Cisco beats forecasts, points to recovery

A sign shows the headquarters of Cisco Systems Inc. in San Jose, California May 6, 2008.

NEW YORK (Reuters) - Cisco Systems Inc posted a stronger-than-expected quarterly profit and signaled that recovery was well on its way, as businesses are investing in network equipment again after cutting back for the past year.

Chief Executive John Chambers gave a revenue forecast for the current quarter, its fiscal second, that topped Wall Street expectations and said that business conditions had hit bottom at least six months ago. Shares of Cisco rose 3.7 percent.

"Q4 fiscal 09, as we indicated in last quarter's conference call, looking back, was clearly the tipping point," Chambers told analysts on a conference call on Wednesday.

Cisco also said its board of directors authorized up to $10 billion in additional share repurchases, bringing its total outstanding repurchasing program to around $13.1 billion.

Cisco is the world's top vendor of routers, switches and other network equipment used by global businesses, including phone companies as well as governments. Many of those customers had put off large investment decisions during the recession, but analysts have said many were beginning to shift gears toward more spending to cope with growing Internet traffic.

Revenue in its fiscal first quarter, ended October 24, fell 13 percent from a year earlier to $9.0 billion. But that was up 6 percent quarter-on-quarter, and higher than the average Wall Street forecast of $8.7 billion, according to Thomson Reuters I/B/E/S.

The company forecast fiscal second quarter revenue to increase 1 percent to 4 percent from a year earlier, or a rise of 2 percent to 5 percent compared to the first quarter. The average Wall Street estimate for the second quarter had implied a revenue decline of 1.3 percent year on year.

"It's better than expected. On first blush, it's very good news, and will be good for the market, but we need to hear what they say about capital spending," said Jim Awad, managing director at Zephyr Management.

Net profit was $1.8 billion, or 30 cents a share, compared with $2.2 billion, or 37 cents a share, a year earlier. Excluding items, profit was 36 cents a share compared to 42 cents a share a year earlier, and higher than the average Wall Street forecast of 31 cents.

Shares of Cisco rose to $24.15 in after-hours trading from their Nasdaq close of $23.29. The stock has climbed more than 40 percent since the start of the year.

(Reporting by Ritsuko Ando, additional reporting by Ian Sherr and Caroline Valetkevitch; Editing by Bernard Orr and Tiffany Wu)