Cisco Systems (CSCO) quarterly sales fell 17 percent and profit dropped 24 percent as customers cut spending. Both sales and profit, though, beat Wall Street expectations. Cisco shares closed at $19.61 on Wednesday, trading three percent higher after hours.
The company cut costs during the quarter, which ended April 25, as CEO John Chambers combined offices and slowed hiring during what he called a "challenging global economy."
The largest maker of computer networking equipment is "well positioned for the eventual economic recovery," Chambers said in a statement yesterday. Cisco should be able to avoid layoffs or salary reductions, Chambers explained in the company earnings conference call, though revenue for the current quarter will drop 17 to 20 percent.
During the quarter ended last month, revenue fell to $8.2 billion, from $9.8 billion in the same quarter last year, while beating the average estimate of $8.1 billion, according to analysts polled by Thomson Reuters.
Net profit fell to $1.35 billion, or 23 cents a share for the fiscal third quarter ended April 25, from $1.77 billion, or 29 cents a share, in the same quarter a year earlier, Cisco said.
Earnings excluding items fell to 30 cents from 38 cents a year earlier, and 5 cents above the average forecast of analysts' estimates.
Cisco, which makes the routers and switches that direct internet traffic, has been expanding its businesses. It bought Pure Digital Technologies, creator of the Flip Video camera, during the quarter, and has added software services.
"As we continue into (the current quarter), we plan to invest in new and adjacent markets." Chambers said on the call. Cisco sees "the same challenges and uncertainties" that others see during the current economic climate.
"Our customers are saying it's leveling out," Chambers said. "It feels dramatically better than before," and a "pretty fair amount better versus a quarter ago."
Erik Suppiger of Signal Hill Capital Group said in an interview on CNBC that, "Longer term we still have some issues," with Cisco's stock, which has risen 20 percent this year.