Full Story Full Story







PRESS RELEASE

Cisco Reports First Quarter Earnings

SAN JOSE, CA -  November 9, 2011 - Cisco (NASDAQ: CSCO)

  • Q1 Net Sales: $11.3 billion 
  • Q1 Net Income: $1.8 billion GAAP; $2.3 billion non-GAAP
  • Q1 Earnings per Share: $0.33 GAAP; $0.43 non-GAAP

Cisco (NASDAQ: CSCO), the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its first quarter results for the period ended October 29, 2011. Cisco reported first quarter net sales of $11.3 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.8 billion or $0.33 per share, and non-GAAP net income of $2.3 billion or $0.43 per share.

"We delivered a solid quarter," said John Chambers, Cisco Chairman and CEO. "We've completed the majority of our restructuring and have organized Cisco to successfully execute against our strategy of providing intelligent networks, architectures and integrated products that solve customers' business problems. Even in times of limited capital spending, intelligent networks are being deployed to drive new business, revenue and consumption models, enable new customer and employee experiences, and drive efficiencies. Cisco's leadership in networking, video, collaboration and cloud, offered together in an integrated architectural approach, uniquely positions Cisco as a strategic business partner."

   
GAAP Results  
               
    Q1 2012   Q1 2011   Vs. Q1 2011  
Net Sales   $ 11.26 billion   $ 10.75 billion   4.7 %
Net Income   $ 1.8 billion   $ 1.9 billion   (7.9 )%
Earnings per Share   $ 0.33   $ 0.34   (2.9 )%
                   
Non-GAAP Results         
                   
      Q1 2012     Q1 2011   Vs. Q1 2011  
Net Income   $ 2.3 billion   $ 2.4 billion   (3.7 )%
Earnings per Share   $ 0.43   $ 0.42   2.4 %
                   

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 7.

Cisco will discuss first 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.

Other Financial Highlights

  • Cash flows from operations were $2.3 billion for the first quarter of fiscal 2012, compared with $1.7 billion for the first quarter of fiscal 2011, and compared with $2.8 billion for the fourth quarter of fiscal 2011.
     
  • Cash and cash equivalents and investments were $44.4 billion at the end of the first quarter of fiscal 2012, compared with $44.6 billion at the end of fiscal 2011.
     
  • During the first quarter of fiscal 2012, Cisco repurchased 100 million shares of common stock under the stock repurchase program at an average price of $15.37 per share for an aggregate purchase price of $1.5 billion. As of October 29, 2011, Cisco had repurchased and retired 3.6 billion shares of Cisco common stock at an average price of $20.49 per share for an aggregate purchase price of approximately $73.3 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program as of October 29, 2011 was approximately $8.7 billion with no termination date.
     
  • Days sales outstanding in accounts receivable (DSO) at the end of the first quarter of fiscal 2012 were 35 days, compared with 38 days at the end of both the fourth quarter of fiscal 2011 and first quarter of fiscal 2011.
     
  • Inventory turns on a GAAP basis were 11.2 in the first quarter of fiscal 2012, compared with 11.8 in the fourth quarter of fiscal 2011, and compared with 11.2 in the first quarter of fiscal 2011. Non-GAAP inventory turns were 10.9 in the first quarter of fiscal 2012, compared with 11.4 in the fourth quarter of fiscal 2011, and compared with 10.8 in the first quarter of fiscal 2011.
     

Select Global Business Highlights

  • Cisco announced the acquisition of privately held Versly, which integrates collaboration capabilities through a plugin to Microsoft Office applications, simplifying the way people work by enabling more effective collaboration around content in documents, spreadsheets, presentations and email.
  • Cisco completed the acquisition of the AXIOSS software assets that give Cisco the ability to extend network and service management technologies across its next-generation IP network platforms, allowing service providers to quickly and efficiently launch new video, data, mobility and cloud services to their customers.
  • Cisco announced its intent to acquire privately held BNI Video, which supplies service providers with two major video products that offer video back-office and content delivery network analytic capabilities.
  • Cisco announced its collaboration with Microsoft to deliver data center virtualization solutions designed to provide improved scalability and operational control of Microsoft Windows Server 8 virtual environments.
  • Cisco and Citrix Systems announced that they entered into a strategic alliance to develop and deliver solutions that help customers simplify and accelerate large-scale desktop virtualization deployments.
  • Cisco and HP announced another option to bridge their data center server and networking architectures, the Cisco® Fabric Extender for HP BladeSystem, also known as the Cisco Nexus® B22 Fabric Extender for HP.

