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Cisco Reports Second Quarter Earnings

SAN JOSE, CA, Feb 04, 2009 (MARKET WIRE via COMTEX News Network) -- Cisco (NASDAQ: CSCO)

--  Q2 Net Sales:  $9.1 billion (decrease of 7.5% year over
year)

--  Q2 Net Income:  $1.5 billion GAAP; $1.9 billion
non-GAAP

--  Q2 Earnings per Share:  $0.26 GAAP (decrease of 21.2% year over
year); $0.32 non-GAAP (decrease of 15.8% year over year)

--  Q2 Cash Flows from Operations:  $3.2 billion

--  Total Cash, Cash Equivalents and Investments:  $29.5
billion

Cisco (NASDAQ: CSCO), the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its second quarter results for the period ended January 24, 2009. Cisco reported second quarter net sales of $9.1 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.5 billion or $0.26 per share, and non-GAAP net income of $1.9 billion or $0.32 per share.

"Cisco showcased solid financial strength during a period of significant economic challenge," said John Chambers, chairman and chief executive officer, Cisco. "We remain comfortable with our long-term vision and strategy as we move into new market adjacencies and prioritize our existing opportunities. We intend to accelerate the alignment of our resources to prioritize future growth opportunities, gradually decrease our operating expenses, while building even stronger customer relationships to position Cisco for ongoing, long-term market leadership."

                                  GAAP Results
                           Q2 2009           Q2 2008            Vs. Q2 2008
Net Sales                  $9.1 billion      $9.8 billion       -7.5%
Net Income                 $1.5 billion      $2.1 billion       -27.0%
Earnings per Share         $0.26             $0.33              -21.2%
                                Non-GAAP Results
                           Q2 2009           Q2 2008            Vs. Q2 2008
Net Income                 $1.9 billion      $2.4 billion       -21.5%
Earnings per Share         $0.32             $0.38              -15.8%

Net sales for both the first six months of fiscal 2009 and fiscal 2008 were $19.4 billion. Net income for the first six months of fiscal 2009, on a GAAP basis, was $3.7 billion or $0.63 per share, compared with $4.3 billion or $0.68 per share for the first six months of fiscal 2008. Non-GAAP net income for the first six months of fiscal 2009 was $4.4 billion or $0.74 per share, compared with $4.9 billion or $0.78 per share for the first six months of fiscal 2008.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 6.

Cisco will discuss second quarter results and business outlook on a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://www.cisco.com/go/investors.

Other Financial Highlights

--  Cash flows from operations were $3.2 billion for the second quarter of
fiscal 2009, compared with $2.4 billion for the second quarter of fiscal
2008, and compared with $2.7 billion for the first quarter of fiscal 2009.


--  Cash and cash equivalents and investments were $29.5 billion at the end
of the second quarter of fiscal 2009, compared with $26.2 billion at the
end of fiscal 2008, and compared with $26.8 billion at the end of the first
quarter of fiscal 2009.

--  Deferred revenue was $9.3 billion at the end of the second quarter of
fiscal 2009, compared with $8.9 billion at the end of fiscal 2008, and
compared with $8.8 billion at the end of the first quarter of fiscal 2009.


--  During the second quarter of fiscal 2009, Cisco repurchased 37 million
shares of common stock at an average price of $16.40 per share for an
aggregate purchase price of $600 million.  As of January 24, 2009, Cisco
had repurchased and retired 2.7 billion shares of Cisco common stock at an
average price of $20.57 per share for an aggregate purchase price of
approximately $55.2 billion since the inception of the stock repurchase
program.  The remaining authorized repurchase amount as of January 24, 2009
was $6.8 billion with no termination date.

--  Days sales outstanding in accounts receivable (DSO) at the end of the
second quarter of fiscal 2009 were 29 days, compared with 34 days at the
end of the fourth quarter of fiscal 2008, and compared with 29 days at the
end of the first quarter of fiscal 2009.

--  Inventory turns on a GAAP basis were 11.6 in the second quarter of
fiscal 2009, compared with 11.9 in the fourth quarter of fiscal 2008, and
compared with 11.9 in the first quarter of fiscal 2009.  Non-GAAP inventory
turns were 11.3 in the second quarter of fiscal 2009, compared with 11.6 in
the fourth quarter of fiscal 2008, and compared with 11.6 in the first
quarter of fiscal 2009.

