Cisco Systems Inc on Tuesday reported a 23 percent rise in quarterly profit on rising demand from corporate customers for its networking gear, and said it expects sales to rise moderately in the current quarter.
Cisco's confidence in the improving global economy led it to announce plans to increase its work force by 3 percent, or 1,000 jobs, through the rest of the year. It was the first quarter in three years that it recorded a net rise in jobs.
However, shares of Cisco dipped 2 percent in after-hours trading, partly due to concerns about a 20 percent rise in inventories from the previous quarter, said Shawn Campbell, principal with Chicago-based Campbell Asset Management, which owns Cisco shares.
"If you remember when Cisco kind of fell apart back when the tech bubble burst, one of the first issues that we saw was a dramatic rise in inventories," he said. "So it certainly deserves some explaining."
Cisco took a $2.2 billion charge in 2001 to write off excess inventory, but Chief Executive John Chambers told Reuters that the company previously told investors its inventories would rise in its fiscal third quarter and it was not a major issue.
Investors see Cisco as a benchmark for corporate and government spending because about 75 percent of its revenue comes from those customers. The rest comes from the telecom sector.