Cisco Innovation

  • Cisco introduced additions to its data center networking portfolio that address the needs of expanding Internet traffic while remaining highly secure and deliver unmatched architectural flexibility and scale for physical, virtual or cloud computing environments.
  • Cisco introduced new video content solutions and capabilities that enable customers to capture, enhance and analyze video, making it easier to find and access video content on any device at any time.
  • Cisco introduced new and expanded offerings -- from value-priced endpoints to an HD video software client to a hosted solution -- that are designed specifically to make the Cisco TelePresence® experience widely available, including to small and medium-sized businesses.
  • Cisco announced three new platforms in the Cisco ASR 9000 Series Aggregation Services Routers engineered to facilitate the proliferation of new mobile Internet services and devices such as tablets, smartphones and connected appliances.
  • Cisco launched the industry's first integrated wireless IPTV service with AT&T.
  • Cisco unveiled the next phase of its Virtualization Experience Infrastructure (VXI) with a series of offerings and innovations designed to deliver uncompromised desktop virtualization experiences.
  • Cisco introduced a set of Wide Area Application Services (WAAS) and wide-area network (WAN) optimization appliances to help organizations deliver business applications with a high-quality experience across corporate networks.

Select Customer Announcements

  • Charter Communications, a leading communications and entertainment services provider and the fourth-largest cable operator in the United States, is deploying the Cisco CRS-3 Carrier Routing System and Cisco ASR 9000 Series Aggregation Services Routers to deliver enhanced video, data, voice and mobile backhaul services to residential and commercial customers.
  • The STAPLES Center in Los Angeles transformed the fan experience with new high-definition digital video solutions developed by Cisco and Verizon.
  • Perú Credit Bank chose the Cisco Data Center architecture from Cisco's Data Center and Virtualization solutions to optimize its internal and external processes in order to attain stability and a higher level of operations.
  • The Buenos Aires Provincial Judiciary chose Cisco TelePresence technology to optimize legal services by facilitating the delivery of statements by experts in criminal processes.
  • Shaw Communications and Cisco announced an agreement to deploy an extensive and advanced Wi-Fi network in Western Canada to provide broadband wireless access.
  • Kabel Deutschland selected the Cisco ASR 9000 Series Aggregation Services Routers to upgrade its broadband and video network.
  • Mobile TeleSystems, the leading telecommunications service provider in Russia and other Commonwealth of Independent States (CIS) countries, has deployed the Cisco CRS-3 Carrier Routing System to provide its rapidly growing audience of subscribers with high-quality Internet access despite the growing shortage of IPv4 addresses.

Editor's Note:

  • Q1 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, November 9, 2011. 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, November 9, 2011 to 4:30 p.m. Pacific Time, November 20, 2011 at 866-493-8039 (United States) or 203-369-1749 (international). The replay also will be available via webcast from Wednesday, November 9, 2011 through January 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, November 9, 2011. 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 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 strategy of providing intelligent networks, architectures and integrated products, product integration, market leadership and positioning, and marketplace trends involving the intelligent network) 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 report on Form 10-K filed on September 14, 2011. 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 report on Form 10-K as it may be amended from time to time. Cisco's results of operations for the three months ended October 29, 2011 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 © 2011 Cisco Systems, Inc. and/or its affiliates. All rights reserved. Cisco, the Cisco logo, Cisco Nexus, and Cisco TelePresence 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  
    October 29, 2011     October 30, 2010  
NET SALES:                
  Product   $ 8,952     $ 8,700  
  Service     2,304       2,050  
    Total net sales     11,256       10,750  
                 
COST OF SALES:                
  Product     3,563       3,249  
  Service     803       746  
    Total cost of sales     4,366       3,995  
GROSS MARGIN     6,890       6,755  
                 
OPERATING EXPENSES:                
  Research and development     1,375       1,431  
  Sales and marketing     2,452       2,402  
  General and administrative     552       458  
  Amortization of purchased intangible assets     99       113  
  Restructuring and other charges     202       --  
    Total operating expenses     4,680       4,404  
OPERATING INCOME     2,210       2,351  
  Interest income     164       160  
  Interest expense     (148 )     (166 )
  Other income, net     19       80  
    Interest and other income, net     35       74  
INCOME BEFORE PROVISION FOR INCOME TAXES     2,245       2,425  
Provision for income taxes     468       495  
  NET INCOME   $ 1,777     $ 1,930  
                 
