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Cisco Systems$25.15$.03.12%

    Cisco Reports Third Quarter Earnings
    Wednesday, May 09, 2012 at 4:05:27 PM ET
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Cisco (CSCO)

--  Q3 Net Sales: $11.6 billion (increase of 7% year over year)


--  Q3 Net Income: $2.2 billion GAAP (increase of 20% year over year);
    $2.6 billion non-GAAP (increase of 11% year over year)


--  Q3 Earnings per Share: $0.40 GAAP (increase of 21% year over year);
    $0.48 non-GAAP (increase of 14% year over year)



Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its third quarter results for the period ended April 28, 2012. Cisco reported third quarter net sales of $11.6 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion, or $0.40 per share, and non-GAAP net income of $2.6 billion, or $0.48 per share.

"We delivered solid results this quarter with record revenue and non-GAAP earnings per share," said John Chambers, Cisco chairman and CEO. "We are successfully executing against our long-term strategic plan of growing profit faster than revenue, and in a cautious IT spending environment, we continue to outperform our competitors."

Chambers continued, "In a world of clouds, video and mobile device proliferations, the role of the intelligent network has never been greater and our value proposition with our customers is the strongest it has ever been. Our vision and strategy is focused on the right market transitions, and I want to thank our shareholders, employees, customers and partners for their ongoing commitment to Cisco."




                                GAAP Results


                                Q3 2012          Q3 2011       Vs. Q3 2011
                           ---------------- ---------------- ---------------
Net Sales                  $   11.6 billion $   10.9 billion            6.6%
Net Income                 $    2.2 billion $    1.8 billion           19.8%
Earnings per Share         $           0.40 $           0.33           21.2%

                              Non-GAAP Results


                                 Q3 2012         Q3 2011       Vs. Q3 2011
                             --------------- --------------- ---------------
Net Income                   $   2.6 billion $   2.3 billion           10.9%
Earnings per Share           $          0.48 $          0.42           14.3%




Net sales for the first nine months of fiscal 2012 were $34.4 billion, compared with $32.0 billion for the first nine months of fiscal 2011. Net income for the first nine months of fiscal 2012, on a GAAP basis, was $6.1 billion, or $1.13 per share, compared with $5.3 billion, or $0.94 per share, for the first nine months of fiscal 2011. Non-GAAP net income for the first nine months of fiscal 2012 was $7.5 billion, or $1.38 per share, compared with $6.8 billion, or $1.22 per share, for the first nine months of fiscal 2011.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 5.

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

Other Financial Highlights

--  Cash flows from operations were $3.0 billion for the third quarter of
    fiscal 2012, compared with $3.1 billion for the second quarter of
    fiscal 2012, and compared with $3.0 billion for the third quarter of
    fiscal 2011.


--  Cash and cash equivalents and investments totaled $48.4 billion at the
    end of the third quarter of fiscal 2012, compared with $46.7 billion
    at the end of the second quarter of fiscal 2012, and compared with
    $44.6 billion at the end of fiscal 2011.


--  During the third quarter of fiscal 2012, Cisco repurchased 27 million
    shares of common stock under its stock repurchase program at an
    average price of $20.28 per share for an aggregate purchase price of
    $550 million. As of April 28, 2012, Cisco had repurchased and retired
    3.6 billion shares of Cisco common stock at an average price of $20.47
    per share for an aggregate purchase price of approximately $74.3
    billion since the inception of the stock repurchase program. The
    remaining authorized amount for stock repurchases under this program
    is approximately $7.7 billion with no termination date. During the
    third quarter of fiscal 2012, Cisco also paid a cash dividend of
    $0.08, or $432 million.


--  Days sales outstanding in accounts receivable (DSO) at the end of the
    third quarter of fiscal 2012 were 31 days, compared with 31 days at
    the end of the second quarter of fiscal 2012, and compared with 37
    days at the end of the third quarter of fiscal 2011.


--  Inventory turns on a GAAP basis were 11.5 in the third quarter of
    fiscal 2012, compared with 11.1 in each of the second quarter of
    fiscal 2012 and the third quarter of fiscal 2011. Non-GAAP inventory
    turns were 11.1 in the third quarter of fiscal 2012, compared with
    10.8 in the second quarter of fiscal 2012, and compared with 10.3 in
    the third quarter of fiscal 2011.



