Industrial conglomerate Tyco International Ltd posted a net $2.57 billion quarterly net loss as it wrote down assets in light of the weak economy, but earnings before special items beat Wall Street expectations.

The company also cut its fiscal 2009 profit forecast, but the midpoint of its new range was slightly higher than the analysts' average estimate, and Tyco shares rose nearly 10 percent.

Tyco cited recent cost cuts and revenue from product maintenance and other services as factors that lifted results above its earlier forecast. It said service sales remained strong and predicted they would generate $7 billion this year.

Our recurring revenue and service businesses have held up quite well in this environment, Chief Executive Ed Breen said on a conference call.

Tyco posted a net loss of $2.57 billion, or $5.42 per share, for the second quarter ended March 27, compared with a year-earlier profit of $280 million, or 57 cents per share.

Earnings from continuing operations before special items were 55 cents a share, ahead of the 41 cents analyst had expected, according to Reuters Estimates.

Revenue fell 15 percent to $4.15 billion, compared with Wall Street forecasts for sales of $4.25 billion.

Sales were worse than expected, but compare favorably with other industrial companies, Merrill Lynch analyst John Inch said in a research note. Overall, we are pleased with Tyco's results.

Before special items, profit margins increased at Tyco's biggest segment, security systems unit ADT Worldwide, and at its flow control segment, which makes valves.

Sales were down in all five of Tyco's divisions, with each citing the strong dollar as a major factor. A strong dollar depresses the value of international sales.

The company, which has reincorporated from Bermuda to Switzerland and lost its place in the S&P 500 index <.SPX>, said it expected full-year earnings of $2.15 to $2.25 per share from continuing operations.

In February, the company had forecast profit of $2.28 to $2.50 per share, and analysts were expecting $2.19.

Tyco said a lower tax rate resulting from the Switzerland move would offset weaker-than-expected results at its electrical and metal products segment, which posted an operating loss in the latest quarter.

The company's shares were up 9.7 percent at $24.75 in early New York Stock Exchange trade.

(Reporting by Nick Zieminski; Editing by Lisa Von Ahn)