"Despite a clearly challenging macro-economic environment, Cisco generated $3.2 billion in cash flows from operations in our second quarter, resulting in total cash and investments of $29.5 billion," said Frank Calderoni, chief financial officer, Cisco. "I believe our business model and financial position provide us with two key capabilities: speed and flexibility. We believe we have been able to minimize risk to our business, while still positioning Cisco to take advantage of new opportunities."

Select Global Business Highlights

--  Cisco achieved the first major milestone in its investment into South
Africa under the National Industrial Participation Programme with the first
graduates of Cisco's Global Talent Acceleration Program.

--  Cisco celebrated the first anniversary of its Globalisation Centre
East, which has emerged as a world-class model for technology growth,
innovation and talent.

Acquisitions and Investments

--  Cisco completed the acquisition of Denver-based Jabber, Inc., a
provider of presence and messaging software.  Jabber is now part of the
Cisco Collaboration Software Group.

--  Cisco announced an increased equity stake in VMware, Inc., taking
Cisco's holding to approximately 1.7 percent of VMware's total outstanding
common stock.

Cisco Innovation

--  Cisco announced the new Cisco(R) Aironet(R) 1140 Series Access Point,
taking 802.11n to the enterprise mainstream with new solutions that are
designed to offer ease of deployment, reliability and performance.


--  Cisco outlined its strategy for bringing Unified Computing to the Data
Center.

--  Cisco extended its web conferencing and collaboration capabilities to
the Apple iPhone 3G user experience, with the Cisco WebEx(TM) meetings
iPhone application.

--  Cisco introduced the Cisco 9000 Series Aggregation Services Router
designed to meet service providers' need to increase the speed, longevity,
services richness and efficiency of the network edge.

--  Cisco announced the Linksys(R) by Cisco Wireless Home Audio solution
which uses Wireless-N technology to deliver a rich audio experience to any
room in the home and the Linksys by Cisco Media Hub designed to simplify
access and interaction with digital content by gathering, organizing and
presenting all the digital video, photos and music that users have spread
among various devices in the home.

--  Cisco announced the Cisco Eos(TM) software platform, a hosted,
white-label software platform that allows media and entertainment companies
to create, manage and grow online communities around their content.


Select Customer Announcements

--  Cisco brings high-definition video and advanced communications
technology to the new Yankee Stadium, creating the ultimate fan experience.


--  Cisco, the National Hockey League and the National Hockey League
Players' Association announced a new strategic agreement whereby Cisco will
support the league's strategic digital media initiatives with Cisco
technology designed to help the league serve millions of avid hockey fans
across North America with digital video of their favorite teams and
players.

--  Deutsche Telekom expanded its broadband infrastructure with the
implementation of the Cisco IP Service Engine technology to help meet
customer demand.

--  Hungarian service provider Magyar Telekom implemented Cisco
TelePresence(TM) virtual meeting rooms to connect its head office with the
company's southeast European subsidiaries.

--  In Malaysia, YTL e-Solutions Berhad entered into a strategic
collaboration with Cisco to establish a WiMAX core network in Peninsular
Malaysia.

--  TRUST National Bank in Russia completed the upgrade of its country-wide
communications network with Cisco Unified Communications to offer highly
secure, uninterrupted, multiservice communications across Russia.

--  In Japan, Capcom Co., Ltd. deployed the Cisco Unified Communications
solution to improve employee efficiency through coordination of phones,
PCs, and presence.

--  SENA, the Colombian National Learning Service, selected Cisco to
upgrade and integrate its 175 offices, offering more Colombian citizens
access to education and training programs virtually.

Editor's Note:

--  Q2 FY09 conference call to discuss Cisco's results along with its
business outlook will be held at 1:30 p.m. Pacific Time, Wednesday,
February 4, 2009.  Conference call number is 888-848-6507 (United States)
or 212-519-0847 (international).

--  Conference call replay will be available from 4:30 p.m. Pacific Time,
February 4, 2009 to 4:30 p.m. Pacific Time, February 11, 2009 at
866-357-4205 (United States) or 203-369-0122 (international).  The replay
also will be available via webcast from February 4, 2009 through April 17,
2009 on the Cisco Investor Relations website at
http://www.cisco.com/go/investors.

--  Additional information regarding Cisco's financials, as well as a
webcast of the conference call with visuals designed to guide participants
through the call, will be available at 1:30 p.m. Pacific Time, February 4,
2009.  Text of the conference call's prepared remarks will be available
within 24 hours of completion of the call.  The webcast will include both
the prepared remarks and the question-and-answer session.  This
information, along with GAAP reconciliation information, will be available
on the Cisco Investor Relations website at
http://www.cisco.com/go/investors.

