Cisco Reports First Quarter Earnings

SAN JOSE, CA -- Nov 13, 2013  - Cisco (NASDAQ: CSCO)

• Q1 Revenue: $12.1 billion (increase of 2% year over year)
• Q1 Earnings per Share: $0.37 GAAP; $0.53 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 26, 2013. Cisco reported first quarter revenue of $12.1 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.0 billion or $0.37 per share, and non-GAAP net income of $2.9 billion or $0.53 per share.

"This quarter we delivered record non-GAAP profitability and continued our steady stream of innovation and market leadership," stated Cisco Chairman and CEO John Chambers. "While our revenue growth was below our expectation, our financials are strong, our strategy is strong and our innovation engine is executing extremely well. We remain confident in our long-term goal to be the #1 IT company in the world and help our customers solve their biggest business problems."

GAAP net income for the first quarter of fiscal 2014 included pre-tax charges of $237 million related to the workforce reduction plan announced in August 2013, and a pre-tax charge of $257 million related to compensation expense in connection with Cisco's acquisition of the remaining interest in Insieme Networks, Inc. ("Insieme"). These charges were excluded from non-GAAP net income and earnings per share.

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

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/.

Stock Repurchase Program Expanded

Cisco is also announcing that its board of directors authorized up to $15 billion in additional repurchases of its common stock. Cisco's board had previously authorized up to $82 billion in stock repurchases. There is no fixed termination date for the repurchase program. The remaining authorized amount for stock repurchases under this program, including the additional authorization, is approximately $16.1 billion.

Other Financial Highlights

• Cash flows from operations were $2.6 billion for the first quarter of fiscal 2014, compared with $4.0 billion for the fourth quarter of fiscal 2013, and compared with $2.5 billion for the first quarter of fiscal 2013.
• Cash and cash equivalents and investments were $48.2 billion at the end of the first quarter of fiscal 2014, compared with $50.6 billion at the end of the fourth quarter of fiscal 2013.
• During the first quarter of fiscal 2014, Cisco paid a cash dividend of $0.17 per common share, or $914 million.
• Cisco repurchased approximately 84 million shares of common stock under the stock repurchase program at an average price of $23.65 per share for an aggregate purchase price of $2.0 billion during the first quarter of fiscal 2014.

"We delivered solid profitability in the quarter and are focused on capitalizing on our strategic opportunities," stated Frank Calderoni, Cisco executive vice president and chief financial officer. "We are committed to our capital allocation strategy as we demonstrated today with the $15 billion increase in the authorization of our stock repurchase program."

Select Global Business Highlights

• Cisco completed its acquisition of Sourcefire, Inc., a leader in intelligent cybersecurity solutions, effectively making Cisco a provider of one of the industry's most comprehensive advanced threat protection portfolios, as well as a broad set of enforcement and remediation options that are integrated, pervasive, continuous and open.
• Cisco completed its acquisition of privately-held Composite Software, Inc. to expand its portfolio of Smart Services and extend its next-generation services platform by connecting data and infrastructure.
• Cisco announced its intent to acquire WhipTail Technologies, Inc., a leader in high performance, scalable, solid-state memory systems designed to enable organizations to simplify data center and virtualized environments and process more data in less time.
• Cisco opened a Center of Innovation in Rio de Janeiro, Brazil to develop technology solutions specifically tailored to local needs in the country.

Cisco Innovation

• Cisco unveiled nPower, the world's most advanced network processor, which is uniquely designed to power the Internet of Everything.
• Cisco introduced its Network Convergence System (NCS), a network fabric family designed to serve as the foundation of a massively scalable, smarter and more adaptable Internet to power the Internet of Everything.
• At its annual Collaboration Summit, Cisco announced the next phase of its vision for collaboration, which focuses on delivering innovations that embrace the modern workspace and enable users to work smarter and more efficiently from virtually anywhere.
• At the Meeting of the Minds conference in Toronto, Cisco released Smart+Connected™ City Wi-Fi, an integrated solution geared toward helping global cities provide citywide connectivity and to establish a platform where the Internet of Things (IoT) can be fully utilized to develop new services for citizens.

Select Customer Announcements

• Cisco and NetApp broadened the FlexPod® portfolio with new validated designs across the entire portfolio, highlighted by the introduction of FlexPod Select for dedicated data-intensive workloads.
• Cisco announced that Shenandoah Telecommunications Company, a leading regional U.S. telecommunications service provider, has updated its dense wavelength division multiplexing (DWDM) fiber-optic network with Cisco's Coherent DWDM technology to support 100 Gbps speeds to its subscribers throughout Virginia, West Virginia and Maryland.
• Cisco announced that its Videoscape™ Distribution Suite supported the introduction of Deutsche Telekom's recently launched TV Everywhere service "Entertain to go."
• Cisco announced that AirFasTickets, a fast-growing international online travel agency, has deployed the Cisco® Business Edition 6000 to deliver complete collaboration capabilities from a single, centrally managed platform.
• Cisco announced a collaboration with Facebook, Cisco Connected Mobile Experience (CMX), that helps businesses increase brand recognition and proactively target promotions and advertisements based on customer preferences and demographics using Wi-Fi.
• Cisco announced that DKSH Malaysia, a leading Market Expansion Services provider in the country, has implemented Cisco Unified Contact Center Express solutions to enhance the customer service experiences for their Business Unit Healthcare.
• Cisco announced that Belgacom, a leading telecommunications service provider, selected the Cisco Aggregated Services Router (ASR) 5000 to enable the evolution of its network and provide subscribers with superior mobile Internet experiences.
• Cisco announced that Grupo Experiencias Xcaret deployed Cisco Unified Communications, Cisco Customer Collaboration (Contact Center), business video, and wireless solutions in the three natural parks that it manages in the Mayan Riviera and their central offices in Cancun.
• Cisco and the University of Alberta announced the establishment of a Cisco Research Chair in Healthcare Solutions which will focus on how advanced technologies and strategies can support health care.

Editor's Notes:

• Q1 fiscal year 2014 conference call to discuss Cisco's results along with its business outlook will be held on Wednesday, November 13, 2013 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, November 13, 2013 to 4:00 p.m. Pacific Time, November 20, 2013 at 1-866-363-1808 (United States) or 1-203-369-0196 (international). The replay will also be available via webcast from November 13, 2013 through January 18, 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, November 13, 2013. 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, innovation engine, our goal to be the #1 IT company, capitalizing on our strategic opportunities, and our capital allocation strategy) 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 report on Form 10-K filed on September 10, 2013. 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 26, 2013 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 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 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 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, impact to cost of sales from purchase accounting adjustments to inventory, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation settlements (such as the patent litigation settlement with TiVo 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, 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.

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