After growing into one of Silicon Valleys most prominent companies by selling behind-the-scenes computing products, Cisco is now expanding aggressively, using its hefty financial resources to go on the attack while other companies are just trying to survive.

In recent weeks, Cisco said it will start selling servers, opening a new rivalry with longtime partners like Hewlett-Packard Co. and IBM Corp. Cisco also agreed to pay about $590 million in stock to pick up Pure Digital Technologies, which makes the popular Flip camcorders.

Cisco has not been spared by the recession. Its profit declined 27 percent in its last quarter, which ended in late January, and it reported flat earnings in the previous period. It is slashing more than $1 billion in expenses, partly by cutting back on travel and freezing hiring.

Yet it also has $29.5 billion in cash and investments, a solid reputation, a network of product resellers and thousands of sales employees – assets that the company hopes to exploit.

One challenge will be whether Cisco can maintain focus. By the companys own count, it has 28 overall priorities, running the gamut from computer networks in space to “virtual health care.”

Even if Cisco doesnt stumble, Ciscos rivals will try to use the breadth of its goals against it.

Mike Banic, vice president of marketing for the switches business at Juniper Networks Inc., a Cisco competitor, said it appears Cisco is focusing more on moving into adjacent markets and less on innovations in its core business.

“Based on what customers are telling us, we are seeing theyre becoming a bit distracted,” Banic said.

Even so, Banic said Juniper remains wary of Cisco. “We never underestimate them,” he said.

Since its founding in 1984, San Jose-based Cisco has become the largest provider of the routers and switches that companies use to send data on the Internet and internal networks. This has been incredibly profitable, and briefly made Cisco the most valuable company in the world in 2000, when its market capitalization topped $500 billion. It hasnt come close to this peak since the tech bubble burst shortly thereafter, and today the companys market value is about $100 billion.

The end of dot-com mania erased almost a third of Ciscos business, as many customers simply went out of business. Back then, the vast majority of Ciscos business involved data-networking equipment.

In this downturn, Cisco is unlikely to find itself so exposed, according to Marthin De Beer, head of Ciscos emerging technologies group. The company has spent most of this decade diversifying into multiple aspects of computing and consumer electronics.

Cisco is seeking more ways to capture revenue from the data zipping across networks. Rather than just being in the middle, with its routers and switches, now Cisco wants to sell products at more places on the chain.

This accounts for the plan to sell servers, which is part of Ciscos larger strategy for “Unified Computing” – a combination of networking, data storage and “virtualization” technology that makes servers operate more efficiently.

This thinking also explains the deal for Pure Digital, the maker of the Flip cameras. Cisco wants a piece of the action as people make and share videos on social Web sites – “visual networking” in the words of Ciscos vice president of consumer marketing, Ken Wirt.

“There is a method to the madness here,” said Brent Bracelin, an analyst with Pacific Crest Securities, who thinks both moves will drive network traffic and, ultimately, demand for Ciscos networking equipment.

Wirt said Cisco looks for times of disruption. One such instance, he said, is coming from the rise of devices that can connect to each other – to transfer photos or videos from your computer to your TV, for example – and to the Internet. Meanwhile, broadband adoption has soared in recent years, with 57 percent of American adults now having high-speed Internet access at home, according to the Pew Internet and American Life Project.

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