--  A Q&A with Cisco's Chairman and CEO John Chambers and CFO Frank
Calderoni about Q2 FY09 results will be available at
http://newsroom.cisco.com.

--  To view videos of Cisco's CEO and CFO discussing Q2 FY09 results ,
visit Cisco's blog site, The Platform, at http://blogs.cisco.com.

About Cisco

Cisco (NASDAQ: CSCO) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, visit http://newsroom.cisco.com.

This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our long-term vision and strategy, the acceleration of our resource alignment, our intent to gradually decrease operating expenses, our movement into market adjacencies and prioritization of our existing opportunities, and the positioning of our business to take advantage of new opportunities and for ongoing, long-term market leadership) and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the return on our investments in certain market adjacencies and geographical locations during the current economic downturn; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; increased competition in our product and service markets; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters, and governmental investigations; natural catastrophic events; our ability to achieve the benefits anticipated from our investments in sales and engineering activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during the current economic downturn; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; potential volatility in operating results; and other factors listed in Cisco's most recent reports on Form 10-K and Form 10-Q. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent reports on Form 10-K and Form 10-Q, as each may be amended from time to time. Cisco's results of operations for the three and six months ended January 24, 2009 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

This release includes non-GAAP net income, non-GAAP net income per share data, shares used in non-GAAP net income per share calculation, and non-GAAP inventory turns.

These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco's results of operations in conjunction with the corresponding GAAP measures.

Cisco believes that the presentation of non-GAAP net income, non-GAAP net income per share data and shares used in non-GAAP net income per share calculation, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations. In addition, Cisco believes that the presentation of non-GAAP inventory turns provides useful information to investors and management regarding financial and business trends relating to inventory management based on the operating activities of the period presented.

For its internal budgeting process, Cisco's management uses financial statements that do not include employee share-based compensation expense, impact to cost of sales from purchase accounting adjustments to inventory, payroll tax on stock option exercises, compensation expense related to acquisitions and investments, in-process research and development, amortization of acquisition-related intangible assets, significant gains and losses on publicly traded equity securities, the income tax effects of the foregoing, tax effects of post-acquisition integration of intangible assets from significant acquisitions, and significant effects of retroactive tax legislation. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco.

For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

Copyright Copyright2009 Cisco Systems, Inc. All rights reserved. Cisco, the Cisco logo, Cisco Systems, Aironet, Catalyst, Cisco Eos, Cisco TelePresence, Cisco WebEx, Linksys, WebEx and WebEx Connect are registered trademarks or trademarks of Cisco Systems, Inc. and/or its affiliates in the United States and certain other countries. All other trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.