Select Global Business Highlights

--  Cisco announced its intent to acquire NDS Group Ltd., a provider of
    video software and content security solutions. The acquisition is
    expected to help Cisco’s ability to transform how service providers
    and media companies deliver next-generation video experiences to
    subscribers.
--  Cisco completed the acquisition of privately held Lightwire, Inc.
    Lightwire develops advanced optical interconnect technology for
    high-speed networking applications. The acquisition is expected to
    allow Cisco to deliver cost-effective, high-speed networks with the
    next generation of optical connectivity.
--  Cisco acquired privately held ClearAccess, Inc. The acquisition
    enhances Cisco’s network management capabilities and enables service
    providers to better deliver, manage and monetize their services.
--  Cisco announced strategic investments in Brazil to foster innovation,
    transformation and socio-economic development.

Cisco Innovation

--  Cisco announced it has updated its cloud-ready switching portfolio to
    enhance network virtualization with simplicity and scale.
--  Cisco announced a successful demonstration and validation of its
    coherent 100G dense wavelength division multiplexing solution,
    exceeding 3,000 km in reach without the need for regeneration. This
    distance is 50 percent farther than any non-Raman alternative solution
    on the market today.
--  Cisco introduced the industry’s first carrier-grade, end-to-end Wi-Fi
    infrastructure to deliver next-generation hotspots. The technology is
    designed to deliver seamless mobile experiences and enables operators
    to support a continuing expansion of mobile traffic, devices and new
    services.
--  Cisco announced innovations across the Cisco Unified Computing
    System(R) (UCS) that quadruple memory capacity, double switching
    capacity and simplify management for large-scale Cisco UCS(R)
    deployments.
--  Cisco introduced new Linksys Smart Wi-Fi Routers with app-enabled
    capabilities for new home experiences. The three new routers offer
    wireless performance and support for Cisco Connect(R) Cloud.
--  Cisco announced it expanded its small business product portfolio with
    new wireless access points, routers, switches, unified communications
    and partner-managed service offerings.
--  Cisco and NetApp announced FlexPod was the first data center
    infrastructure solution to be validated by Microsoft for the updated
    Microsoft Private Cloud Fast Track 2.0 program.

Select Customer Announcements

--  TELUS announced it has deployed key components of the Cisco
    Videoscape(TM) platform to extend its Optik TV services to mobile
    devices.
--  Cisco announced it has been chosen by Fastway Transmissions Private
    Ltd. to facilitate cable digitization deployment across its customer
    base in India. Fastway is expected to deploy more than two million
    next-generation digital set-top boxes from Cisco during the next two
    years.
--  Magyar Telekom rolled out 4G LTE services with Cisco mobile internet
    solutions. Magyar Telekom is Hungary’s largest telecommunications
    company.
--  IPLAN chose Cisco technology for its newest data center which is
    expected to be launched in June 2012. IPLAN is a leader in
    telecommunications and cloud computing services for small and
    medium-sized businesses in Argentina.
--  Videotron launched its enhanced illico digital TV service with Cisco’s
    HD set-top box platform. Videotron is a leading Canadian
    telecommunications operator providing communications and broadband
    entertainment services.
--  Peru Credit Bank implemented the Cisco Unified Communications system
    to increase business flexibility and reduce costs.
--  Kabel Deutschland (KD) selected Cisco CRS-3 routers for its Internet
    Protocol Next-Generation Network core to meet demand for video and
    broadband services. KD is Germany’s largest cable operator.
--  Netelligent announced that it will collaborate with Desktone, Inc. to
    offer cloud-hosted virtual desktops. These cloud-based solutions will
    include Cisco UCS, the Desktone desktops-as-a-service (DaaS) platform
    and NetApp storage systems.

