Skip to main content

Updated from 12:14 p.m. EST


(CSCO) - Get Cisco Systems, Inc. Report

huge sales warning

failed to spark the usual selloff in tech stocks.

Either the networking equipment giant has stopped serving as a barometer for the sector, or the news that Cisco saw orders fall 20% in January merely confirmed the obvious: Tech spending is falling in tandem with the global economy.

To those who have been watching the recent earnings reports, Cisco is just the latest of the big tech shops, including


(MSFT) - Get Microsoft Corporation (MSFT) Report



(JNPR) - Get Juniper Networks, Inc. (JNPR) Report



(NOK) - Get Nokia Oyj Sponsored ADR Report

, to add similar brush strokes to the bleak picture.

TheStreet Recommends

Cisco said it isn't planning to idly wait out the downturn, however. And that fighting spirit may be one reason investors were sticking with the stock Thursday.

Cisco, which supplies routers and switches to data network operators, saw its stock rise 3.4%, while the tech-rich Nasdaq was also up nearly 2.5% in late-morning trading Thursday.

Using its financial strength and market dominance, Cisco appears to be willing to stash cash, take more business from weaker players and play banker to cash-strapped customers by lending money to finance its own sales.

In the fiscal second quarter, Cisco generated $3.2 billion in cash, pushing its savings account up to a whopping $29 billion. Using the cash as a weapon in a credit-averse environment, Cisco says it financed $2.1 billion worth of customer purchases in the past two quarters and now has $4.4 billion in so-called vender financing liabilities on its books.

One of the signs of tech's last apocalypse -- around the turn of the century -- was the heavy

lending by equipment makers to subprime network builders

to help keep order flowing. Cisco was more prudent in its lending than rivals





but still ended up on the hook for loans to failed outfits like Winstar and Rhythms NetConnections.

Investors who once dubbed supplier financing as the "special sauce" that helped prop up otherwise unappetizing top lines will no doubt keep an eye on Cisco's customer loans.

Late Wednesday, after beating estimates with a solid fiscal second quarter performance, Cisco guided sales for the April quarter to as much as 20% below year-ago levels, nearly twice the decline that analysts had expected.

On an earnings conference call, CEO John Chambers said the expanding economic slump has been a challenging environment for most of Cisco's customers. As phone companies


(VZ) - Get Verizon Communications Inc. Report



(T) - Get AT&T Inc. Report

demonstrated last week, 2009 spending would come down.

Hoping to offset the stark negatives with his characteristic optimism, Chambers told analysts on the call that Cisco plans to emerge even stronger when spending thaws.

"This downturn, in my opinion, is both the biggest challenge of our lifetime but also represents the biggest opportunity to transform our company as well as our economy through a series of bold steps," Chambers.

Chambers tried to rule out the near-term need for a round of layoffs, choosing instead to squeeze expenses and kill unproductive projects. Cisco, for example, managed to cut travel expenses in half in the fiscal second quarter. The method apparently included limiting all but 17 company officials to flying coach in their business travel. A Cisco representative was unavailable for immediate comment.