Shares in Cisco Systems (Nasdaq: CSCO) plummeted 16.2 percent, or $3.97 a share, Thursday following an earnings report Wednesday that disappointed Wall Street analysts.

Cisco ended the day at $20.52 with more than 450 million shares being traded. That’s 10 times the daily volume.

Analysts unleashed a series of downgrades on Cisco, as reported at The Street.com:

  • Deutsche cut Cisco to “Hold” from “Buy” with a stock target price of $22
  • William Blair downgraded Cisco to “Market perform.”
  • Wunderlich cut Ciso to “Hold” from “Buy” with a $22 target price
  • Goldman Sachs cut its Cisco stock target to $23 from $25.

Robert Blair’s Jayson Nolan said in a note that “We don’t expect much from the stock near term as guidance implies a back-end loaded fiscal 2011.”

Cisco Chairman and Chief Executive Officer John Chambers acknowledged in an interview with CNBC before the markets opened Thursday that the company had hit “a couple of air pockets.”

However, Chambers insisted the company is growing.

Shares in Cisco, which employs more than 4,000 people in RTP, traded as low as $20.25 Thursday morning. Its 52-week low is $19.82.

The disappointing sales forecast for the second quarter in a row on Wednesday after the arkets closed raised doubts about the network equipment maker’s competitive chops despite an uptick in its most recent quarterly earnings.

Back in August, Chambers rattled investors by pointing to “unusual uncertainty” among customers about the pace of economic recovery.

But some analysts worry the latest shortfall in Cisco’s revenue projections may have more to do with smaller competitors eroding its dominant market position.

Juniper Networks Inc., for instance, is just a fraction of Cisco’s size but has grown revenue steadily over the past few years. And last month Juniper projected that fourth-quarter sales will be up at least 17 percent over the same quarter a year ago.

While the numbers are not directly comparable, Cisco said Wednesday that revenue for the quarter running from November through January will climb just 3 percent to 5 percent. That’s less than half the growth rate that analysts predicted.

The news sent Cisco shares down some 12 percent, or $2.89, to $21.60 in after-hours trading.

(Read LTW coverage of the earnings report here.)

“The concern is that Cisco is growing slower than the market,” said Kaufman Bros. analyst Shaw Wu. “If you look at what Cisco’s peers have said, as well as other data points in the supply chain, they’ve been arguably more upbeat.”

Wu said it is too soon to conclude that Cisco won’t rebound from the competitive threat, but investors picked up on the concern as well. Cisco’s stock dropped $3.09, or 12.6 percent, to $21.40 in extended trading after the company released results.

In a conference call with analysts, Chambers pushed back against the idea that the problem is fiercer competition, not economic trends.

With a broad customer base that includes government agencies and big companies across the globe, Cisco is thought of as a bellwether for technology spending. Chambers also pointed to broad economic factors resulting in the shortfall, from state governments in the U.S. that can’t afford technology upgrades to European countries that have slashed budgets to cope with deficits.

The CEO conceded that orders in Cisco’s television set-top box business in North America have slowed at least in part because Motorola Inc. has made inroads.

But, he said, “On the issues we can control and influence, I think we’re as strong as ever.”

Cisco said Wednesday it earned $1.9 billion, or 34 cents per share, in the fiscal first quarter ended Oct. 30. That’s up 8 percent from $1.8 billion, or 30 cents per share, a year ago.

Stripping out unusual items, it would have earned 42 cents per share. Analysts expected 40 cents, according to Thomson Reuters.

Revenue rose 19 percent to $10.75 billion, just above the average forecast of $10.74 billion.

But that was still below the $10.95 billion that analysts had predicted for the quarter in August, before the company lowered expectations.

Cisco’s outlook for the quarter that ends in January also fell short. The company’s projected growth of 3 percent to 5 percent works out to revenue of between $10.1 billion and $10.3 billion, while analysts expected $11.08 billion.

Cisco employs more than 4,000 people at its campus in Research Triangle Park, N.C.

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