Today's the day, Fools. In just a few short hours, tech economy bellweather Cisco Systems (NASDAQ:CSCO) makes its final earnings report of fiscal 2008.

Our question of the day: Will growing economic turmoil trip it up -- or is Cisco still great?

What analysts say:

  • Buy, sell, or waffle? Thirty-two analysts give Cisco 17 buy ratings, 14 holds, and a single sell.
  • Revenue. On average, they expect to see 9% quarterly sales growth to $10.31 billion.
  • Earnings. While profits are predicted to rise 8% to $0.39 per share.

What management says:
If the idea of Cisco growing its profits more slowly than its sales doesn't particularly thrill you, then consider the alternative: Last quarter, Cisco grew its sales 10%, and its profits went down.

CEO John Chambers doesn't seem concerned by either scenario, however. Reviewing the results, he pronounced himself "very pleased," and confident in the future. Why? "Our optimism lies in our vision that the network is a strategic asset to optimize productivity and to enable collaboration in the second phase of the Internet."

What management does:
That might work as a corporate mission statement, but I doubt it plays as well with investors concerned over declining profit margins. For two quarters running, Cisco's rolling operating and net margins have been on the downswing -- although they still leave rivals like Juniper (NASDAQ:JNPR), Ciena (NASDAQ:CIEN), Nortel (NYSE:NT), and Alcatel-Lucent (NYSE:ALU) in the dust.

Also worth noting is that gross margins continue to inch upwards -- but until Cisco gets its costs under control, those operating margins will continue to dwindle.

Margins

1/07

4/07

7/07

10/07

1/08

4/08

Gross

64.2%

64%

64%

64.1%

64.3%

64.5%

Operating

24.8%

25.1%

24.9%

25%

24.8%

24.1%

Net

20.3%

20.8%

21%

21.9%

21.4%

20.6%

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

One Fool says:
What costs were those? Glad you asked. Year to date, sales are up around 14%, and true to Chambers' confidence in the future, Cisco continues to invest in R&D, where spending is outgrowing even the respectable rate of sales growth.

To this Fool's mind, investment in R&D is never a bad thing for a tech shop. (Are you listening, Symantec (NASDAQ:SYMC)? Microsoft (NASDAQ:MSFT) is.) I'm more concerned about Cisco's selling, general, and administrative costs, up 22% year to date. With a recession on the horizon (if not already underfoot), there's no time like the present for Cisco to slim down and plump up those margins.

Further Foolish news and views on Cisco:

Fool contributor Rich Smith does not own shares of any company named above. Both Symantec and Cisco are Motley Fool Inside Value selections. The Motley Fool has a disclosure policy.