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Cisco's Confidence Scheme

Forever optimistic, however cautiously, Cisco chief Chambers marches boldly into the slowing recovery.



) -- It's the economy,


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As growth slows and tech spending wanes, Cisco CEO John Chambers' cautious optimism starts to look a lot like a bold bet in a confidence game. Chambers called the sharp drop off in orders in late June and early July "a mixed signal pattern that we haven't seen before."

Cisco CEO John Chambers

Clear-eyed investors saw it as something else. Not nearly as optimistic as Chambers, investors started selling as news of a revenue miss was reported late Wednesday. The selling pace increased later, when guidance came in below expectations for the October quarter.

Cisco shares were down 10% to $21.42 in early trading Thursday, leading a broad tech selloff that has giants like


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down 5% this week.

After sales stalled for four weeks, Chambers says it snapped back in time to salvage the quarter. "Quickly people took their foot off a gas pedal and then put it right back down," he said.

Not to shine too bright a spotlight on the issue, but it's possible that Cisco helped push that pedal by flexing some sales and pricing muscle. "We believe revenue could have missed our estimate by an even wider margin were it not for the late quarter order push that may have masked, we believe, further order weakness," Morgan Stanley analyst Ehud Gelblum wrote in a note Thursday.

It is becoming clear that the so-called global economic recovery is slowing. Projected GDP numbers are now half of what they had been at the beginning of the year.

But when pondering a glass, Chambers always opts for the half-full bias.

"We're not making a call on the economy going down, I think that probability on double-dip or whatever you want to call it are relatively low," said Chambers, according to a transcript on



Eager to demonstrate courage in the face of deceleration, Chambers, unlike his customers who are cutting spending and postponing hiring, is going the other direction. As he repeated on the earnings call with analysts Wednesday, Chambers again said Thursday on


that Cisco was hiring and was in the middle of a nearly 10% staffing increase.

Chambers, it can be said, is trying valiantly to take his lead-by-example management style to new heights of economic influence.

Unfortunately, at least for now, Wall Street fears those kinds of heights.

--Written by Scott Moritz in New York.