Net income per share:                
Basic   $ 0.33     $ 0.34  
Diluted   $ 0.33     $ 0.34  
                 
Shares used in per-share calculation:                
Basic     5,394       5,595  
Diluted     5,407       5,675  
                 
Cash dividends declared per common share   $ 0.06     $ --  
                 
                 
   
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME  
(In millions, except per-share amounts)  
   
    Three Months Ended  
    October 29, 2011     October 30, 2010  
GAAP net income   $ 1,777     $ 1,930  
  Adjustments to cost of sales:                
    Share-based compensation expense     50       58  
    Amortization of acquisition-related intangible assets     87       101  
    Significant asset impairments and restructurings     (5 )     --  
  Total adjustments to GAAP cost of sales     132       159  
                   
  Adjustments to operating expenses:                
    Share-based compensation expense     291       349  
    Amortization of acquisition-related intangible assets     99       113  
    Other acquisition-related costs     8       45  
    Significant asset impairments and restructurings     202       --  
  Total adjustments to GAAP operating expenses     600       507  
  Total adjustments to GAAP income before provision for income taxes     732       666  
  Income tax effect     (187 )     (185 )
                 
Non-GAAP net income   $ 2,322     $ 2,411  
                 
Diluted net income per share:                
GAAP   $ 0.33     $ 0.34  
                 
Non-GAAP   $ 0.43     $ 0.42  
                 

Additional reconciliations between GAAP and non-GAAP financial measures are provided in the tables that follow on page 11. 

 
 
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
         
    October 29, 2011   July 30, 2011
ASSETS            
Current assets:            
  Cash and cash equivalents   $ 4,747   $ 7,662
  Investments     39,641     36,923
  Accounts receivable, net of allowance for doubtful accounts of $180 at October 29, 2011 and $204 at July 30, 2011     4,300     4,698
  Inventories     1,622     1,486
  Financing receivables, net     3,300     3,111
  Deferred tax assets     2,158     2,410
  Other current assets     1,499     941
  Total current assets     57,267     57,231
Property and equipment, net     3,753     3,916
Financing receivables, net     3,209     3,488
Goodwill     16,823     16,818
Purchased intangible assets, net     2,369     2,541
Other assets     3,543     3,101
TOTAL ASSETS   $ 86,964   $ 87,095
             
LIABILITIES AND EQUITY            
Current liabilities:            
  Short-term debt   $ 589   $ 588
  Accounts payable     908     876
  Income taxes payable     455     120
  Accrued compensation     2,557     3,163
  Deferred revenue     8,444     8,025
  Other current liabilities     4,508     4,734
  Total current liabilities     17,461     17,506
Long-term debt     16,264     16,234
Income taxes payable     1,501     1,191
Deferred revenue     3,952     4,182
Other long-term liabilities     572     723
Total liabilities     39,750     39,836
Total equity     47,214     47,259
TOTAL LIABILITIES AND EQUITY   $ 86,964   $ 87,095
             
             
   
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In millions)  
(Unaudited)  
             
    Three Months Ended  
    October 29, 2011     October 30, 2010  
Cash flows from operating activities:                
  Net income   $ 1,777     $ 1,930  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation, amortization, and other     621       553  
    Share-based compensation expense     341       407  
    Provision for doubtful accounts     (22 )     (22 )
    Deferred income taxes     109       338  
    Excess tax benefits from share-based compensation     (21 )     (28 )
    Net gains on investments     (13 )     (108 )
    Change in operating assets and liabilities, net of effects of acquisitions and divestitures:                
      Accounts receivable     399       506  
      Inventories     (168 )     (193 )
      Financing receivables, net     --       (78 )
      Other assets     (374 )     (30 )
      Accounts payable     36       45  
      Income taxes, net     (38 )     (408 )
      Accrued compensation     (548 )     (678 )
      Deferred revenue     232       (367 )
      Other liabilities     2       (200 )
        Net cash provided by operating activities     2,333       1,667  
                 
Cash flows from investing activities:                
  Purchases of investments     (11,770 )     (9,569 )
  Proceeds from sales of investments     7,721       6,232  
  Proceeds from maturities of investments     1,179       3,574  
  Acquisition of property and equipment     (265 )     (326 )
  Acquisition of businesses, net of cash and cash equivalents acquired     (38 )     (69 )
  Change in investments in privately held companies     (95 )     (28 )
  Other     77       19  
        Net cash used in investing activities     (3,191 )     (167 )
                 