Editor’s Note:

--  Q3 FY 2012 conference call to discuss Cisco’s results along with its
    business outlook will be held at 1:30 p.m. Pacific Time, Wednesday,
    May 9, 2012. 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,
    May 9, 2012 to 4:30 p.m. Pacific Time, May 16, 2012 at 866-493-8039
    (United States) or 203-369-1749 (international). The replay also will
    be available via webcast from May 9, 2012 through July 20, 2012 on the
    Cisco Investor Relations website at http://investor.cisco.com.
--  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, May 9, 2012. 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://investor.cisco.com.

About Cisco

Cisco (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, please go to 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 statements regarding our ability to execute our long-term strategic plan, our competitive performance, the role of the intelligent network, our value proposition with customers and our strategy regarding market transitions) 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 priorities, including our foundational priorities, and in certain geographical locations; 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, including the data center; 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; a pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco’s most recent reports on Form 10-K and 10-Q filed on September 14, 2011 and February 21, 2012, respectively. 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 10-Q, as each may be amended from time to time. Cisco’s results of operations for the three and nine months ended April 28, 2012 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 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 and non-GAAP net income per share data 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, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, other acquisition-related costs, significant asset impairments and restructurings, the income tax effects of the foregoing, and significant tax matters. Cisco’s management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future, there may be other items, such as significant gains or losses from contingencies that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results.

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 Copyright 2012 Cisco and/or its affiliates. All rights reserved. Cisco, the Cisco logo, Cisco Systems, Cisco Connect, Cisco UCS, Cisco Unified Computing System, and Cisco Videoscape are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. A listing of Cisco’s trademarks can be found at www.cisco.com/go/trademarks. Third party 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     Nine Months Ended
                                 --------------------  --------------------
                                 April 28,  April 30,  April 28,  April 30,
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  ---------
NET SALES:
  Product                        $   9,106  $   8,669  $  27,176  $  25,605
  Service                            2,482      2,197      7,195      6,418
                                 ---------  ---------  ---------  ---------

    Total net sales                 11,588     10,866     34,371     32,023
                                 ---------  ---------  ---------  ---------

COST OF SALES:
  Product                            3,563      3,437     10,776     10,068
  Service                              856        770      2,471      2,280
                                 ---------  ---------  ---------  ---------

    Total cost of sales              4,419      4,207     13,247     12,348
                                 ---------  ---------  ---------  ---------

GROSS MARGIN                         7,169      6,659     21,124     19,675

OPERATING EXPENSES:
  Research and development           1,358      1,430      4,072      4,339
  Sales and marketing                2,383      2,446      7,230      7,292
  General and administrative           562        466      1,611      1,376
  Amortization of purchased
   intangible assets                    96        103        292        419
  Restructuring and other
   charges                              20         31        225         31
                                 ---------  ---------  ---------  ---------

    Total operating expenses         4,419      4,476     13,430     13,457
                                 ---------  ---------  ---------  ---------


OPERATING INCOME                     2,750      2,183      7,694      6,218
  Interest income                      161        161        483        477
  Interest expense                    (151)      (153)      (449)      (480)
  Other income, net                     19         12         45        143
                                 ---------  ---------  ---------  ---------

    Interest and other income,
     net                                29         20         79        140
                                 ---------  ---------  ---------  ---------

INCOME BEFORE PROVISION FOR
 INCOME TAXES                        2,779      2,203      7,773      6,358
Provision for income taxes             614        396      1,649      1,100
                                 ---------  ---------  ---------  ---------

  NET INCOME                     $   2,165  $   1,807  $   6,124  $   5,258
                                 ---------  ---------  ---------  ---------


Net income per share:
Basic                            $    0.40  $    0.33  $    1.14  $    0.95
                                 ---------  ---------  ---------  ---------

Diluted                          $    0.40  $    0.33  $    1.13  $    0.94
                                 ---------  ---------  ---------  ---------


Shares used in per-share
 calculation:
Basic                                5,388      5,508      5,383      5,545
                                 ---------  ---------  ---------  ---------

Diluted                              5,456      5,537      5,418      5,596
                                 ---------  ---------  ---------  ---------

Cash dividends declared per
 common share                    $    0.08  $    0.06  $    0.20  $    0.06
                                 ---------  ---------  ---------  ---------



               RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
                  (In millions, except per-share amounts)


