Network equipment maker Cisco Systems Inc posted a smaller-than-expected drop in quarterly profit due to cost cuts that helped offset lower revenue as companies reduced technology spending.

Shares of Cisco rose 4 percent after hours as investors waited for Chief Executive John Chambers to give his outlook on a conference call later on Wednesday.

Revenue fell 16.6 percent from a year earlier to $8.2 billion in Cisco's fiscal third quarter ended April 25, compared with analysts' average estimate of $8.1 billion, according to Reuters Estimates.

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 fell to 30 cents from 38 cents, and was above analysts' average estimate of 25 cents.

Cisco positively surprised on earnings by a significant margin and unlike a lot of other companies we've seen this quarter, they also surprised on revenues, said Tim Ghriskey, chief investment officer at Solaris Asset Management. I think that's why the stock is reacting so favorably in the after-market.

Tighter credit and the recession have discouraged many of Cisco's customers from big technology investments.

But Cisco has been cutting costs to help protect its bottom line. Total operating expenses fell to $3.6 billion from $4.1 billion, the company said.

Cisco is the biggest U.S. maker of routers and switches, which direct Internet traffic. It recently expanded into software, services, and consumer electronics. Its results are often seen as a benchmark for the overall technology sector.

Analysts have said that Cisco's results and outlook could provide global investors with a better idea of the depth of the current downturn and possible timing of a recovery.

U.S. Federal Reserve Chairman Ben Bernanke said on Tuesday that he was hopeful that the economic decline would moderate considerably in the near term, and return to positive growth by the end of the year.

Cisco shares rose 4 percent after closing Wednesday trade at $19.61.

(Reporting by Ritsuko Ando and Chuck Mikolajczak; Editing by Richard Chang and Tiffany Wu)

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