                   CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In millions, except per-share amounts)
                                (Unaudited)
                           Three Months Ended         Six Months Ended
                        ------------------------- -------------------------
                        January 24,  January 26,  January 24,  January 26,
                            2009         2008         2009         2008
                        -----------  ------------ -----------  ------------
NET SALES:
Product                 $     7,347  $      8,245 $    15,982  $     16,260
Service                       1,742         1,586       3,438         3,125
                        -----------  ------------ -----------  ------------
Total net sales               9,089         9,831      19,420        19,385
                        -----------  ------------ -----------  ------------
COST OF SALES:
Product                       2,737         2,890       5,718         5,720
Service                         629           636       1,298         1,220
                        -----------  ------------ -----------  ------------
Total cost of sales           3,366         3,526       7,016         6,940
                        -----------  ------------ -----------  ------------
GROSS MARGIN                  5,723         6,305      12,404        12,445
OPERATING EXPENSES:
Research and
 development                  1,279         1,260       2,685         2,492
Sales and marketing           2,155         2,158       4,438         4,236
General and
 administrative                 380           367         775           709
Amortization of
 purchased intangible
 assets                         136           116         248           233
In-process research and
 development                     --            --           3             3
                        -----------  ------------ -----------  ------------
Total operating
 expenses                     3,950         3,901       8,149         7,673
                        -----------  ------------ -----------  ------------
OPERATING INCOME              1,773         2,404       4,255         4,772
Interest income, net            159           212         354           435
Other income (loss),
 net                            (64)           22        (136)           53
                        -----------  ------------ -----------  ------------
Interest and other
 income (loss), net              95           234         218           488
                        -----------  ------------ -----------  ------------
INCOME BEFORE PROVISION
 FOR INCOME TAXES             1,868         2,638       4,473         5,260
Provision for income
 taxes                          364           578         768           995
                        -----------  ------------ -----------  ------------
NET INCOME              $     1,504  $      2,060 $     3,705  $      4,265
                        -----------  ------------ -----------  ------------
Net income per share:
Basic                   $      0.26  $       0.34 $      0.63  $       0.71
                        -----------  ------------ -----------  ------------
Diluted                 $      0.26  $       0.33 $      0.63  $       0.68
                        -----------  ------------ -----------  ------------
Shares used in
 per-share calculation:
Basic                         5,848         6,010       5,865         6,049
                        -----------  ------------ -----------  ------------
Diluted                       5,864         6,202       5,901         6,273
                        -----------  ------------ -----------  ------------
Certain reclassifications have been made to prior period amounts to conform
to the current period's presentation.
              RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
                  (In millions, except per-share amounts)
                           Three Months Ended         Six Months Ended
                        ------------------------  ------------------------
                        January 24,  January 26,  January 24,  January 26,
                            2009         2008       2009(1)        2008
                        -----------  -----------  -----------  -----------
GAAP net income         $     1,504  $     2,060  $     3,705  $     4,265
   Employee share-based
    compensation
    expense                     276          273          558          499
   Payroll tax on stock
    option exercises             --            8            1           19
   Compensation expense
    related to
    acquisitions and
    investments                  59           34          203           73
   In-process research
    and development              --           --            3            3
   Amortization of
    acquisition-related
    intangible assets           190          177          356          355
                        -----------  -----------  -----------  -----------
   Total adjustments to
    GAAP income before
    provision for
    income taxes                525          492        1,121          949
                        -----------  -----------  -----------  -----------
   Income tax effect           (162)        (173)        (356)        (333)
   Effect of
    retroactive tax
    legislation (1)              --           --         (106)          --
                        -----------  -----------  -----------  -----------
   Total adjustments
    to GAAP provision
    for income taxes           (162)        (173)        (462)        (333)
                        -----------  -----------  -----------  -----------
Non-GAAP net income     $     1,867  $     2,379  $     4,364  $     4,881
                        -----------  -----------  -----------  -----------
Diluted net income per
 share:
GAAP                    $      0.26  $      0.33  $      0.63  $      0.68
                        -----------  -----------  -----------  -----------
Non-GAAP                $      0.32  $      0.38  $      0.74  $      0.78
                        -----------  -----------  -----------  -----------
Shares used in diluted
 net income per share
 calculation:
GAAP                          5,864        6,202        5,901        6,273
                        -----------  -----------  -----------  -----------
Non-GAAP                      5,885        6,197        5,919        6,267
                        -----------  -----------  -----------  -----------
(1) In the first quarter of fiscal 2009, the Tax Extenders and Alternative
    Minimum Tax Relief Act of 2008 reinstated the U.S. federal R&D tax
    credit, retroactive to January 1, 2008. GAAP net income for the first
    six months of fiscal 2009 included a $106 million tax benefit related
    to fiscal 2008 R&D expenses.  Non-GAAP net income for the first six
    months of fiscal 2009 excluded the $106 million tax benefit related to
    fiscal 2008 R&D expenses.
Additional reconciliations between GAAP and non-GAAP financial measures are
provided in the tables that follow on page 10.
                      CONSOLIDATED BALANCE SHEETS
                             (In millions)
                              (Unaudited)
                                                  January 24,    July 26,
                                                     2009          2008
                                                 ------------  ------------
ASSETS
Current assets:
   Cash and cash equivalents                     $      4,175  $      5,191
   Investments                                         25,356        21,044
   Accounts receivable, net of allowance for
    doubtful accounts of $230 at January 24,
    2009 and $177 at July 26, 2008                      2,893         3,821
   Inventories                                          1,107         1,235
   Deferred tax assets                                  2,134         2,075
