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Cisco's Spending Plan Can't Save Shares

The stock slumps despite the company's intention to keep spending.



plans to boost its technology spending -- despite the ongoing econmic slump -- were unable to bolster its shares Wednesday, as the networking giant's stock joined the broader market's downturn.

According to various media reports, CEO John Chambers told a Gartner event audience late Tuesday that the company will increase its tech spending by 10% next year. Cisco needs to increase its tech budget to cope with demand for a slew of emerging technologies, he explained.

Despite the current economic malaise, Chambers is bullish about Cisco's prospects, highlighting technologies such as virtualization and

cloud computing as key drivers behind the company's spending Tuesday. Cisco has already partnered with



to support virtualization, a technology which is used to expand computers' physical capacities, and Chambers also wants to boost the company's Web-based "cloud" services.

Chambers also warned his audience that broader IT spending will depend on individual companies' philosophies, explaining that some firms see technology as an expense to be cut whereas others recognize its value as a "competitive advantage."

Despite Chambers' confidence, Cisco itself is hardly immune to restructuring; the company is


planning 129 job cuts at its facility in Richardson, Texas.

Jefferies lowered its price target Monday on Cisco's stock to $24 from $30, citing high levels of economic uncertainty, although the analyst firm maintained its buy rating.

Shares of Cisco were recently off 85 cents, or 4.6%, to $17.69. The stock has lost nearly 50% of its value in the past 12 months.

"In the last two weeks, we touched base with some of Cisco's large channel partners - these contacts indicate demand for Cisco products appear to be sluggish in the months of August and September," wrote Jefferies analyst William Choi. "Cisco is not immune to the current global macro slowdown; however, a sharp focus on execution and strong market position will enable Cisco to perform relatively well."