NEW YORK (CNN/Money) - Cisco Systems Inc. reported higher earnings Tuesday that met Wall Street forecasts. But sales came in just a shade short of expectations, news that sent the company's stock skidding.

The San Jose-based firm, the world's No. 1 maker of Internet gear, said first-quarter net income rose to $1.4 billion, or 21 cents a share, from $1.1 billion, or 15 cents a share, a year earlier.

Excluding one-time charges, Cisco's profits were also 21 cents a share, up from 17 cents a share in the year-ago quarter and in line with analysts' estimates.

And while sales for the quarter that ended Oct. 30 rose 17 percent to just under $6 billion, that fell a tad shy of analysts' estimates of $6.02 billion.

Cisco also said it would expand its stock buyback program by $10 billion, to $25 billion. Since 2001 the company has repurchased $20 billion worth of stock.

"We were comfortable with first-quarter results," CEO John Chambers said on a conference call.

Wall Street reacted negatively, and Cisco (Research) shares sank nearly 2 percent in after-hours trading after falling 1 percent during the regular session. Cisco has a reputation for beating Wall Street forecasts by a penny a share.

Analyst reactions to Cisco's results ranged from empathy to disappointment.

"It's a tough market out there," said William Becklean, an analyst with Oppenheimer & Co.

In addition to a seasonal slowdown in sales of its core business selling Internet routers and switches, there were signs in the first quarter that future growth in sales of those products would be sluggish.

What's more, Chambers cited increased price competition from companies in Asia, especially in China, as a major concern.

"On balance I think it was an okay quarter," added Becklean. "It would be nice if they were doing better."

Erik Suppiger, an analyst with Pacific Growth Equities, went a bit further and said he was "modestly disappointed" with Cisco's results. In addition to lackluster sales and orders for its core products, the company's gross profit margins continued to shrink on a sequential basis.

Gross margins in the first quarter were 67.2 percent, down from 68.4 percent in the fourth quarter and 68.8 percent in the third quarter of 2004.

Suppiger attributed some of the gross margin squeeze to aggressive pricing by Cisco.

One bright light: total inventory remained at fourth-quarter levels after rising in the previous two quarters. Too much inventory raises concerns that a company will have unsold goods on its books if demand falls short.

Analysts hoping for a rosy outlook for the current quarter were disappointed.

Looking ahead, Chambers said during the conference call that revenues in the second-quarter would grow 1 to 3 percent from the first quarter and 12 to 14 percent from the year-ago quarter.

That guidance suggests fiscal second-quarter revenue of $6.03 billion to $6.15 billion. Chambers did not give a profits-per-share outlook.

Analysts were forecasting year-over-year sales growth of 20 percent.

Cisco's earnings are considered a bellwether for the health of the tech sector as well as a key indicator of corporate sentiment, since its results depend on how heavily companies are spending to upgrade technology.

Chambers reminded analysts during the call that Cisco's fortunes continue to be closely linked to the health of the global economy.

Gross domestic product growth in countries around the world "will continue to be the best indicator of what you should expect from Cisco," he said.

Chambers, who has frequently put himself into the role of economic prognosticator, warned investors in August that CEOs appeared to have grown cautious in their outlooks for the economy and said Cisco's sequential revenue growth would be flat.

He counted increased competition from low-priced computer network manufacturers in Asia, especially in China, as a major concern for Cisco.

On Tuesday, however, he said he did not have enough evidence to say whether that CEO pessimism had lifted in the last three months, although he cited the finality of the presidential election, falling oil prices, and a desire among executives to be more positive as encouraging signs.

"I think it's too early to tell," said Chambers, reluctant to stick out his neck. Chambers has been criticized by some investors for being overly sanguine immediately after the tech sector crashed in 2000.

But Cisco could use a dose of optimism. The company's shares, down about 30 percent for the year, have been trading near a 52-week low.