   Prepaid expenses and other current assets            2,330         2,333
                                                 ------------  ------------
   Total current assets                                37,995        35,699
Property and equipment, net                             4,141         4,151
Goodwill                                               12,572        12,392
Purchased intangible assets, net                        1,792         2,089
Other assets                                            4,857         4,403
                                                 ------------  ------------
TOTAL ASSETS                                     $     61,357  $     58,734
                                                 ------------  ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Current portion of long-term debt             $        500  $        500
   Accounts payable                                       625           869
   Income taxes payable                                   108           107
   Accrued compensation                                 2,078         2,428
   Deferred revenue                                     6,592         6,197
   Other current liabilities                            3,701         3,757
                                                 ------------  ------------
   Total current liabilities                           13,604        13,858
Long-term debt                                          6,348         6,393
Income taxes payable                                    1,198           749
Deferred revenue                                        2,708         2,663
Other long-term liabilities                               698           669
                                                 ------------  ------------
Total liabilities                                      24,556        24,332
                                                 ------------  ------------
Minority interest                                          18            49
Shareholders' equity                                   36,783        34,353
                                                 ------------  ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       $     61,357  $     58,734
                                                 ------------  ------------
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In millions)
                                (Unaudited)
                                                     Six Months Ended
                                                 -------------------------
                                                  January 24,   January 26,
                                                     2009          2008
                                                 ------------  ------------
Cash flows from operating activities:
    Net income                                   $     3,705   $     4,265
Adjustments to reconcile net income to net cash
 provided by operating activities:
    Depreciation and amortization                        818           878
    Employee share-based compensation expense            558           499
    Share-based compensation expense related to
     acquisitions and investments                         44            45
    Provision for doubtful accounts                       59            29
    Deferred income taxes                               (293)         (632)
    Excess tax benefits from share-based
     compensation                                        (21)         (338)
    In-process research and development                    3             3
    Net losses (gains) on investments                    123          (104)
Change in operating assets and liabilities, net
 of effects of acquisitions:
       Accounts receivable                               818          (196)
       Inventories                                       113            66
       Lease receivables, net                           (109)         (260)
       Accounts payable                                 (228)          (33)
       Income taxes payable and receivable               467           220
       Accrued compensation                             (213)          (38)
       Deferred revenue                                  544           946
       Other assets                                     (470)           38
       Other liabilities                                  (2)          144
                                                 -----------   -----------
Net cash provided by operating activities              5,916         5,532
                                                 -----------   -----------
Cash flows from investing activities:
    Purchases of investments                         (24,110)       (7,846)
    Proceeds from sales of investments                12,545         8,235
    Proceeds from maturities of investments            6,920         1,218
    Acquisition of property and equipment               (585)         (591)
    Acquisition of businesses, net of cash and
     cash equivalents acquired                          (327)         (385)
    Change in investments in privately held
     companies                                           (53)          (55)
    Other                                                (54)         (111)
                                                 -----------   -----------
Net cash (used in) provided by investing
 activities                                           (5,664)          465
                                                 -----------   -----------
Cash flows from financing activities:
    Issuance of common stock                             441         2,165
    Repurchase of common stock                        (1,603)       (7,120)
    Excess tax benefits from share-based
     compensation                                         21           338
    Other                                               (127)           94
                                                 -----------   -----------
Net cash used in financing activities                 (1,268)       (4,523)
                                                 -----------   -----------
Net (decrease) increase in cash and cash
 equivalents                                          (1,016)        1,474
Cash and cash equivalents, beginning of period         5,191         3,728
                                                 -----------   -----------
Cash and cash equivalents, end of period         $     4,175   $     5,202
                                                 -----------   -----------
Certain reclassifications have been made to prior period amounts to
conform to the current period's presentation.
                      ADDITIONAL FINANCIAL INFORMATION
                              (In millions)
                               (Unaudited)
                                                  January 24,   July 26,
                                                    2009         2008
                                                 -----------   -----------
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents                        $     4,175   $     5,191
Fixed income securities                               24,641        19,869
Publicly traded equity securities                        715         1,175
                                                 -----------   -----------
Total                                            $    29,531   $    26,235
                                                 -----------   -----------
INVENTORIES
Raw materials                                    $       142   $       111
Work in process                                           50            53
Finished goods:
    Distributor inventory and deferred cost of
     sales                                               431           452
    Manufactured finished goods                          277           381
