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After Hours Action: Cisco

After the bell Wednesday the traders were closely watching the action in Cisco, which slipped in extended trade despite an earnings beat.

The world's biggest maker of routers and switches reported stronger-than-expected quarterly results thanks to a pick-up in the global economy and growing Internet use, and CEO John Chambers said it was gaining market share.

"We emerge from this downturn gaining market share, a larger share of the total wallet spend of our customers," Chambers said in a statement. "It is clear that our game plan for how to handle economic downturns is hitting on all cylinders."

The results seem so positive, why would shares trade off almost 2% in the aftermarket?

"Chambers sounded a cautionary note about how long the recovery may last and whether there may be impediments unforeseen," explains CNBC's Jim Goldman on Fast Money.

"It was that cautious wording that scared investors," Goldman explains.

Cisco gets 20% of its revenue from Europe and considering the financial headwinds, the sell-off may be the Street expressing concern that tech spending overseas will take a hit.

Looking at the numbers more closely, Cisco said its revenue in the fiscal third quarter through May 1 rose 27 percent to $10.4 billion from $8.2 billion a year ago.

Analysts on average had expected $10.2 billion, according to Thomson Reuters I/B/E/S. The company in February had forecast a 23-26 percent year-on-year rise.

Quarterly profit rose to $2.2 billion, or 37 cents per share, compared with $1.3 billion, or 23 cents a share, a year earlier. Excluding items, it earned 42 cents per share -- higher than Wall Street's forecast for 39 cents per share.

What should you make of it?

"(It was a) Good solid quarter," said Broadpoint Amtech Analyst Mark McKechnie. "Chambers' commentary sounds pretty good—he's talking about balanced growth across geographies and product segments. He calls this one of the strongest quarters in history for the company."

The results underscore Cisco's continued recovery from the technology downturn of 2009. Despite initial fears of a 2001-style freeze in corporate spending, recent results show companies have been quick to resume investment in Cisco's products like routers and switches.

What’s the trade?

I don't see anything wrong with the stock, says Guy Adami. I'd look for a dip to get long.

Or look at EMC or VMWare as a downstream trade, says Joe Terranova. I think Cisco results are a referendum for cloud computing.

Elsewhere in tech, I'm bullish IBM , adds Guy Adami. They're doing everything right. And I'm bullish Hewlett -Packard, he adds. They're diversified enough that they can weather a storm.

> Click here for additional coverage of Cisco earnings



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Trader disclosure: On May 12, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (DRYS), (INTC), (TIE); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Kelly Owns (FXE) Puts; Kelly Owns (FXB) Puts; Terranova Owns (PFE), (GLD), (XCO), (SWN), (TER); Terranova Owns Gold; Karabell Owns (GOOG), (AAPL), (IBM), (CSCO), (TIE), (GS), (C); Levy Owns (GS), (GS) Calls

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