                                  Three Months Ended     Nine Months Ended
                                 --------------------  --------------------
                                 April 28,  April 30,  April 28,  April 30,
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  ---------

GAAP net income                  $   2,165  $   1,807  $   6,124  $   5,258

  Adjustments to cost of sales:
    Share-based compensation
     expense                            51         60        155        182
    Amortization of acquisition-
     related intangible
     assets(1)                          99        102        276        367
    Significant asset
     impairments and
     restructurings                     (5)       120        (26)       120
                                 ---------  ---------  ---------  ---------

  Total adjustments to GAAP cost
   of sales                            145        282        405        669
                                 ---------  ---------  ---------  ---------

  Adjustments to operating
   expenses:
    Share-based compensation
     expense                           286        340        879      1,055
    Amortization of acquisition-
     related intangible
     assets(1)                          96        103        292        419
    Other acquisition-related
     costs                              14         14         29        123
    Significant asset
     impairments and
     restructurings(3)                  20         31        225         31
                                 ---------  ---------  ---------  ---------

  Total adjustments to GAAP
   operating expenses                  416        488      1,425      1,628


  Total adjustments to GAAP
   income before provision for
   income taxes                        561        770      1,830      2,297
                                 ---------  ---------  ---------  ---------

  Income tax effect                   (121)      (228)      (464)      (652)

  Significant tax matters(2)            --         --         --        (65)
                                 ---------  ---------  ---------  ---------

  Total adjustments to GAAP
   provision for income taxes         (121)      (228)      (464)      (717)
                                 ---------  ---------  ---------  ---------

Non-GAAP net income              $   2,605  $   2,349  $   7,490  $   6,838
                                 ---------  ---------  ---------  ---------

Diluted net income per share:
GAAP                             $    0.40  $    0.33  $    1.13  $    0.94
                                 ---------  ---------  ---------  ---------

Non-GAAP                         $    0.48  $    0.42  $    1.38  $    1.22
                                 ---------  ---------  ---------  ---------

(1) Amortization of acquisition-related intangible assets for the first nine
    months of fiscal 2011 includes impairment charges of approximately $155
    million, with $63 million recorded in product cost of sales and $92
    million in operating expenses.

(2) In the second quarter of fiscal 2011, the Tax Relief, Unemployment
    Insurance Reauthorization, and Job Creation Act of 2010 reinstated the
    U.S. federal R&D tax credit, retroactive to January 1, 2010. GAAP net
    income for the first nine months of fiscal 2011 included a $65 million
    tax benefit related to fiscal 2010 R&D expenses. Non-GAAP net income for
    the first nine months of fiscal 2011 excluded the $65 million tax
    benefit related to fiscal 2010 R&D expenses.

(3) Restructuring and other charges for the first nine months of fiscal 2012
    includes a $2 million credit for share based compensation related to
    forfeitures of unvested awards.




A reconciliation between GAAP to non-GAAP inventory turns is provided on page 9.



                         CONSOLIDATED BALANCE SHEETS
                                (In millions)
                                 (Unaudited)

                                                      April 28,    July 30,
                                                         2012        2011
                                                     ----------- -----------
ASSETS
Current assets:
  Cash and cash equivalents                          $     6,461 $     7,662
  Investments                                             41,951      36,923
  Accounts receivable, net of allowance for doubtful
   accounts of $216 at April 28, 2012 and $204 at
   July 30, 2011                                           3,980       4,698
  Inventories                                              1,497       1,486
  Financing receivables, net                               3,709       3,111
  Deferred tax assets                                      2,104       2,410
  Other current assets                                     1,510         941
                                                     ----------- -----------
  Total current assets                                    61,212      57,231
Property and equipment, net                                3,634       3,916
Financing receivables, net                                 3,518       3,488
Goodwill                                                  17,006      16,818
Purchased intangible assets, net                           2,134       2,541
Other assets                                               3,650       3,101
                                                     ----------- -----------
TOTAL ASSETS                                         $    91,154 $    87,095
                                                     ----------- -----------