                                                 -----------   -----------
Total finished goods                                     708           833
Service-related spares                                   169           191
Demonstration systems                                     38            47
                                                 -----------   -----------
Total                                            $     1,107   $     1,235
                                                 -----------   -----------
PROPERTY AND EQUIPMENT, NET
Land, buildings, and leasehold improvements      $     4,499   $     4,445
Computer equipment and related software                1,785         1,770
Production, engineering, and other equipment           4,975         4,839
Operating lease assets                                   217           209
Furniture and fixtures                                   451           439
                                                 -----------   -----------
                                                      11,927        11,702
Less accumulated depreciation and amortization        (7,786)       (7,551)
                                                 -----------   -----------
Total                                            $     4,141   $     4,151
                                                 -----------   -----------
OTHER ASSETS
Deferred tax assets                              $     2,139   $     1,770
Investments in privately held companies                  716           706
Lease receivables, net (1)                               874           862
Financed service contracts (2)                           550           588
Other                                                    578           477
                                                 -----------   -----------
Total                                            $     4,857   $     4,403
                                                 -----------   -----------
DEFERRED REVENUE
Service                                          $     6,073   $     6,133
Product
    Unrecognized revenue on product shipments
     and other deferred revenue                        2,315         2,152
    Cash receipts related to unrecognized
     revenue from two-tier distributors                  912           575
                                                 -----------   -----------
Total product deferred revenue                         3,227         2,727
                                                 -----------   -----------
Total                                            $     9,300   $     8,860
                                                 -----------   -----------
Reported as:
Current                                          $     6,592   $     6,197
Noncurrent                                             2,708         2,663
                                                 -----------   -----------
Total                                            $     9,300   $     8,860
                                                 -----------   -----------
Note:
(1) The current portion of lease receivables, net, which was $550 million
    and $554 million as of January 24, 2009 and July 26, 2008,
    respectively, is recorded in prepaid expenses and other current assets.
(2) The current portion of financed service contracts, which was
    $751 million and $730 million as of January 24, 2009 and July 26,
    2008, respectively, is recorded in prepaid expenses and other
    current assets. These financed service contracts primarily relate to
    technical support services, and the associated revenue is deferred and
    recognized ratably over the period during which the services are to be
    performed, which is typically from one to three years.
             SUMMARY OF EMPLOYEE SHARE-BASED COMPENSATION EXPENSE
                               (In millions)
                              Three Months Ended       Six Months Ended
                            ----------------------- -----------------------
                            January 24, January 26, January 24, January 26,
                               2009        2008        2009        2008
                            ----------- ----------- ----------- -----------
Cost of sales--product      $        10 $        11 $        21 $        20
Cost of sales--service               32          30          63          53
                            ----------- ----------- ----------- -----------
Employee share-based
 compensation expense in
 cost of sales                       42          41          84          73
                            ----------- ----------- ----------- -----------
Research and development             84          81         166         146
Sales and marketing                 104         111         217         210
General and administrative           46          40          91          70
                            ----------- ----------- ----------- -----------
Employee share-based
 compensation expense in
 operating expenses                 234         232         474         426
                            ----------- ----------- ----------- -----------
Total employee share-based
 compensation expense       $       276 $       273 $       558 $       499
                            ----------- ----------- ----------- -----------
The income tax benefit for employee share-based compensation expense was
$73 million and $150 million for the second quarter and first six months of
fiscal 2009, respectively, and $86 million and $160 million for the second
quarter and first six months of fiscal 2008, respectively.
          RECONCILIATION OF SHARES USED IN THE GAAP AND NON-GAAP
                 DILUTED NET INCOME PER SHARE CALCULATION
                              (In millions)
                              Three Months Ended       Six Months Ended
                            ----------------------  ----------------------
                            January 24, January 26, January 24, January 26,
                               2009        2008        2009        2008
                            ----------- ----------  ----------- ----------
Shares used in diluted net
 income per share
 calculation--GAAP                5,864      6,202        5,901      6,273
Effect of SFAS 123(R)                21         (5)          18         (6)
                            ----------- ----------  ----------- ----------
Shares used in diluted net
 income per share
 calculation--Non-GAAP            5,885      6,197        5,919      6,267
                            ----------- ----------  ----------- ----------
             RECONCILIATION OF GAAP TO NON-GAAP COST OF SALES
                          USED IN INVENTORY TURNS
                              (In millions)
                                          Three Months Ended
                            ----------------------------------------------
                            January 24, October 25,  July 26,   January 26,
                               2009        2008        2008        2008
                            ----------  ----------  ----------  ----------
GAAP cost of sales          $    3,366  $    3,650  $    3,733  $    3,526
   Employee share-based
    compensation expense           (42)        (42)        (38)        (41)
   Amortization of
    acquisition-related
    intangible assets              (54)        (54)        (54)        (61)
                            ----------  ----------  ----------  ----------
Non-GAAP cost of sales      $    3,270  $    3,554  $    3,641  $    3,424
                            ----------  ----------  ----------  ----------

Press Contact:
Robyn Jenkins-Blum
Cisco
+1 (408) 853-9848
rojenkin@cisco.com

Investor Relations Contact:
Laura Graves
Cisco
+1 (408) 526-6521
lagraves@cisco.com


SOURCE: Cisco

mailto:rojenkin@cisco.com
mailto:lagraves@cisco.com

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