Cisco Systems Reports First Quarter Earnings

  • Q1 Net Sales: $6.5 billion (9.7% increase year over year)
  • Q1 Net Income: $1.3 billion GAAP (includes a first time stock-based compensation expense of $228 million, net of tax) compared with $1.1 billion for Q1 FY'05, including pro forma stock-based compensation expense; $1.6 billion non-GAAP (pro forma) compared with $1.5 billion for Q1 FY'05
  • Q1 Earnings Per Share: $0.20 GAAP (includes a first time stock-based compensation expense of $0.04 ) compared with $0.17 for Q1 FY'05, including pro forma stock-based compensation expense; $0.25 non-GAAP (pro forma) compared with $0.21 for Q1 FY'05

SAN JOSE, Calif. - November 9, 2005 - Cisco Systems, Inc., the worldwide leader in networking for the Internet, today reported its first quarter results for the period ended October 29, 2005.

Net sales for the first quarter of fiscal 2006 were $6.5 billion, compared with $6.0 billion for the first quarter of fiscal 2005, an increase of 9.7 percent, and compared with $6.6 billion for the fourth quarter of fiscal 2005, a decrease of 0.5 percent.

Net income for the first quarter of fiscal 2006, on a generally accepted accounting principles (GAAP) basis, was $1.3 billion or $0.20 per share which includes stock-based compensation expense of $228 million, net of tax, or $0.04 per share, due to the implementation of SFAS 123(R). Net income prior to fiscal 2006 did not include stock-based compensation expense. Including the pro forma stock-based compensation expense previously disclosed in Cisco's financial statements footnotes, net income for the first quarter of fiscal 2005 would have been $1.1 billion or $0.17 per share and net income for the fourth quarter of fiscal 2005 would have been $1.3 billion or $0.20 per share. Please refer to the table on page 8 for a quarter-to-quarter comparison of net income including the effect of stock-based compensation expense. Net income on a GAAP basis, which does not include the effect of stock-based compensation expense, for the first quarter of fiscal 2005 was $1.4 billion or $0.21 per share and for the fourth quarter of fiscal 2005 was $1.5 billion or $0.24 per share.

Non-GAAP (pro forma) net income for the first quarter of fiscal 2006 was $1.6 billion or $0.25 per share, compared with $1.5 billion or $0.21 per share for the first quarter of fiscal 2005, and compared with $1.6 billion or $0.25 per share for the fourth quarter of fiscal 2005. A reconciliation between net income on a GAAP basis and non-GAAP (pro forma) net income is provided in a table on page 8.

During the first quarter of fiscal 2006, Cisco completed the acquisitions of KiSS Technology A/S, Nemo Systems, Inc. and Sheer Networks, Inc.

"Q1 was a solid quarter for Cisco, with balanced execution across most of our geographies, market segments and product categories," said John Chambers, president and CEO, Cisco Systems, Inc. "We are especially pleased with the improving business momentum in the U.S. and Asia Pacific, the strength of our product families and the accelerated growth of the commercial marketplace, which has become our fastest growing customer segment."

Chambers continued, "Cisco's long-term product architecture strategy is taking hold. We are seeing an increased trend toward customers choosing integrated networking solutions that combine our core products with advanced technologies. By coupling routing and switching with our advanced technologies such as security, enterprise IP communications and wireless, Cisco's architectural approach is allowing customers to more effectively scale their IT operations. Going forward, we will continue to foster a culture of innovation, incorporating internal development, acquisitions and partnerships to anticipate the evolving needs of customers and extend our core competitive advantage."

Cisco will discuss first quarter 2006 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.

