Cisco is the leading player in internet connection equipment

Net income in the first quarter of its fiscal year was $1.3bn (�745m), down from $1.4bn a year ago.

Excluding the cost of stock options, Cisco said profits rose to $1.6bn, topping Wall Street estimates.

Stock options are a popular form of compensation for executives and were widely used during the dotcom boom.

They grant an employee the future right to buy shares in their employer at a preset discounted price. The employee makes a profit if the share price rises compared to the initial grant price.

'Solid quarter'

California-based Cisco is the top supplier to businesses of the routers and switches that drive the internet.

Sales at Cisco were up 9.7% to $6.55bn, from $5.97bn a year ago, slightly below the estimates for sales of $6.57bn.

We are seeing an increased trend toward customers choosing integrated networking solutions John Chambers, president See Cisco's share price

Revenues were driven by increased customer spending on internet phones, fuelling revenues gains at its advanced technologies division.

This helped offset slowing sales growth from routers and switches, which account for over 60% of Cisco's sales.

"Q1 was a solid quarter for Cisco, with balanced execution across most of our geographies, market segments and product categories," said John Chambers, president and chief executive.

Cisco is currently fighting smaller rival Juniper Networks for a bigger slice of the telecoms carrier supply business.