Cisco shares fall despite profits rise

Cisco Systems last night reported quarterly profit surged 41 per cent but said its shares fell sharply in after-hours trade on…

Cisco Systems last night reported quarterly profit surged 41 per cent but said its shares fell sharply in after-hours trade on a rise in inventories and comments about cautious customers.

Cisco also forecast sales for the current quarter, its first of fiscal 2005, would be flat to up 2 per cent from the prior quarter, below Wall Street's expectations.

"Most of the CEOs that I talk with view the economy as growing at a modest level and are a little more cautious . . . than they were a quarter ago," Cisco Chief Executive Mr John Chambers said.

Cisco said inventories rose 9 per cent in its fiscal fourth quarter from the prior quarter.

Inventories are closely watched at the world's largest maker of equipment that directs Internet and other network traffic. A rise in inventories was one of the first signs of trouble before the telecom bubble burst in 2001.

Cisco reported a net profit of $1.4 billion, or 20 cents a share, for the fiscal fourth quarter ended July 31, compared with $982 million, or 14 cents a share, in the year-earlier quarter.  The quarterly profit was a new company record.

Excluding one-time items, Cisco earned 21 cents a share, beating the average analyst estimate of 20 cents a share.

Investors see Cisco as a benchmark for corporate and government spending because about 75 per cent of its revenue comes from those customers. The rest comes from the telecom sector.

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