Cash flows from financing activities:                
  Issuances of common stock     203       374  
  Repurchases of common stock     (1,881 )     (2,701 )
  Short-term borrowings, maturities less than 90 days, net     --       (16 )
  Excess tax benefits from share-based compensation     21       28  
  Dividends paid     (322 )     --  
  Other     (78 )     30  
        Net cash used in financing activities     (2,057 )     (2,285 )
Net decrease in cash and cash equivalents     (2,915 )     (785 )
Cash and cash equivalents, beginning of period     7,662       4,581  
Cash and cash equivalents, end of period   $ 4,747     $ 3,796  
                 

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

   
   
ADDITIONAL FINANCIAL INFORMATION  
(In millions)  
(Unaudited)  
             
    October 29, 2011     July 30, 2011  
CASH AND CASH EQUIVALENTS AND INVESTMENTS                
Cash and cash equivalents   $ 4,747     $ 7,662  
Fixed income securities     38,264       35,562  
Publicly traded equity securities     1,377       1,361  
Total   $ 44,388     $ 44,585  
                 
INVENTORIES                
Raw materials   $ 193     $ 219  
Work in process     43       52  
Finished goods:                
  Distributor inventory and deferred cost of sales     684       631  
  Manufactured finished goods     437       331  
Total finished goods     1,121       962  
Service-related spares     195       182  
Demonstration systems     70       71  
Total   $ 1,622     $ 1,486  
                 
PROPERTY AND EQUIPMENT, NET                
Land, buildings, and building & leasehold improvements   $ 4,616     $ 4,760  
Computer equipment and related software     1,410       1,429  
Production, engineering, and other equipment     5,075       5,093  
Operating lease assets     293       293  
Furniture and fixtures     486       491  
      11,880       12,066  
Less accumulated depreciation and amortization     (8,127 )     (8,150 )
Total   $ 3,753     $ 3,916  
                 
OTHER ASSETS                
Deferred tax assets   $ 1,895     $ 1,864  
Investments in privately held companies     898       796  
Other     750       441  
Total   $ 3,543     $ 3,101  
                 
DEFERRED REVENUE                
Service   $ 8,321     $ 8,521  
Product:                
  Unrecognized revenue on product shipments and other deferred revenue     3,209       3,003  
  Cash receipts related to unrecognized revenue from two-tier distributors     866       683  
Total product deferred revenue     4,075       3,686  
Total   $ 12,396     $ 12,207  
                 
Reported as:                
Current   $ 8,444     $ 8,025  
Noncurrent     3,952       4,182  
Total   $ 12,396     $ 12,207  
                 
                 
 
SUMMARY OF SHARE-BASED COMPENSATION EXPENSE
(In millions)
 
    Three Months Ended
    October 29, 2011   October 30, 2010
Cost of sales--product   $ 13   $ 15
Cost of sales--service     37     43
Share-based compensation expense in cost of sales     50     58
Research and development     101     121
Sales and marketing     142     164
General and administrative     48     64
Share-based compensation expense in operating expenses     291     349
Total share-based compensation expense   $ 341   $ 407
             

The income tax benefit for share-based compensation expense was $90 million and $109 million for the three months ended October 29, 2011 and October 30, 2010, respectively.

   
   
RECONCILIATION OF GAAP TO NON-GAAP  
COST OF SALES USED IN INVENTORY TURNS  
(In millions)  
                   
    Three Months Ended  
    October 29, 2011     July 30, 2011     October 30, 2010  
GAAP cost of sales   $ 4,366     $ 4,334     $ 3,995  
                         
  Share-based compensation expense     (50 )     (56 )     (58 )
  Amortization of acquisition-related intangible assets     (87 )     (96 )     (101 )
  Significant asset impairments and restructurings     5       (4 )     --  
Non-GAAP cost of sales   $ 4,234     $ 4,178     $ 3,836  
                         
                         

 

Web Content Display Web Content Display
 
Web Content Display Web Content Display

Subscribe


Web Content Display Web Content Display

The Network is offering Google Translate in an effort to more easily share our content with a global audience. As these are free, machine translations, we cannot verify that all translations are accurate.

Translate


Web Content Display Web Content Display

Stay Connected


Web Content Display Web Content Display

Web Content Display Web Content Display

Leadership@Cisco

Web Content Display Web Content Display
 
Web Content Display Web Content Display

 
 
Like us on Facebook
 
Follow us on Twitter