May 8 (Bloomberg) -- Cisco Systems Inc., the world's biggest maker of computer-networking equipment, said third-quarter profit rose 34 percent on emerging market demand. The shares fell after the company forecast sales that may miss analysts' estimates.

Net income rose to $1.87 billion, or 30 cents a share, from $1.4 billion, or 22 cents, a year earlier, San Jose, California- based Cisco said today in a statement. Sales in the period ended April 28 gained 21 percent to $8.87 billion.

Revenue growth will slow to as little as 15 percent this quarter, the first time in four periods the forecast failed to beat analysts' predictions. Orders from Cisco's biggest customers in the U.S. are ``relatively sluggish,'' Chief Executive Officer John Chambers said today. He is leaning on smaller companies and phone service providers in Asia and Africa to counter the slump.

``U.S. enterprise continues to be lackluster,'' said Shaw Wu, an analyst at American Technology Research in San Francisco, who rates the shares ``buy'' and doesn't own any. ``The stock is off mainly due to high expectations.''

Shares of Cisco fell 5.5 percent to $26.80 in extended trading. They gained 55 cents to $28.36 at 4 p.m. New York time on the Nasdaq Stock Market.

Excluding some costs, profit of 34 cents a share topped the average 33-cent estimate of 25 analysts in a Bloomberg survey. Analysts expected sales of $8.76 billion.

Fourth-Quarter Outlook

Chambers said fourth-quarter sales growth will be 15 percent to 16 percent. Analysts on average anticipated 16 percent growth to $9.23 billion, based on 25 estimates compiled by Bloomberg. Chief Financial Officer Dennis Powell said on a conference call that net earnings per share in the current period will be 3 cents to 5 cents lower because of stock-based compensation costs.

Revenue will grow 10 percent to 15 percent for the long-term and the company is gaining market share versus most of its competitors, Chambers, 57, said on the call.

Third-quarter orders from emerging markets jumped 40 percent while commercial orders, which include small- and medium-sized businesses, rose 20 percent, Cisco said. Both outstripped the 14 percent growth from the large business, or enterprise, market and expansion in the mid-single digits for U.S. enterprise.

``As long as it's only one or two things challenging at a time, we're fine,'' Chambers said in an interview. ``If it were to spread across geographies or from enterprise to commercial, it might be challenging.''

Sales in the switching unit gained 15 percent to $3.1 billion, Cisco said. Sales of routers rose 16 percent to $1.8 billion and those of advanced technologies climbed 24 percent to $2.1 billion. Chambers said that of the company's top 20 products, 19 grew in double digits.

Emerging Markets

Cisco won a contract during the quarter from MTN Group Ltd., Africa's largest mobile-phone company, to help deliver video over wireless devices in South Africa. In South Korea, mobile operator KTF selected Cisco gear for a high-speed network.

``We continue to view Cisco's solid penetration into emerging markets as the single most meaningful incremental growth story for the company over the next several years,'' wrote A.G. Edwards & Sons Inc. analyst Aaron Rakers, who rated the shares ``buy,'' in a May 2 report.

Cisco continued its decade-long buying spree in the quarter, agreeing to purchase WebEx Communications Inc. for $3.2 billion to add Internet teleconferencing customers. It's Cisco's biggest deal since last year's $6.9 billion acquisition of cable set-top box maker Scientific-Atlanta Inc. Sales at Scientific-Atlanta increased 85 percent to $752 million, Cisco said.

``It's video, video and more video,'' said Kevin Landis, chief investment officer of San Jose-based Firsthand Capital Management, which oversees $750 million including Cisco shares. For Cisco, ``that opportunity is really big.''

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

Last Updated: May 8, 2007 19:09 EDT