Financial Highlights

  • Cash flows from operations were $1.4 billion for the first quarter of fiscal 2006, compared with $1.5 billion for the first quarter of fiscal 2005, and compared with $2.4 billion for the fourth quarter of fiscal 2005.
  • Cash and cash equivalents and investments were $13.5 billion at the end of the first quarter of fiscal 2006, compared with $16.1 billion at the end of the fourth quarter of fiscal 2005.
  • During the first quarter of fiscal 2006, Cisco repurchased 194 million shares of common stock at an average price of $18.03 per share for an aggregate purchase price of $3.5 billion. As of October 29, 2005, Cisco had repurchased and retired 1.7 billion shares of Cisco common stock at an average price of $18.14 per share for an aggregate purchase price of approximately $30.7 billion since the inception of the stock repurchase program.
  • Days sales outstanding (DSO) in accounts receivable at the end of the first quarter of fiscal 2006 were 33 days, compared with 31 days at the end of the fourth quarter of fiscal 2005.
  • Inventory turns on a GAAP basis were 6.5 in the first quarter of fiscal 2006, compared with 6.6 in the fourth quarter of fiscal 2005. Non-GAAP (pro forma) inventory turns were 6.4 in the first quarter of fiscal 2006.

"Our performance this quarter demonstrated once again that our focus and execution on long-term financial priorities translates to sustained profitable growth and a strong competitive advantage," said Dennis Powell, chief financial officer, Cisco Systems. "Non-GAAP (pro forma) quarterly earnings per share of $0.25, net income of $1.6 billion, and 68.5 percent product gross margins are all strong indicators of the momentum we're achieving in our business, while we continue to ramp resources for continued execution throughout the fiscal year."

Business Highlights

  • Intel Corporation and Cisco expanded their existing alliance in an effort to enhance wireless LAN reliability, deliver higher-quality services and allow businesses to use computers and the network as a combined defense against security threats.
  • MCI, Inc. is expanding its managed IP Communications offerings to the business market with the launch of Managed IP PBX, which is based on Cisco technology and includes the Cisco CallManager product suite.
  • SOFTBANK BB Corporation expanded its Cisco IP Next-Generation Network (IP NGN) architecture with the Cisco Carrier Routing System (CRS-1) and Cisco Catalyst® 6500 Series switches to enable nationwide expansion of advanced video services, including broadband program broadcasting and video on demand (VoD).
  • Linksys, a division of Cisco Systems, and Skype teamed to launch a new cordless handset designed to enable users to place Skype Internet phone calls while sitting at home or at the office.
  • Cisco introduced the company's newest emerging technology, the Cisco Internet Protocol Interoperability and Collaboration System (IPICS), designed to integrate disparate push-to-talk radio systems with other communication resources such as voice, video and data devices.
  • Cisco announced a $40 million commitment in a multiphase, three-year education "21S Initiative" in the Gulf Coast region, which will begin in Mississippi, for reconstructing and improving schools.
  • Cisco announced its investment initiative plans for India, totaling up to US$1.1 billion. This announcement highlights the growing importance of the Indian market in the global economy.
  • Cisco reached a major milestone in the IP Communications market with the sale of its 6-millionth Internet Protocol (IP) phone worldwide.
  • Cisco introduced the Cisco Business Communications Solution, specifically designed for small to medium businesses (SMBs) and mid-market companies through voice and switching products.
  • Underscoring its focus on social responsibility, Cisco won the prestigious State Department Award for Corporate Excellence (ACE) for its education program in Jordan designed to teach young people information-technology skills. It also issued its first-ever Corporate Social Responsibility (CSR) report, a summary of the company's responsible business practices and social investment programs for fiscal years 2004 and 2005.

Editor's Note:

  • Q1 FY'06 conference call to discuss Cisco's results along with its outlook for Q2 FY'06 to be held at 1:30 p.m. Pacific Time, Wednesday, November 9, 2005. Conference call number is 888-848-6507 (United States); 212-519-0847 (international).
  • Conference call replay will be available from 4:30 p.m. Pacific Time, November 9, 2005 to 4:30 p.m. Pacific Time, November 16, 2005 at 866-357-4205 (United States); 203-369-0122 (international). The replay is also available from November 9, 2005 through January 20, 2006 on the Cisco Investor Relations Website at http://www.cisco.com/go/investors.
  • Additional information regarding Cisco's financials as well as a Webcast of the conference call with visuals designed to guide participants through the call will be available at 1:30 p.m. Pacific Time, November 9, 2005. Text of the conference call's prepared remarks will be available within 24 hours of completion of the call. The Webcast will include both the prepared remarks and the question-and-answer session. This information, along with GAAP reconciliation information, will be available on the Cisco Investor Relations Website at http://www.cisco.com/go/investors.
  • A Q&A with Cisco's CEO and CFO on Q1 FY'06 results will be available at http://newsroom.cisco.com.

