In the computer networking business, there is no technology investment more iconic than Cisco Systems (NASDAQ: CSCO). In fact, the company virtually created the network equipment industry. Although Cisco has strong competitors such as Alcatel-Lucent (NYSE: ALU) and Juniper Networks (NYSE: JNPR), even its competitors would acknowledge Cisco is the big dog in the yard when it comes to technology investment.

Unfortunately, Cisco’s stock price has been a different type of dog of late — the kind of dog with a whole lot of fleas.

Over the past three months, CSCO stock is down more than -9% and just set a new 52-week low in trading early Friday. That’s very poor performance compared to ALU, which has surged an incredible 75% over the past three months. JNPR isn’t up as much as ALU, but Juniper shares have jumped 20% over the same period.

If we look at a little further back, we see that over the past 12 months CSCO has fallen more than -30%. That’s as a disaster when compared to ALU, which has soared 58%, while JNPR has climbed 45%. So, what’s next for CSCO? Will the stock continue to flounder, or will the networking giant’s shares stage a comeback?  Here are the pros and cons of CSCO.

Cisco Stock Pros

Still the industry leader. Despite Cisco’s recent woes, the technology investment remains the leader in its industry, and still has a dominant market share in the network equipment space. The company has long enjoyed status as the go-to shop for large companies, and this could prove to be the difference between Cisco and its niche competitors in a rapidly changing network environment.

CEO John Chambers. Cisco’s outstanding chief executive isn’t one of those in-the-rear Generals. Rather, Chambers has been known to step in and actually close a big sale whenever necessary. One industry executive recently told me that Chambers actually likes getting on his private jet and going to shake hands on a deal. This kind of active leadership is what’s made technology investment Cisco so successful, and that spirit could help the shares stage a comeback.

Bargain shoppers’ delight. After sustaining such a big hit over the past year, CSCO may just be ready for a bounce. Bargain-hunting value players are liable to see the shares as a buy, especially if they continue languishing at current levels.

CSCO Stock Cons

Poor earnings performance. Cisco’s most recent earnings report was a big disappointment. Although the company reported a 6% year-over-year revenue increase in its fiscal second quarter, and adjusted earnings per share that beat expectations, it also warned Wall Street about slow growth ahead. CEO Chambers said he expected revenue for fiscal Q3 rise 4% to 6%. That’s far below last summer, when revenue rose 27%. That number also is lower than Cisco’s long-term growth target of 12% to 17%.

Losing government customers. When your biggest customers are in fiscal trouble, you’re in trouble. Late last year, Cisco warned that sales to government customers were dropping off, and Chambers recently told analysts that this trend was continuing. As many U.S. states continue struggling with big budget shortfalls, Cisco is likely to see this customer base shrivel up even further.

That pesky competition. We’ve already seen Cisco’s relative problems in terms of share price compared the competition. Well, on the fundamental front, the competition continues taking a bite out of Cisco. For example, Juniper Networks reported that sales grew 26% in the fourth quarter, blowing away Cisco’s growth. Many industry analysts think 2011 will be Juniper’s breakout year, as the company embarks on an aggressive expansion campaign that’s directly at Cisco, and that’s designed to leverage the technological push toward so-called “cloud computing.”

The Verdict on Technology Investment Cisco…

Although I never like to bet against a proven winner like Cisco and its über-competent CEO John Chambers, it certainly seems as though Wall Street has put CSCO shares in a the bear’s lair. Until the stock can show some signs of renewed life, I think the verdict has to go to the cons.

At the time of this writing, Jim Woods had no positions in any of the securities mentioned here.

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