Updated from 7:31 a.m. EST

Cisco

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shares dropped 6% early Thursday, a day after the networker warned investors that it's feeling the effects of the credit crunch hitting Wall Street.

The San Jose, Calif., company posted an adjusted profit of 37 cents a share for the fiscal first quarter, beating the Thomson Financial analyst consensus estimate by a penny. Revenue rose 17% from a year ago, in line with the Thomson target. Cisco also offered guidance that's in line with Wall Street estimates.

But shares slid as investors continue to worry about the damage being done by bad debt in the financial sector.

Morgan Stanley

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,

Washington Mutual

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and

AIG

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were among the biggest losers on Wall Street Wednesday as credit fears intensified. AIG and Morgan Stanley later Wednesday became the latest big financial firms to take multibillion-dollar hits on subprime mortgage-related securities gone sour.

"We saw dramatic decreases year over year in orders from financial services" as well as softness in the automotive market, CEO John Chambers said on a postclose conference call.

Investors who have seen Cisco shares rise sharply over the past year saw other issues in the report.

"They didn't beat on the top line and they were a little weak on the gross margins," says one investor who was short Cisco shares going into the announcement. "I think we will hear some caution from Chambers. The U.S. market matters and the financial services are hurting."

Indeed, on a postclose call with investors, Chambers reiterated that fiscal 2008 sales growth will be somewhere between 12% and 17%. He said with the first fiscal quarter of the year now complete, it looks like the company is "operating at the high end of this guidance." Chambers went on to project fiscal second quarter guidance of 16% over year-ago levels, which is in line with analysts' expectations.

Chambers said the book-to-bill ratio in the first quarter -- a measure of order pace compared with shipping volumes -- was one, which is a modestly bullish assessment of business trends.

But one area of ongoing weakness for Cisco is U.S. tech buying by big businesses. That trend continued as, Chambers says, growth in "enterprise orders were in the mid-single digits," due to credit market turmoil and the profit pinch among financial service companies. Chambers said the orders from U.S. businesses were uneven in the first quarter and "will continue to be lumpy" in the second quarter.

The slowdown in business tech spending in the U.S. is not spreading to other markets, said Chambers, adding that that he isn't seeing any "issues of concern" among customers outside the U.S.

As for gross margin guidance in the current quarter, CFO Dennis Powell said the margin will remain at 65.5%, flat with fiscal first quarter levels.

After dropping $1.33 to $32.75 in regular action Wednesday, Cisco dropped an added $1.93 early Thursday to $30.81.