Networking giant Cisco Systems Inc. on Wednesday posted lower fiscal second-quarter earnings due to the communications spending slowdown that were still almost twice what analysts had expected, but shares fell as the company sounded a cautious note on the current quarter.

Cisco said it sees fiscal third-quarter revenues flat to rising in the "low single-digit" range from the second quarter, and added that it was difficult to give a clear picture on the company's outlook, given the uncertain economic climate.

Shares of Cisco, the largest maker of equipment that powers the Internet, fell in after-hours trade to $17.25, after initially rising to $19.40 right after the earnings were released. The share had closed up 11 cents, or 0.6 percent, at $18.61 in regular Nasdaq trade. 

While Chief Executive John Chambers noted on a conference call that he would like to be more confident of economic growth resuming in the next several quarters, "In our opinion, no one is really sure," he said. 

He said while economists are optimistic, chief executives he speaks with see more of a plateau than an upturn. 

"It was a solid quarter. What people just want to see is sustainability on that," Chambers told Reuters in a telephone interview, touting the company's cash growth, solid profits and market share gains. 

INVESTOR CONCERNS REMAIN 

Despite the strong quarter, some investors and analysts were disappointed the forward guidance was not stronger and the company still cannot predict business beyond one quarter. Some also were concerned Cisco's business is treading water. 

"The clear message here is, 'We're doing okay, but the market remains unpromising,"' CIBC World Markets analyst Steve Kamman said. 

Others said Cisco has performed well despite the weak environment. "The issues are more with the macroeconomic world than this company," said Ray Hirsch, analyst with American Express Financial Advisors, a large Cisco shareholder. 

Chambers also said that revenues from service providers will decline this year, and the enterprise, or large corporate business in the United States "continues to be mixed." 

The earnings came after Cisco said earlier in the day it would top Wall Street's expectations -- a surprise disclosure made because of an inadvertent e-mail sent to a large number of employees telling of the good quarter and order bookings for products exceeding internal goals. 

San Jose, California-based Cisco said earnings before special items fell to $664 million, or 9 cents a share, in the quarter ended Jan. 26, from $1.3 billion, or 18 cents a share, a year earlier. The results doubled from the fiscal first quarter, when Cisco earned $332 million, or 4 cents a share. 

Analysts had expected Cisco to earn 5 cents a share, with a range of 5 cents to 7 cents, according to Thomson Financial/First Call. 

Revenues in the quarter ended Jan. 26 fell 29 percent to $4.8 billion from an all-time quarterly high of $6.75 billion in the same period the previous year. Analysts had expected $4.55 billion, First Call said. 

HIGH-GROWTH OLD DAYS NOT AT HAND 

While the results indicate a bottoming out at hand in Cisco's main corporate business, a return to the old days of 50 percent growth is not at hand, said Henry Asher, president of North Star Group, a New York money manager that owns Cisco shares. 

"The mistake would be to assume this means that they're on the way back to where they were in terms of growth," he said. 

Cisco is the dominant supplier for large corporations, while its telecom business is much weaker, analysts said. Since the beginning of last year, Cisco shares have outperformed their competitors in the American Stock Exchange Networking Index <.NWX> by about 34 percent. 

It is a different story, however, for suppliers that rely heavily on the telecom sector, where carriers like Qwest Communications International Inc. and Sprint Corp. are still cutting spending. 

Optical networking company Ciena Corp. on Tuesday signaled the telecom sector remained weak after it said it would post a wider-than-expected fiscal first-quarter loss. 

Cisco said, however, that it disposed of an additional $704 million in inventory, raising the total to $2.1 billion of the $2.2 billion it reserved against in the fiscal third quarter of 2001. It sold some of the inventory, boosting the quarter's net income by $195 million but that total was excluded from earnings before one-time items. 

Actual net income in the second quarter was $660 million, or 9 cents a share, down from $874 million, or 12 cents a share, in the same period the previous year. The results include the effects of acquisition charges, payroll tax on stock option exercises, net gains or losses on investments, and an excess inventory benefit. 

Cisco's cash and short-term investments rose to $21 billion at the end of the latest quarter from $19.1 billion at the end of the fiscal first quarter, executives said.