Cisco Calls a Bottom

Cisco Systems (NASDAQ: CSCO) reported surprisingly strong quarterly results late today, and CEO John Chambers made his strongest statements yet on the prospects for a recovery in the economy and IT spending.

Cisco’s fiscal first-quarter sales were down 13 percent from a year ago to $9 billion, but that was about $250 million better than Wall Street analysts expected, and earnings of 36 cents a share were a nickel better than the Thomson Reuters forecast. The networking giant also predicted a return to year-over-year revenue growth this quarter.

“Building off what we saw as a clear tipping point in Q4, our Q1 results continued to reflect strong sequential growth trends that meet or exceed expectations during normal economic times,” Chambers said in a statement. “We view the improving economic outlook, combined with solid execution on our growth strategy, as creating unparalleled opportunity to drive more value into the core of the network. Simply said, we believe that key market transitions across collaboration, virtualization and video will drive productivity and growth in network loads for the next decade, and are evolving even faster than expected.”

He added that “a new model of productivity based on collaboration is clearly emerging and we believe this may be the most profound opportunity for businesses in our 25 years as a company.”

Cisco shares gained about 3 percent in after-hours trading on the news.

But stocks were mixed during the day despite a strong early rally, as upbeat comments from the Federal Reserve in the afternoon couldn’t sustain the rally. Financial stocks led the late decline on worries about credit card legislation passed by the House, according to the AP, while other sources blamed fear of rising interest rates despite the Fed’s pledge to keep rates low. And a weak ADP jobs report gave little hope that Friday’s monthly government data will be any better.

STEC (NASDAQ: STEC) was the day’s biggest decliner on all exchanges, plunging 39 percent on worries about inventories at EMC (NYSE: EMC), its biggest solid state drive customer.

Garmin (NASDAQ: GRMN) tumbled 14 percent on a weak holiday forecast.

Agilysys (NASDAQ: AGYS) soared 33 percent on its results.

Microsoft (NASDAQ: MSFT), Seagate (NASDAQ: STX) and ON Semi (NASDAQ: ONNN) were solid gainers on the Nasdaq, rising 2 percent or more each.

Sun (NASDAQ: JAVA) was little changed despite reports that its merger with Oracle (NASDAQ: ORCL) could be blocked by the EU.

The Nasdaq slipped 1 to 2055, the S&P 500 added 1 to 1046, and the Dow rose 30 to 9802. Volume rose to 5.64 billion shares on the NYSE, and 2.25 billion on the Nasdaq. Advancers led by a 21-16 margin on the NYSE, while decliners led 16-10 on the Nasdaq. Downside volume was 53 percent on the NYSE, and 51 percent on the Nasdaq. New highs-new lows were 94-40 on the NYSE, and 49-36 on the Nasdaq.