Shares of

Cisco

(CSCO) - Get Report

were down in early trading Thursday as investors digested the tech bellwether's weak second-quarter outlook.

Although it met analysts' revenue estimates in its first-quarter results, Cisco reported flat profits and projected a second-quarter revenue dip between 5% and 10%. Analysts had estimated second-quarter revenue growth of around 6%.

Cisco shares were down 34 cents, or 1.96%, to $17.05 Thursday, as the Nasdaq fell 2.75%.

The networking giant is feeling the pain of the current economic crisis, noting a significant slowdown in tech spending during the last weeks of the quarter. Cisco cited shrinking enterprise and service provider budgets and an increasing economic uncertainty.

Against this backdrop, Cisco is preparing for a tough fiscal 2009. During a conference call late Wednesday, the company disclosed plans to cuts its expenses by $1 billion and realign another $500 million of its resources.

Clearly keen to grab the current crisis by the horns, Cisco CEO John Chambers outlined a six-point plan that includes a temporary hiring freeze, reductions in travel, and investment in the struggling U.S. market, which he predicts will be the first to recover from the economic downturn.

Despite those attempts to stabilize Cisco, one analyst predicts even tougher times ahead.

The third and fourth quarters of Cisco's fiscal 2009 could be "meaningfully worse," said

Credit Suisse

analyst Paul Silverstein in a note. Silverstein warns that enterprise IT and service provider budgets could be even lower than anticipated in 2009, with particularly tight spending in the first half of the year.

The analyst nonetheless maintained his 'neutral' rating and a $19 price target.

Piper Jaffray

analyst Troy Jensen also mentioned the global economic slowdown and limited visibility into service provider spending as major hurdles for Cisco. Jensen reiterated his buy rating for Cisco in a note Thursday and lowered the company's price target to $21 from $24.

The troubled guidance from Cisco, which competes with telecom manufacturers

Alcatel-Lucent

(ALU)

and

Nortel

(NT)

and networking companies

Juniper

(JNPR) - Get Report

,

F5

(FFIV) - Get Report

and

Riverbed

(RVBD)

offers an insight into the true scale of the IT spending slowdown.

"Comments regarding a massive order slowdown in October are negative for the data networking industry," wrote

Oppenheimer

analyst Ittai Kidron, in a note, adding that this could pose challenges to Juniper, F5, and Riverbed.

Despite its current problems, Cisco was bullish about its long-term prospects during its conference call. Chambers reiterated the company's commitment to a long-term growth rate between 12% and 17% and said the company had around $27 billion in cash and investments at the end of the first quarter.

The CEO added that Cisco has around $7 billion available for share buybacks, after spending around $1 billion repurchasing shares during the first quarter.

Faced with an increasingly difficult economy, Cisco will likely pare back its share repurchases, said

JP Morgan

analyst Ehud Gelblum.

Gelblum said Cisco's first-quarter stock repurchase was below the $1.4 billion the company spent on buybacks in the prior quarter. "We suspect Cisco is hoardingcash, since no one really knows just how bad the global slowdown could be," he wrote, in a note released Thursday.

Cisco's John Chambers said that the company has no plans for any layoffs in an interview on CNBC early Thursday.