LIABILITIES AND EQUITY
Current liabilities:
  Short-term debt                                    $        83 $       588
  Accounts payable                                           903         876
  Income taxes payable                                       453         120
  Accrued compensation                                     2,626       3,163
  Deferred revenue                                         8,568       8,025
  Other current liabilities                                4,491       4,734
                                                     ----------- -----------
  Total current liabilities                               17,124      17,506
Long-term debt                                            16,286      16,234
Income taxes payable                                       1,698       1,191
Deferred revenue                                           4,080       4,182
Other long-term liabilities                                  588         723
                                                     ----------- -----------
Total liabilities                                         39,776      39,836
Total equity                                              51,378      47,259
                                                     ----------- -----------
TOTAL LIABILITIES AND EQUITY                         $    91,154 $    87,095
                                                     ----------- -----------



                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In millions)
                                (Unaudited)


                                                        Nine Months Ended
                                                     ----------------------
                                                      April 28,   April 30,
                                                        2012        2011
                                                     ----------  ----------
Cash flows from operating activities:
  Net income                                         $    6,124  $    5,258
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation, amortization, and other                 1,816       1,813
    Share-based compensation expense                      1,032       1,237
    Provision for doubtful accounts                          20          (1)
    Deferred income taxes                                    75         (37)
    Excess tax benefits from share-based
     compensation                                           (57)        (65)
    Net gains on investments                                (38)       (185)
    Change in operating assets and liabilities, net
     of effects of acquisitions and divestitures:
      Accounts receivable                                   660         603
      Inventories                                          (113)       (105)
      Financing receivables, net                           (737)     (1,089)
      Other assets                                         (495)        190
      Accounts payable                                       34        (103)
      Income taxes, net                                     151        (192)
      Accrued compensation                                 (451)       (265)
      Deferred revenue                                      482         537
      Other liabilities                                    (100)       (341)
                                                     ----------  ----------

        Net cash provided by operating activities         8,403       7,255
                                                     ----------  ----------

Cash flows from investing activities:
  Purchases of investments                              (32,690)    (30,303)
  Proceeds from sales of investments                     19,591      14,942
  Proceeds from maturities of investments                 7,930      14,134
  Acquisition of property and equipment                    (830)       (930)
  Acquisition of businesses, net of cash and cash
   equivalents acquired                                    (333)       (266)
  Purchases of investments in privately held
   companies                                               (299)       (179)
  Return of investments in privately held companies         212          93
  Other                                                     175          48
                                                     ----------  ----------

        Net cash used in investing activities            (6,244)     (2,461)
                                                     ----------  ----------

Cash flows from financing activities:
  Issuances of common stock                               1,115       1,516
  Repurchases of common stock                            (2,868)     (5,564)
  Short-term borrowings maturities less than 90
   days, net                                               (505)        392
  Issuances of debt, maturities greater than 90 days         --       4,109
  Repayments of debt, maturities greater than 90
   days                                                      --      (3,000)
  Excess tax benefits from share-based compensation          57          65
  Dividends paid                                         (1,076)       (329)
  Other                                                     (83)         71
                                                     ----------  ----------

        Net cash used in financing activities            (3,360)     (2,740)
                                                     ----------  ----------

Net (decrease) increase in cash and cash equivalents     (1,201)      2,054
Cash and cash equivalents, beginning of period            7,662       4,581
                                                     ----------  ----------

Cash and cash equivalents, end of period             $    6,461  $    6,635
                                                     ----------  ----------



Certain reclassifications have been made to prior period amounts to conform to the current period’s presentation.



                      ADDITIONAL FINANCIAL INFORMATION
                               (In millions)
                                (Unaudited)


                                                    April 28,     July 30,
                                                       2012         2011
                                                   -----------  -----------
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents                          $     6,461  $     7,662
Fixed income securities                                 40,437       35,562
Publicly traded equity securities                        1,514        1,361
                                                   -----------  -----------
Total                                              $    48,412  $    44,585
                                                   -----------  -----------

INVENTORIES
Raw materials                                      $       114  $       219
Work in process                                             37           52
Finished goods:
  Distributor inventory and deferred cost of sales         629          631
  Manufactured finished goods                              437          331
                                                   -----------  -----------
Total finished goods                                     1,066          962
Service-related spares                                     202          182
Demonstration systems                                       78           71
                                                   -----------  -----------
Total                                              $     1,497  $     1,486
                                                   -----------  -----------

