SAN JOSE, CA -- May 14, 2014 - Cisco (NASDAQ: CSCO)

• Q3 Revenue: $11.5 billion
• Q3 Earnings per Share: $0.42 GAAP; $0.51 non-GAAP 

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 26, 2014. Cisco reported third quarter revenue of $11.5 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion or $0.42 per share, and non-GAAP net income of $2.6 billion or $0.51 per share. 

"I'm pleased with our performance in Q3. Our financial results exceeded the guidance we provided last quarter as we demonstrated clear progress on returning to growth. The entire team is focused on moving Cisco forward aggressively and we remain confident in our long-term goal to be the #1 IT company," stated John Chambers, Cisco chairman and chief executive officer.

Revenue for the first nine months of fiscal 2014 was $34.8 billion, compared with $36.2 billion for the first nine months of fiscal 2013. Net income for the first nine months of fiscal 2014, on a GAAP basis, was $5.6 billion or $1.06 per share, compared with $7.7 billion or $1.44 per share for the first nine months of fiscal 2013. Non-GAAP net income for the first nine months of fiscal 2014 was $8.0 billion or $1.51 per share, compared with $8.0 billion or $1.50 per share for the first nine months of fiscal 2013.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table following the Consolidated Statements of Operations.

Cisco will discuss third 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://investor.cisco.com.

Cash and Cash Equivalents and Investments

• Cash flows from operations were $3.2 billion for the third quarter of fiscal 2014, compared with $2.9 billion for the second quarter of fiscal 2014, and compared with $3.1 billion for the third quarter of fiscal 2013.
   
• Cash and cash equivalents and investments were $50.5 billion at the end of the third quarter of fiscal 2014, compared with $47.1 billion at the end of the second quarter of fiscal 2014, and compared with $50.6 billion at the end of the fourth quarter of fiscal 2013.
   

Dividends and Stock Repurchase Program

• Cisco repurchased approximately 90 million shares of common stock under the stock repurchase program at an average price of $22.24 per share for an aggregate purchase price of $2.0 billion during the third quarter of fiscal 2014. As of April 26, 2014, Cisco had repurchased and retired 4.2 billion shares of Cisco common stock at an average price of $20.56 per share for an aggregate purchase price of approximately $86.9 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program as of April 26, 2014 was approximately $10.1 billion with no termination date.
   
• During the third quarter of fiscal 2014, Cisco paid a cash dividend of $0.19 per common share, or $974 million.
   

"We executed well this quarter with a focus on operational excellence," stated Frank Calderoni, Cisco executive vice president and chief financial officer. "Our strong and consistent cash generation demonstrates the value of our business model."

Internet of Everything

• Cisco announced plans to build the world's largest global Intercloud for the Internet of Everything (IoE) together with a set of partners, a distributed network and security architecture designed for high-value application workloads, real-time analytics, "near infinite" scalability and full compliance with local data sovereignty laws.
• Cisco and AGT International announced a Smart City Global Strategic Alliance that plans to deliver the promise of the IoE through edge analytics and cloud technologies that dramatically change the way cities are managed and safeguarded.
• Cisco selected Toronto as the location for one of four global Cisco® Internet of Everything Innovation Centers, representing a planned investment of up to $100 million over 10 years.
   

Next Generation of IT

• Cisco's Visual Networking Index™ Global Mobile Data Traffic Forecast Update for 2013 to 2018 projects that worldwide mobile data traffic is expected to increase nearly 11-fold over the next four years and reach an annual run rate of 190 exabytes by 2018.
• Cisco announced it worked with Fira de Barcelona and the GSMA to successfully provide one of the world's largest carrier-grade Wi-Fi networks at the GSMA's Mobile World Congress 2014 at Fira Gran Via in Barcelona, underscoring the growing importance of Wi-Fi to cellular.
• Cisco, AT&T, GE, IBM and Intel announced the formation of the Industrial Internet Consortium™, an open membership group focused on breaking down the barriers of technology silos to support better access to big data with improved integration of the physical and digital worlds.
• Cisco announced Managed Threat Defense, a managed security solution that applies real-time, predictive analytics designed to detect attacks and protect against advanced malware across customers' extended networks.
   

Innovation

• Cisco extended Application Centric Infrastructure (ACI) by introducing the Cisco Application Policy Infrastructure Controller (APIC) Enterprise Module, which extends to the WAN and access networks.
• Cisco continued delivering on its vision for fog computing with the announcement of Cisco IOx, transforming the network edge into a distributed computing infrastructure for applications that take advantage of the billions of devices already connected in the Internet of Things (IoT).
• Cisco announced OpenAppID, allowing for the ability to create and integrate new open source application identification capabilities into its Snort engine.
• Cisco announced an agreement with CableLabs to provide them with core infrastructure and Videoscape components for a new IPTV Innovations Lab in Louisville, Colorado designed to provide cable system operator members with a state-of-the-art location for Internet Protocol (IP) video testing.
• Cisco and Sony became the first companies to publicly demonstrate the live delivery of full-frame rate 4K 60P content at NAB 2014.
   

Editor's Notes:

• Q3 fiscal year 2014 conference call to discuss Cisco's results along with its business outlook will be held on Wednesday, May 14, 2014 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).
• Conference call replay will be available from 4:00 p.m. Pacific Time on May 14, 2014 to 11:59 p.m. Pacific Time on June 1, 2014 at 1-800-945-7422 (United States) or 1-203-369-3952 (international). The replay will also be available via webcast from May 14, 2014 through July 19, 2014 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 14, 2014. 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 (NASDAQ: CSCO) is the worldwide leader in IT that helps companies seize the opportunities of tomorrow by proving that amazing things can happen when you connect the previously unconnected. For ongoing news, please go to http://thenetwork.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 strategy and execution, our ability and plan to return to growth, our goal to be the #1 IT company, financial strength, strong cash generation and value of our business model) 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; our ability to achieve expected benefits of our partnerships; 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 Forms 10-Q and 10-K filed on February 20, 2014 and September 10, 2013, 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 Forms 10-Q and 10-K as each may be amended from time to time. Cisco's results of operations for the three and nine months ended April 26, 2014 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 effective tax rates, non-GAAP net income per share data, non-GAAP inventory turns and free cash flow.

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 effective tax rates, 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 periods presented. Cisco believes that the presentation of free cash flow, which it defines as the net cash provided by operating activities less cash used to acquire property and equipment, to be a liquidity measure that provides useful information to management and investors because of its intent to return a stated percentage of free cash flow to shareholders in the form of dividends and stock repurchases. Cisco further regards free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in its business, make strategic acquisitions, repurchase common stock, and pay dividends on its common stock, after deducting capital investments.

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, impact to cost of sales from purchase accounting adjustments to inventory, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation and other contingencies (such as the supplier component remediation charge in the second quarter of fiscal 2014 and the patent litigation settlement with TiVo, Inc. incurred in the fourth quarter of fiscal 2013), 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 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.

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