Cisco shares fall in spite of profit rise

Shares of Cisco Systems fell more than 5 per cent in after-hours trading Tuesday, even as the world’s biggest maker of data networking equipment reported better than expected sales and profits.

The slide in the company’s stock price underscored investors’ high expectations as the company attempts to cash in on the growing importance of online video and other bandwidth-intensive services.

John Chambers, chairman and chief executive, hailed the “very strong” results Tuesday.

Cisco reported third-quarter profits of $1.9bn, or 30 cents a share, up from $1.4bn, or 22 cents, a year ago.

Sales were $8.9bn, up from $7.3bn last time. That included sales and profits from Scientific Atlanta, the maker of set-top television boxes that Cisco acquired in 2005 for $6.9bn as part of a push into consumer markets.

Shares in the company, which fell 5.2 per cent in after-hours trading to $26.87, have risen from a recent low of $17.29 last August.

Cisco said it expected sales growth of 15-16 per cent in the coming quarter.

Mr Chambers said Cisco was poised to benefit as the internet entered a “second phase” of growth driven by video, blogs, wikis and other online collaboration tools.

“We’ve spent the last six years preparing for the next wave of collaboration,” he added.

“I don’t think we’re being overly optimistic when we say this second phase of the internet will drive the industry for the next decade.”

Cisco has been investing heavily in applications and services in recent years in an attempt to spread beyond its core networking infrastructure business.

This year it bought WebEx, a company specialising in teleconferences and other forms of online collaboration.

By moving into services such as video conferencing and IP telephony, Cisco hopes to capture more of the value of the data that flows through its switches and routers.