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NEW YORK (Reuters) – Network equipment maker Cisco Systems Inc. on Tuesday posted quarterly earnings that beat Wall Street expectations, but shares dipped in after-hours trading on the company’s revenue forecast.

Cisco forecast fourth-quarter revenue between $7.8 billion and $7.95 billion, in line with Wall Street expectations of $7.88 billion.

Some investors had hoped for revenue that would beat Street expectations, said Tim Daubenspeck, an analyst at Pacific Crest Securities.

“I think people were hoping there was great acceleration in some of their enterprise business,” added Daubenspeck.

“I think going into this quarter expectations were a little bit higher, and an inline… guide is probably why you’re seeing a little bit of disappointment in the after hours,” he added.

Cisco’s revenue rose to $7.32 billion in the fiscal 2006 third quarter, compared with $6.19 billion in the same quarter last year. That beat Wall Street forecasts of $7.16 billion, according to Reuters Estimates.

Cable set-top box maker Scientific Atlanta contributed $407 million to the third quarter revenue, Cisco said.

“The contribution from Scientific-Atlanta was a little bit more than I was expecting. I was looking for about a quarter billion and it was $400 million,” said Erik Suppiger, network specialist at Pacific Growth Equities.

Third-quarter net income fell slightly to $1.4 billion from $1.41 billion, a year ago, largely due to stock-based accounting.

Earnings per share edged up to 22 cents from 21 cents, however, as the number of shares outstanding declined.

Not counting items and stock-based compensation, Cisco earned 29 cents per share, compared with analysts’ expectations of 26 cents a share.

Excluding Scientific-Atlanta’s contribution, Cisco revenue rose 12 percent from the year-ago quarter, at the high end of the company’s guidance.

Network equipment for businesses and telecommunications accounts for most of Cisco’s revenue, but the company is increasing its reach into the consumer market. Its biggest move so far into that area was the $7 billion purchase of Scientific-Atlanta, which was completed in February.

Scientific-Atlanta likely will contribute more than $500 million to fourth-quarter revenue, said Cisco vice president and corporate controller Betsy Rafael in an interview.

Some analysts had worried that the acquisition could hurt Cisco’s gross margins. Gross margin for the quarter was 65.7 percent, counting the acquisition. Excluding Scientific-Atlanta, it was 67.5 percent.

Cisco’s expansion into home entertainment comes amid consolidation in the telecommunications sector, a trend some analysts say could put a squeeze on equipment suppliers.

French equipment supplier Alcatel plans to buy U.S.-based Lucent Technologies Inc. for about $14 billion.

Cisco’s smaller rival, Juniper Networks , has been tapped as a potential takeover target by several firms.

Cisco’s shares trade at about 18 times estimated 2007 earnings, below the average valuation of about 21 on the Dow Jones U.S. Telecommunications Equipment Index.

The company’s shares fell 21 cents, or 0.97 percent, to $21.47 in after-hours Inet trading. The stock earlier in the day closed down 8 cents, or 0.4 percent, at $21.68 on Nasdaq.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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