The more people there are online, the better it is for firms like Cisco

Cisco reported a 41% jump in quarterly earnings, with profits in the three months ending 31 July reaching $1.4bn (�766m), up from $932m.

But analysts noted rising inventories, and comments by the network equipment maker that customers were "cautious".

Cisco is one of the technology industry's most closely-watched names.

The company's warning that sales in the current quarter may be less than many market observers had forecast has worried many investors.

The firm is seen as a benchmark for spending by large organisations, because three quarters of its earnings are generated by corporate or government contracts.

In the things we can control, I feel good John Chambers, Cisco CEO

The rest comes mainly from the telecoms sector.

Shares in Cisco were down $2.13, or 10%, at $18.33 on the Nasdaq index on Wednesday morning.

Upbeat

Chief executive John Chambers played down the concerns over future prospects.

"In the things we can control, I feel good," he said.

"Most of the CEOs that I talk with view the economy as growing at a modest level and are a little more cautious... than they were a quarter ago.

"I would not say that is a major factor."

Sales in the first quarter of Cisco's financial year, the current three-month period, are usually one of the company's weakest.

Cisco is predicting that revenues will rise between 0% and 2%.

Stockpile

Inventories, meanwhile, rose 9% to $1.2bn in the fiscal fourth quarter, up from $1.1bn in the previous three months.

That may mean the company is either selling fewer products than it expected or producing too many, and can indicate a waning of demand.

"Overall the quarter was on target," said Justin McNichols, a fund manager at Osborne Partners Capital Management.

"If you are searching for something negative, inventories were a little higher than I'd like to see," he added.