“We didnt build up $34 billion in cash to have it there just for security,” Chambers said today during an interview with Bloomberg Television. The companys cash and short-term investments have climbed 14 percent in the past three months.

Cisco, the worlds largest maker of networking equipment, is coping with a plunge in sales as recession-wary customers curb spending. AT&T Inc. and Verizon Communications Inc., the biggest U.S. phone companies, were downgraded by JPMorgan Chase & Co. because of slowing subscriber growth. To adjust to lower demand, Cisco set out to cut at least $1 billion in costs by July — a goal the company is close to exceeding, Chambers said.

Cisco, based in San Jose, California, dropped 72 cents, or 3.7 percent, to $18.89 at 1:16 p.m. New York time in Nasdaq Stock Market trading. The shares had gained 20 percent this year before today.

Third-quarter net income dropped 24 percent to $1.35 billion, or 23 cents a share, from $1.77 billion, or 29 cents, a year earlier, the company said yesterday. Revenue fell 17 percent to $8.16 billion in the period, which ended April 24.

Sales in emerging markets fell more steeply last quarter, with a 22 percent drop. Still, large and small customers across all industries are now seeing sales bottom out, Chambers said.

Making Cutbacks

The company has curbed hiring, reduced business trips and combined offices to cut costs.

“They know how to squeeze and not have it massively affect the organization,” said Sam Wilson, a San Francisco-based analyst for JMP Securities LLC. He expects the shares to perform better than the market.

Fourth-quarter sales will fall 17 percent to 20 percent, Cisco said. That would be about $8.29 billion to $8.6 billion, compared with the $8.36 billion predicted by analysts.

“Things were in free fall in the past few quarters — now hes seeing some leveling,” said Jason Ader, an analyst with William Blair & Co. in Boston.

Ciscos cash, cash equivalents and investments were $33.6 billion at the end of last quarter, up from $29.5 billion three months earlier.

Investors view Cisco as a technology-industry bellwether because its the dominant seller of routers and switches, products that direct and control the flow of data. Large companies account for most sales of switches, which are used to run their corporate networks. Phone carriers and Internet- service providers mostly purchase routers.

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