(Reuters) - Cisco Systems Inc (CSCO.O) posted stronger-than-expected quarterly results and Chief Executive John Chambers said his customers were seeing more stability, adding to hopes that business conditions would soon recover.
His comments, which came a day after similarly optimistic remarks by U.S. Federal Reserve Board Chairman Ben Bernanke, helped shares of the network equipment maker rise 2.5 percent in after-hours trading on Wednesday as investors looked beyond the double-digit fall in sales in the last quarter.
"They are seeing some stabilization, a leveling out, or in other words, they are finally beginning to have something reasonably solid underneath their feet," Chambers said of how Cisco customers are describing their current business.
Cisco, the biggest maker of routers and switches, forecast revenue in the current quarter falling 17 percent to 20 percent from a year earlier. The midpoint of that outlook was slightly better than Wall Street's expectation for a 19 percent decline to $8.36 billion, according to Reuters Estimates.
Revenue and earnings for Cisco's fiscal third quarter ended April 25 were also better than expected. While sales for the quarter fell 17 percent to $8.2 billion, that was higher than Wall Street's average outlook of $8.1 billion.
"I think you could make some fairly broadbased conclusion that the environment appears to be stabilizing and doesn't appear to be getting worse," said Morgan, Keegan & Co analyst Simon Leopold, adding that Cisco's report boded well for the overall market.
"I don't expect a rapid recovery but this is what we need to see happen before we can even consider a recovery."
Cost cuts, underscored by a 12 percent fall in operating expenses to $3.6 billion, bolstered Cisco's bottom line.
Net profit fell to $1.3 billion, or 23 cents a share, from $1.8 billion, or 29 cents a share, a year ago. Earnings excluding items was 30 cents, above the average analyst forecast of 25 cents, according to Reuters Estimates.
Cisco shares rose about 4 percent after the results, before settling at around $20.10, up from their Nasdaq close on Wednesday at $19.61.
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