PROPERTY AND EQUIPMENT, NET

Land, buildings, and building & leasehold
 improvements                                      $     4,547  $     4,760
Computer equipment and related software                  1,454        1,429
Production, engineering, and other equipment             5,286        5,093
Operating lease assets                                     291          293
Furniture and fixtures                                     489          491
                                                   -----------  -----------
                                                        12,067       12,066
Less accumulated depreciation and amortization          (8,433)      (8,150)
                                                   -----------  -----------
Total                                              $     3,634  $     3,916
                                                   -----------  -----------

OTHER ASSETS
Deferred tax assets                                $     2,063  $     1,864
Investments in privately held companies                    841          796
Other                                                      746          441
                                                   -----------  -----------
Total                                              $     3,650  $     3,101
                                                   -----------  -----------

DEFERRED REVENUE
Service                                            $     8,778  $     8,521
Product:
  Unrecognized revenue on product shipments and
   other deferred revenue                                2,943        3,003
  Cash receipts related to unrecognized revenue
   from two-tier distributors                              927          683
                                                   -----------  -----------
Total product deferred revenue                           3,870        3,686
                                                   -----------  -----------
Total                                              $    12,648  $    12,207
                                                   -----------  -----------

Reported as:
Current                                            $     8,568  $     8,025
Noncurrent                                               4,080        4,182
                                                   -----------  -----------
Total                                              $    12,648  $    12,207
                                                   -----------  -----------



                 SUMMARY OF SHARE-BASED COMPENSATION EXPENSE
                                (In millions)

                                     Three Months Ended   Nine Months Ended
                                    ------------------- --------------------
                                    April 28, April 30, April 28,  April 30,
                                       2012      2011      2012       2011
                                    --------- --------- ---------  ---------
Cost of sales -- product            $      12 $      16 $      39  $      47
Cost of sales -- service                   39        44       116        135
                                    --------- --------- ---------  ---------

Share-based compensation expense in
 cost of sales                             51        60       155        182
                                    --------- --------- ---------  ---------

Research and development                   97       120       297        373
Sales and marketing                       138       160       429        491
General and administrative                 51        60       153        191
Restructuring and other charges            --        --        (2)        --
                                    --------- --------- ---------  ---------

Share-based compensation expense in
 operating expenses                       286       340       877      1,055
                                    --------- --------- ---------  ---------

Total share-based compensation
 expense                            $     337 $     400 $   1,032  $   1,237
                                    --------- --------- ---------  ---------



The income tax benefit for share-based compensation expense was $88 million and $271 million for the three and nine months ended April 28, 2012, respectively, and $107 million and $335 million for the three and nine months ended April 30, 2011, respectively.



                     RECONCILIATION OF GAAP TO NON-GAAP
                              INVENTORY TURNS
              (In millions, except annualized inventory turns)

                                                  Three Months Ended
                                          ---------------------------------
                                          April 28,  January 28,  April 30,
                                             2012        2012        2011
                                          =========  ===========  =========

Annualized inventory turns- GAAP               11.5         11.1       11.1
  Cost of sales adjustments                    (0.4)        (0.3)      (0.8)
                                          ---------  -----------  ---------
Annualized inventory turns- non-GAAP           11.1         10.8       10.3

GAAP cost of sales                        $   4,419  $     4,462  $   4,207
Cost of sales adjustments:
  Share-based compensation expense              (51)         (54)       (60)
  Amortization of acquisition-related
   intangible assets                            (99)         (90)      (102)
  Significant asset impairments and
   restructurings                                 5           16       (120)

                                          ---------  -----------  ---------
Non-GAAP cost of sales                    $   4,274  $     4,334  $   3,925
                                          ---------  -----------  ---------

Press Contact:
Robyn Jenkins-Blum
Cisco
+1 (408) 853-9848
Email Contact

Investor Relations Contact:
Melissa Selcher
Cisco
+1 (408) 424-1335
Email Contact


SOURCE: Cisco

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