About Cisco Systems

Cisco Systems, Inc. (NASDAQ: CSCO) is the worldwide leader in networking for the Internet. 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 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 and in various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth 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; 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 the networking industry; 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; natural catastrophic events; achievement of the benefits anticipated from our investments in sales and engineering activities; our ability to recruit and retain key personnel; our ability to manage financial risk; currency fluctuations and other international factors; potential volatility in operating results and other factors listed in Cisco's most recent reports on Form 10-K, 10-Q and 8-K. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent reports on Form 10-K and Form 10-Q, each as it may be amended from time to time. Cisco's results of operations for the three months ended October 29, 2005 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 (pro forma) net income, non-GAAP (pro forma) net income per share data, non-GAAP (pro forma) inventory turns, non-GAAP (pro forma) gross margin, and other non-GAAP line items from the Consolidated Statements of Operations, including cost of sales information, gross margin, operating expenses (including research and development, sales and marketing, and general and administrative expenses), other income (loss), net, and provision for income taxes. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP (pro forma) measures used by other companies. Cisco believes that the presentation of non-GAAP (pro forma) net income, non-GAAP (pro forma) net income per share data, non-GAAP (pro forma) inventory turns and non-GAAP (pro forma) gross margin, when shown in conjunction with the corresponding GAAP measures, provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations. Cisco further believes that where the adjustments used in calculating non-GAAP (pro forma) net income and non-GAAP (pro forma) net income per share are based on specific, identified charges that impact different line items in the statements of operations (including cost of sales, research and development, sales and marketing, and general and administrative expense), that it is useful to investors to know how these specific line items in the statements of operations are affected by these adjustments. In particular, as Cisco begins to apply SFAS 123(R), it believes that it is useful to investors to understand how the expenses associated with the application of SFAS 123(R) are reflected on its statements of operations. For its internal budgets, Cisco's management uses financial statements that do not include stock-based compensation expense, payroll tax on stock option exercises, in-process research and development, compensation expense related to acquisitions and investments, amortization of purchased intangible assets, gain (loss) on publicly traded equity securities and the income tax effects of the foregoing on cost of sales, research and development, sales and marketing and general and administrative expenses, as applicable. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco.

Copyright© 2005 Cisco Systems, Inc. All rights reserved. Cisco, Cisco Systems, the Cisco Systems logo, Catalyst and Linksys are registered trademarks or trademarks of Cisco Systems, Inc. and/or its affiliates in the U.S. and certain other countries. All other trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company.

Cisco Systems, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)
(Unaudited)

