained steadfast in its refusal to pay dividends.

To keep investors happy, Cisco has been employing a good portion of the $1 billion in cash it generates each quarter to buy back its stock. With $21 billion in cash on hand, Cisco has plenty of leverage to apply to this strategy.

But with Cisco's passion for the employee stock option, some question who is getting paid first in the process -- shareholders or employees.

Cisco has spent $7.8 billion to buy back some 548 million shares in the past two years. Over that period, though, the outstanding share count has fallen by just 381 million. That shows how employee options issuance has diluted the effect of the buyback.

That aside, however, share buybacks certainly do reduce shareholder dilution, and they can also enhance the bottom line even as the top line sags. If Cisco effectively reduces the share count, the all-important earnings-per-share number improves. According to J.P. Morgan Chase analyst Ehud Gelblum, if Cisco were to spend an additional $7 billion on buybacks, it would translate to a 3-cent improvement in 2004 EPS. Gelblum has a buy rating on Cisco.

While some see Cisco's buybacks as distracting investors from the company's depressing growth shortage, others like Gelblum are less cynical.

Cisco, which likes to buy other companies but hates to part with cash, may be building a supply of shares to fund an acquisition or two. In any case, tech investors are hoping they see something soon to get excited about.