Cisco Systems (NASDAQ:CSCO) is ready to rock its first-quarter 2009 report on Wednesday night. Fiscal 2008 ended with a bang, but the general market panic has sent the stock down to the basement nonetheless. Is this the beginning of the end for Cisco, or just another day in the life of a market leader?

What Fools say:
Here's how Cisco's CAPS rating stacks up against some of its peers and competitors:

Company

Market Cap (in billions)

Trailing P/E Ratio

CAPS Rating (out of 5)

Cisco

$107.9

14.0

 ****

LM Ericsson Telephone (NASDAQ:ERIC)

$25.6

15.0

 ***

Motorola (NYSE:MOT)

$11.7

N/A

 **

Juniper Networks (NASDAQ:JNPR)

$10.0

20.7

 ***

Alcatel-Lucent (NYSE:ALU)

$6.5

N/A

 **

Data taken from Motley Fool CAPS on Nov. 4, 2008.

All-star CAPS player javnnf gives Cisco a thumbs-down rating because its "products are not really needed in this gloomy economy." That seems like a fair representation of the bears' general consensus these days.

But the bulls see things in a different light. FreeFlyingFool, for example, sees a "value play" with a skimpy P/E ratio but tremendous fundamentals. "The current hard times will be painful for Cisco in the short term," the Free Flyer says, "but beneficial in the long term, as the weak economy lets them use their superior balance sheet to good effect."

I'll expound further on that theme in a minute. Feel free to weigh in with your own $0.02 anytime.

What management does:
The recession seems to be hurting Cisco's sales growth, but I don’t think that the company will stoop to a price war to protect its market share. Instead, the gross margins are staying solid as a rock. Once a discount-priced supplier, always a bargain-bin option. Keeping prices at a relative premium is a smart long-term strategy.

And don't forget that Cisco is a veritable cash cow,  routinely pumping out free cash flow in the $2 billion range with every passing quarter.

Margins

4/2007

7/2007

10/2007

1/2008

4/2008

7/2008

Gross

64%

64%

64.1%

64.3%

64.5%

64.5%

Operating

25.1%

24.9%

25%

24.8%

24.1%

23.9%

Net

20.8%

21%

21.9%

21.4%

20.6%

20.4%

Growth (YOY)

4/2007

7/2007

10/2007

1/2008

4/2008

7/2008

Revenue

23.6%

22.6%

20.5%

18%

15.3%

13.2%

Earnings

24.6%

31.4%

33.8%

24.7%

14.7%

9.8%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Despite a generous share-repurchase program and the occasional acquisition, all of that cash is piling up on Cisco's balance sheet. In the last report, there was a $26.2 billion cash balance and only $6.4 billion in long-term debt. That puts Cisco's financial health somewhere between Microsoft's (NASDAQ:MSFT) $17.8 billion in net cash and Apple's (NASDAQ:AAPL) $24.5 billion.

Is it time for another major buyout soon? Given the ripe market conditions, a cash-rich buyer like Cisco could get a great deal on something very big.

But first, we need to see the latest numbers. Rivals like Juniper, Nortel, and Alcatel-Lucent have shown good results lately despite the weak economy, and they all live and work in Cisco's territory. Sales might disappoint again, as I don't see this market leader changing its pricing strategy anytime soon. But the bottom line should stay strong.

Cisco hasn't been this cheap since the summer of 2006. You know that this ultra-rich market leader will make it through these lean times and come out stronger on the other side.

Microsoft is a Motley Fool Inside Value recommendation. Apple is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days. Or just sign up for a free CAPS account to find the identities of your fellow Fools who were quoted above. They might have more to tell you!

Fool contributor Anders Bylund holds no position in any of the companies discussed here, though he probably should. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.