Feb. 7 (Bloomberg) -- Cisco Systems Inc. shares rose after Chief Executive Officer John Chambers forecast fiscal third- quarter sales at the world's biggest maker of computer-networking equipment would beat analysts' estimates.

Revenue in the three months ending in April will increase as much as 20 percent to $8.8 billion, Chambers said yesterday after the company reported second-quarter earnings. Analysts predict $8.57 billion, the average of 22 estimates in a Bloomberg survey.

Chambers expanded the San Jose, California-based company's customer roster by buying set-top box maker Scientific-Atlanta Inc. Cable and telephone companies are buying more boxes as well as faster Internet routers, and Cisco also is benefiting from 40 percent growth in emerging markets, including India.

``This report is just outstanding,'' said Matthew Kelmon, who helps manage $400 million at Kelmoore Investment Co. in San Francisco. ``Everyone is upgrading their networks to video capabilities, and it's going to be a couple of years of a good run for Cisco.''

Shares of Cisco rose 81 cents, or 3 percent, to $28.09 at 4 p.m. New York time in Nasdaq Stock Market trading. UBS AG, in a note to investors, raised its price estimate for Cisco shares to $33 from $32. Morgan Stanley raised its price estimate by 6.7 percent to $32.

Second-quarter net income rose 40 percent to $1.92 billion, or 31 cents a share, from $1.38 billion, or 22 cents, a year earlier, Cisco said last night. Sales jumped 27 percent to $8.44 billion, beating analysts' estimates for a fifth straight time.

Market Share

Chambers's forecast for third-quarter sales, excluding gains from last year's purchase of Scientific-Atlanta, was an increase of 15 percent to 17 percent. He predicted fourth-quarter growth of as much as 16 percent. Both are above Cisco's long-term forecast for growth of 10 percent to 15 percent.

Cisco's share of the $10 billion router market rose to 70 percent in the third calendar quarter from 68 percent the previous period, according to Redwood City, California-based researcher Dell'Oro Group. Sunnyvale, California-based rival Juniper Networks Inc. slipped to 14 percent from 15 percent.

``Our revenue continues to outpace the growth of our competitors,'' Chief Financial Officer Dennis Powell said in an interview yesterday. ``Based on what we're seeing from our customers today, we're very positive about the growth opportunities certainly for the next couple quarters.''

Router sales gained 18 percent to $1.8 billion, while switching sales climbed 13 percent to $3 billion, Powell said yesterday on a conference call. Sales of advanced technologies jumped 23 percent to $1.9 billion.

Scientific-Atlanta

Revenue at Scientific-Atlanta increased 21 percent in the second quarter to $639 million, exceeding J.P. Morgan Securities Inc. analyst Ehud Gelblum's estimate of $630 million. Chambers said demand for set-top boxes is growing.

For the second half of the year, ``it doesn't get any stronger than the momentum at Scientific-Atlanta,'' Chambers said on the call. ``This is the best pipeline I've seen.''

Sales in emerging markets, where orders surged 40 percent, also will spur growth in 2007, he said. Chambers visited India, Hong Kong and Singapore during the quarter and is investing more than $1 billion in India this year.

Newer products and overseas markets are enabling Cisco to counter slowing expansion in its main business of selling equipment to companies. Cisco said orders in the so-called enterprise business in the U.S. rose in the mid-single digits, which JMP Securities analyst Samuel Wilson said is cause for concern.

``U.S. enterprise is a leading indicator to the whole business,'' said Wilson, who cut the shares to ``market perform'' on Jan. 22. ``It shows weakness first.''

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net.

Last Updated: February 7, 2007 16:48 EST