Three Months Ended
October 29, 2005 October 30, 2004
NET SALES:
Product $ 5,491 $ 5,033
Service 1,059 938
Total net sales 6,550 5,971
COST OF SALES:
Product (includes stock-based compensation expense under SFAS 123(R) of $19 for Q1 FY'06; $0 for Q1 FY'05) 1,751 1,646
Service (includes stock-based compensation expense under SFAS 123(R) of $34 for Q1 FY'06; $0 for Q1 FY'05) 389 310
Total cost of sales (includes stock-based compensation expense under SFAS 123(R) of $53 for Q1 FY'06; $0 for Q1 FY'05) 2,140 1,956
GROSS MARGIN 4,410 4,015
OPERATING EXPENSES:
Research and development (includes stock-based compensation expense under SFAS 123(R) of $103 for Q1 FY'06; $0 for Q1 FY'05) 996 805
Sales and marketing (includes stock-based compensation expense under SFAS 123(R) of $127 for Q1 FY'06; $0 for Q1 FY'05) 1,453 1,120
General and administrative (includes stock-based compensation expense under SFAS 123(R) of $34 for Q1 FY'06; $0 for Q1 FY'05) 278 230
Amortization of purchased intangible assets 59 60
In-process research and development 2 12
Total operating expenses (includes stock-based compensation expense under SFAS 123(R) of $264 for Q1 FY'06; $0 for Q1 FY'05) 2,788 2,227
OPERATING INCOME 1,622 1,788
Interest income 154 130
Other income (loss), net (17 ) 40
Interest and other income (loss), net 137 170
INCOME BEFORE PROVISION FOR INCOME TAXES 1,759 1,958
Provision for income taxes (includes tax benefit for stock based compensation expense under SFAS 123(R) of $89 for Q1 FY'06: $0 for Q1 FY'05) 498 562
NET INCOME (see note below) $ 1,261 $ 1,396
Net income per share (see note below):
Basic $ 0.20 $ 0.21
Diluted $ 0.20 $ 0.21
Shares used in per-share calculation:
Basic 6,245 6,635
Diluted 6,340 6,773
Note: Net income for Q1 FY'06 includes stock-based compensation expense of $228, net of tax, due to the implementation of SFAS 123(R). Net income for the first quarter of fiscal 2005 did not include stock-based compensation expense under SFAS 123. The table below reflects net income and diluted net income per share for the first quarter of fiscal 2006 compared with first quarter of fiscal 2005 including the pro forma stock-based compensation expense as follows:
Three Months Ended
October 29, 2005
October 30, 2004
Net income - as reported for Q1 FY'05 $ 1,396
Stock-based compensation expense, net of tax - as reported for Q1 FY'05 $ (276)
Net income, including the effect of stock-based compensation expense $ 1,261 $ 1,120
Diluted net income per share - as reported for Q1 FY'05 $ 0.21
Stock-based compensation expense, net of tax, per share - as reported for Q1 FY'05 $ (0.04)
Diluted net income per share, including the effect of stock-based compensation expense $ 0.20 $ 0.17

Cisco Systems, Inc.

NON-GAAP (PRO FORMA) CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
Three Months Ended
October 29,
2005
October 30, 2004
NET SALES:
Product $ 5,491 $ 5,033
Service 1,059 938
Total net sales 6,550 5,971
COST OF SALES:
Product (a) 1,732 1,646
Service (a) 355 310
Total cost of sales (a) 2,087 1,956
GROSS MARGIN (a) 4,463 4,015
OPERATING EXPENSES:
Research and development (a) - (c) 859 787
Sales and marketing (a) - (c) 1,320 1,102
General and administrative (a) - (c) 242 225
Total operating expenses (a) - (e) 2,421 2,114
OPERATING INCOME (a) - (e) 2,042 1,901
Interest income 154 130
Other income (loss), net (f) (17) (13 )
Interest and other income (loss), net (f) 137 117
INCOME BEFORE PROVISION FOR INCOME TAXES (a) - (f) 2,179 2,018
Provision for income taxes (g) 610 565
NET INCOME (a) - (g) $ 1,569 $ 1,453
Net income per share:
Basic (a) - (g) $ 0.25 $ 0.22
Diluted (a) - (g) $ 0.25 $ 0.21
Shares used in per-share calculation:
Basic 6,245 6,635
Diluted 6,340 6,773
Note: A reconciliation between net income on a GAAP basis and non-GAAP (pro forma) net income including items (a) - (g) is provided in the RECONCILIATION OF GAAP to NON-GAAP (PRO FORMA) NET INCOME table that follows.

Cisco Systems, Inc.

