Investors snap up computer networking firms
SAN FRANCISCO — Investors snapped up the stocks of companies that make computer networking gear Thursday after industry leader Cisco Systems Inc.'s latest quarterly earnings raised hope that business is picking up after a long stretch of lackluster demand.
Cisco led the rally as its shares surged to their biggest one-day gain in 21 months. The stock had gained $2.59, or more than 12 percent, to $23.80 in afternoon trading.
Other computer networking specialists such as F5 Networks Inc. and Juniper Networks Inc. gained in a reaction to Cisco's solid performance during its fiscal third quarter and the upbeat commentary of Cisco CEO John Chambers as he discussed the results in a conference call held late Wednesday.
Chambers said the business climate in U.S. looks good while prospects in other parts of the world seem brighter too. Although he isn't an economist, Chambers has built a reputation on Wall Street for having a good handle on the ebb and flow of business cycles during his 18 years as Cisco's CEO. He is also in a good position to see the big picture because Cisco sell its routers, switches, software and services to corporate customers and government agencies around the world.
Chambers' remarks were "surprisingly bullish," said Sterne Agee analyst Alex Kurtz in a Thursday note to investors.
That's good news after letdowns that have alienated investors in the sector lately. The most recent disappointments included discouraging financial reports last month from F5 Networks Inc. and Radware Ltd.
But Wedbush Securities Rohit Chopra believes Cisco's performance and reassuring outlook signals that demand is not getting worse for the computer networking equipment market.
Other companies in the sector rallied. F5 Networks' stock gained $4.15, or 5.2 percent, to $84.05 while Radware shares added 58 cents, or 3.8 percent, to $15.88 in afternoon trading. Other rival companies benefiting from the renewed optimism included: Juniper Networks Inc., up 78 cents, or 4.6 percent, to $17.85; Riverbed Technology Inc., up 72 cents, or 4.6 percent, to $16.35; and Infoblox Inc., up 57 cents, or 2.7 percent, to $21.89.
Infoblox is scheduled to report its fiscal third-third quarter earnings on May 23.