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Cisco (CSCO) - Get Cisco Systems, Inc. Report investors awoke Wednesday to find a slipping giant.

Shares of the San Jose, Calif., computer networking giant fell 6% after Tuesday's

postclose earnings report showed growing signs of strain on the company's bottom line. Analysts amplified the concerns, weighing in with less-than-flattering assessments of Cisco's prospects.

A strong rivalry in Cisco's router domain has created price wars, eroding the company's towering profit margins. Cisco also picked up some excess inventory at a time when industry observers were looking for a less lofty parts pile.

Meanwhile, Cisco's efforts to fortify its core business aren't exactly paying off. Demand for the company's new megarouter is questionable, and a revamped line of access routers hasn't taken off yet.

The upshot: It's all pretty much downhill from here, unless IT spending is suddenly resuscitated or Cisco finds growth in new markets through acquisitions, analysts say.

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"While Cisco is a well-run company and continues to manage operating expenses in our view, we believe the long-term trend of declining gross margin is not reversible for Cisco," UBS analyst Nikos Theodosopoulos wrote in a research note Wednesday. "This suggests to us that operating margins have peaked for the company and are likely to trend down slowly over the next two years." Theodosopoulos has a neutral rating on the stock.

To be sure, Cisco did manage to eke out a $1.4 billion profit in the latest quarter, and the company continues to churn out enough cash to promise another massive buyback effort. But growth-focused tech investors are more apt to focus on trends, and some of those don't look as promising.

For instance, when Cisco bought Linksys, a consumer electronics outfit selling home networking gear, it was clear the new unit would be a drag on margins. But few observers expected Cisco's gross margin to drop more than a percentage point in the space of a quarter. That figure hit 67.2% in the latest period.

Cisco blamed Linksys for some of the margin decline, but J.P. Morgan Chase analyst Ehud Gelblum says that would only account for a small part of it. "The rest is good old-fashioned pricing pressure," says Gelblum. "Customers are finally exercising some bargaining power over Cisco." Gelblum has a neutral rating on Cisco.

Rising inventory was one of the first signs that customers were gaining the upper hand on Cisco, says Gelblum. The customers demanded shorter delivery times, forcing Cisco to keep more products and parts on hand.

Now, says Gelblum, "Cisco is being forced into discounting just to make revenue and stay competitive."

Ah, the price of success.