RECONCILIATION OF GAAP to NON-GAAP (PRO FORMA) NET INCOME
(In millions)
Q1 FY'06 Q4 FY'05 Q3 FY'05 Q2 FY'05
Q1 FY'05
GAAP net income $ 1,261 $ 1,540 $ 1,405 $ 1,400 $ 1,396
(a) Stock-based compensation expense under SFAS 123 (R) (*) 317 - - - -
(b) Payroll tax on stock option exercises (*) 2 5 3 3 1
(c) Compensation expense related to acquisitions and investments (*) 40 39 47 39 40
(d) In-process research and development 2 6 6 2 12
(e) Amortization of purchased intangible assets 59 56 54 57 60
(f) (Gain) loss on publicly traded equity securities - - - - (53)
(g) Income tax effect (112) (20) (19) (19) (3)
Non-GAAP (pro forma) net income $ 1,569 $ 1,626 $ 1,496 $ 1,482 $ 1,453
Note: * In Q1 FY'06, stock-based compensation expense of $317 was allocated as follows: $53 to cost of sales ($19 to product cost of sales and $34 to service cost of sales), $103 to research and development (R&D), $127 to sales and marketing (S&M) and $34 to general and administrative (G&A). In Q1 FY'06, payroll tax on stock option exercises of $2 and compensation expense related to acquisitions and investments of $40 was allocated as follows: $34 to R&D, $6 to S&M and $2 to G&A. In Q1 FY'05, payroll tax on stock option exercises of $1 and compensation expense related to acquisitions and investments of $40 was allocated as follows: $18 to R&D, $18 to S&M and $5 to G&A. In calculating the non-GAAP (pro forma) inventory turns for the first quarter of fiscal 2006, stock-based compensation expense of $53 was excluded from cost of sales ($19 from product cost of sales and $34 from service cost of sales).

 

Cisco Systems, Inc.

QUARTER-TO-QUARTER COMPARISON OF NET INCOME INCLUDING THE EFFECT OF STOCK-BASED
COMPENSATION EXPENSE UNDER SFAS 123(R) and SFAS 123
(In millions, except per-share amounts)
Q1 FY'06 Q4 FY'05 Q3 FY'05 Q2 FY'05
Q1 FY'05
Net income -- as reported for prior periods (1) N/A $ 1,540 $ 1,405 $ 1,400 $ 1,396
Stock-based compensation expense $ (317) (363) (377) (428) (460)
Tax benefit $ 89 88 151 171 184
Stock-based compensation expense, net of tax (2) $ (228) (275) (226) (257) (276)
Net income, including the effect of stock-based compensation expense (3) $ 1,261 $ 1,265 $ 1,179 $ 1,143 $ 1,120
Diluted net income per share - as reported for prior periods (1) N/A $ 0.24 $ 0.21 $ 0.21 $ 0.21
Stock-based compensation expense, net of tax, per share (2) $ (0.04) (0.04) (0.03) (0.04) (0.04)
Diluted net income per share, including the effect of stock-based compensation expense (3) $ 0.20 $ 0.20 $ 0.18 $ 0.17 $ 0.17
Notes:
(1) Net income and net income per share prior to fiscal 2006 did not include stock-based compensation expense under SFAS 123.
(2) Stock-based compensation expense and stock-based compensation expense per share prior to fiscal 2006 is calculated based on SFAS 123 as previously disclosed in Cisco's financial statements footnotes.
(3) Net income and net income per share prior to fiscal 2006 represents pro forma information based on SFAS 123 as previously disclosed in Cisco's financial statements footnotes.

 

CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
$ 33,883
October 29,
2005
July 30,
2005
ASSETS
Current assets:
Cash and cash equivalents $ 1,704 $ 4,742
Investments 11,786 11,313
Accounts receivable, net of allowance for doubtful accounts of $173 at October 29, 2005 and $162 at July 30, 2005 2,342 2,216
Inventories 1,318 1,297
Deferred tax assets 1,410 1,475
Prepaid expenses and other current assets 1,193 967
Total current assets 19,753 22,010
Property and equipment, net 3,335 3,320
Goodwill 5,412 5,295
Purchased intangible assets, net 548 549
Other assets 2,707 2,709
TOTAL ASSETS $ 31,755
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 721 $ 735
Income taxes payable 1,462 1,511
Accrued compensation 1,193 1,317
Deferred revenue 3,716 3,854
Other accrued liabilites 2,144 2,094
Total current liabilities 9,236 9,511
Deferred revenue 1,078 1,188
Total liabilities 10,314 10,699
Minority interest 4 10
Shareholders' equity 21,437 23,174
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$ 31,755 $ 33,883
Note: Long-term investments and the related deferred taxes on unrealized gains and losses on investments as of July 30, 2005 have been reclassified to current assets in order to conform to the current period's presentation.

