Let there be no confusion on this point: Cisco Systems (Nasdaq: CSCO) is a thriving technology leader taking market share in many of the most promising hardware and services fields in which it competes.

True, it offered a tepid forecast after reporting in-line earnings this week. And, sure, its share price got an ugly haircut the next day, getting blamed for the market downdraft in the bargain.

Also–and this may be the cruelest indignity of them all—its blah results got lumped with the earnings miss by chronic underachiever Wal-Mart (NYSE: WMT) as further proof that the economic recovery has hit a rough patch.

Management boasts about the company’s rude health weren’t exactly helped by the announcement that 4,000 loyal employees representing 5 percent of the workforce will soon be handed their walking papers.

But let’s stay-on message here, as Cisco CEO John Chambers might say. Firing 1 out of every 20 employees isn’t something a successful American corporation does these days as a result of hardship. It’s more of an elective purge designed to lop some unwanted fat from middle-aged Cisco’s middle management belly.

“We just have too much in the middle of the organization,” Chambers explained on the conference call. “When you have that [number] of layers  and standard controls, without meaning to very well-meaning people begin to really look at how they add value to the decisions made and probably we’re just not moving with the speed that we need in this area.”

Addition by subtraction, in other words. Some of these surplus middle managers might have the skills to transfer into the more promising areas were Cisco is adding jobs, Chambers allowed. As for the rest, the company is grateful, but not so grateful as to jeopardize its 62.1 percent operating gross margin or its 28.2 percent operating margin.

Of the $4 billion in operating cash flow generated during the last quarter, $2.1 billion was returned to shareholders via dividends (currently yielding 2.8 percent) and share buybacks. These shareholders probably won’t mind pre-tax charges of up to $550 million related to the upcoming layoffs, partly because they’ll be of the non-operating variety. On an operating basis, Cisco is targeting 51 to 52 cents a share in line with the consensus, even though its forecast of a first-quarter revenue gain of 3 percent to 5 percent year-over-year fell just shy of what Wall Street had in mind.

And that tempering of expectations is really the world’s fault, not Cisco’s. “The challenging macroeconomic backdrop” and a recovery that’s “slower and more inconsistent” have translated into internal tracking metrics “more lumpy than I like to see,” Chambers acknowledged. Cisco’s answer is to cut middle-management fat from the less promising pursuits like making cable set-top boxes (volume down 40 percent sequentially in the most recent quarter) and to add engineering and sales muscle in the booming business of building data centers (revenue up 43 percent year-over-year.)

Most business schools would call this a no-brainer; it’s not like anyone, even employees, expects listed companies to show any patience with insufficiently profitable business lines any longer.

The other part of the strategy is to keep beefing up offerings in the growth areas seen as critical to the company’s future. One such is corporate network security, and while Cisco was already a leader in this field, just last month it agreed to shell out $2.7 billion to stay ahead by purchasing competitor Sourcefire (Nasdaq: FIRE).

The reason this is such a strategic area is that the US enterprise customers likeliest to shell out big bucks for security increased their purchases from Cisco 9 percent year-over-year, nearly offsetting a 10 percent drop in sales to enterprise customers in Europe.

More encouragingly, US sales were strong across the board, wirth small-business sales jumping 12 percent and the public sector up 4 percent. Emerging markets sales grew 8 percent despite China’s 3 percent decline, with Mexico especially strong. In Europe, service-provider, commercial and public-sector sales improved. Japan was down because of the major infrastructure upgrades Cisco delivered the prior year. The bread-and-butter switching business grew 5 percent. Services grew 6 percent, well below the 10 percent internal target.

And while Cisco’s first–quarter guidance was 2 percentage points shy of the long-term goal for revenue growth of 5 to 7 percent, Chambers indicated on the conference call that this is partly due to normal low-balling… er, conservatism and partly to the effect of recent acquisitions and divestitures.

Add it all up and the outlook looks plenty bright for Cisco shareholders, if not middle managers. With growth of 5 percent now and potentially much more later as mobile computing strains global provider networks, Cisco is selling at just 8 times trailing Enterprise Value/EBITDA and less than 11 times forward earnings.

And if the global economy should continue to disappoint, there’s now more than $50 billion in the corporate till to financially engineer the desired pro-forma earnings per share via buybacks and acquisitions. And cash flow isn’t bad either, as the dividend shows. That makes it hard to argue with the numerous analysts who called this week’s profit-taking in the stock a buying opportunity.