 

Cisco Systems, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)
(Unaudited)

 

Three Months Ended
October 29, 2005 October 30, 2004
Cash flows from operating activities:
Net income $ 1,261 $ 1,396
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 258 251
Stock-based compensation due to the implementation of SFAS 123 (R) 317 -
Stock-based compensation related to acquisitions and investments 28 40
Provision for doubtful accounts 11 -
Provision for inventory 47 62
Deferred income taxes 125 74
Tax benefits from employee stock option plans - 48
Excess tax benefits from stock-based compensation (40) -
In-process research and development 2 12
Net (gains) losses and impairment charges on investments 11 (44)
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable (135) 37
Inventories (65) (63)
Prepaid expenses and other current assets (41) (10)
Lease receivables, net (26) (52)
Accounts payable (14) 16
Income taxes payable 4 188
Accrued compensation (124) (283)
Deferred revenue (249) (241)
Other accrued liabilities 32 28
Net cash provided by operating activities 1,402 1,459
Cash flows from investing activities:
Purchases of investments (7,973) (5,172)
Proceeds from sales and maturities of investments 7,335 6,537
Acquisition of property and equipment (215) (159)
Acquisition of businesses, net of cash and cash equivalents (122) (229)
Change in investments in privately held companies (18) (48)
Purchase of minority interest of Cisco Systems, K.K. (Japan) (25) -
Other (105) 70
Net cash (used in) provided by investing activities (1,123) 999
Cash flows from financing activities:
Issuance of common stock 136 96
Repurchase of common stock (3,500) (3,001)
Excess tax benefits from stock-based compensation 40 -
Other 7 34
Net cash used in financing activities (3,317) (2,871)
Net decrease in cash and cash equivalents (3,038) (413)
Cash and cash equivalents, beginning of period 4,742 3,722
Cash and cash equivalents, end of period $ 1,704 $ 3,309
Note: Net income for Q1 FY'06 includes stock-based compensation expense of $228, net of tax, due to the implementation of SFAS 123(R). Net income for Q1 FY'05 did not include stock-based compensation expense under SFAS 123.
Certain reclassifications have been made to prior period balances in order to conform to the current period's presentation.

 

Cisco Systems, Inc.

ADDITIONAL FINANCIAL INFORMATION

(In millions)
(Unaudited)

 

October 29, 2005 July 30,
2005
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents $ 1,704 $ 4,742
Fixed income securities 10,922 10,372
Publicly traded equity securities 864 941
Total $ 13,490 $ 16,055
INVENTORIES
Raw materials $ 98 $ 82
Work in process 426 431
Finished goods:
Distributor inventory and deferred cost of sales
411 385
Manufacturing finished goods
171 184
Total finished goods 582 569
Service-related spares 172 180
Demonstration systems 40 35
Total $ 1,318 $ 1,297
PROPERTY AND EQUIPMENT, NET
Land, buildings, and leasehold improvements $ 3,524 $ 3,492
Computer equipment and related software 1,289 1,244
Production, engineering, and other equipment 3,241 3,095
Operating lease assets 127 136
Furniture and fixtures 357 355
8,538 8,322
Less, accumulated depreciation and amortization (5,203) (5,002)
Total $ 3,335 $ 3,320
LEASE RECEIVABLES, NET (a)
Current 261 248
Noncurrent 366 353
Total $ 627 $ 601
OTHER ASSETS
Deferred tax assets $ 1,294 $ 1,308
Investments in privately held companies 433 421
Income tax receivable 277 277
Lease receivables, net 366 353
Other 337 350
Total $ 2,707 $ 2,709
DEFERRED REVENUE
Service $ 3,471 $ 3,618
Product 1,323 1,424
Total $ 4,794 $ 5,042
Reported as:
Current 3,716 3,854
Noncurrent 1,078 1,188
Total $ 4,794 $ 5,042
Notes:
(a) The current portion of lease receivables, net, is recorded in prepaid expenses and other current assets, and the noncurrent portion is recorded in other assets in the Consolidated Balance Sheets.
(b) Certain reclassifications have been made to prior period balances in order to conform to the current period's presentation.

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