SAN JOSE, CA -- (MARKET WIRE) -- 11/07/07 -- Cisco (NASDAQ: CSCO)
-- Q1 Net Sales: $9.6 billion (increase of 17% year over year)
-- Q1 Net Income: $2.2 billion GAAP; $2.5 billion non-GAAP
-- Q1 Earnings per Share: $0.35 GAAP (increase of 35% year over year);
$0.40 non-GAAP (increase of 29% year over year)
Cisco(R) (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 27,
2007. Cisco reported first quarter net sales of $9.6 billion, net
income on a generally accepted accounting principles (GAAP) basis of
$2.2 billion or $0.35 per share, and non-GAAP net income of $2.5
billion or $0.40 per share. A tax benefit of $162 million or
approximately $0.03 per share relating to a settlement of certain
U.S. income tax matters was included in both the GAAP and non-GAAP
results for the first quarter of fiscal 2008.
"Cisco delivered another record quarter based on balanced execution
across the company," said John Chambers, chairman and CEO, Cisco. "We
believe these strong results show that Cisco is well-positioned in
terms of our vision, differentiated strategy and execution, and our
ability to act upon key market transitions.
"We believe the migration to the second phase of the Internet and the
proliferation of networked Web 2.0 technologies will help drive
dramatic gains in productivity and innovation across all industries.
If this market transition continues to unfold as we expect, it has
the potential to power Cisco's and the industry's growth for many
years to come."
GAAP Results
------------------------------------------
Q1 2008 Q1 2007 vs. Q1 2007
------------- ------------- ------------
Net Sales $ 9.6 billion $ 8.2 billion +16.7%
------------- ------------- ------------
Net Income $ 2.2 billion $ 1.6 billion +37.1%
------------- ------------- ------------
Earnings per Share $ 0.35 $ 0.26 +34.6%
------------- ------------- ------------
Non-GAAP Results
------------------------------------------
Q1 2008 Q1 2007 vs. Q1 2007
------------- ------------- ------------
Net Income $ 2.5 billion $ 1.9 billion +31.4%
------------- ------------- ------------
Earnings per Share $ 0.40 $ 0.31 +29.0%
------------- ------------- ------------
A reconciliation between GAAP net income and non-GAAP net income is
provided in the table on page 6.
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 $3.1 billion for the first quarter of
fiscal 2008, compared with $2.3 billion for the first quarter of fiscal
2007, and compared with $2.7 billion for the fourth quarter of fiscal 2007.
-- Cash and cash equivalents, and investments were $24.7 billion at the
end of the first quarter of fiscal 2008, compared with $22.3 billion at the
end of the fourth quarter of fiscal 2007.
-- During the first quarter of fiscal 2008, Cisco repurchased 96 million
shares of common stock at an average price of $31.28 per share for an
aggregate purchase price of $3.0 billion. As of October 27, 2007, Cisco had
repurchased and retired 2.3 billion shares of Cisco common stock at an
average price of $19.89 per share for an aggregate purchase price of
approximately $46.2 billion since the inception of the stock repurchase
program. The remaining authorized repurchase amount as of October 27, 2007
was $5.8 billion with no termination date.
-- Days sales outstanding in accounts receivable (DSO) at the end of the
first quarter of fiscal 2008 were 33 days, compared with 38 days at the end
of the fourth quarter of fiscal 2007.
-- Inventory turns on a GAAP basis were 10.3 in the first quarter of
fiscal 2008, compared with 10.3 in the fourth quarter of fiscal 2007. Non-
GAAP inventory turns were 10.0 in the first quarter of fiscal 2008,
compared with 10.1 in the fourth quarter of fiscal 2007.
"We are very pleased with Cisco's financial results, delivering
another quarter of record revenue, net income and earnings per share,
as well as our highest cash flow from operations to date of $3.1
billion," said Dennis Powell, chief financial officer, Cisco. "This
consistency in both top and bottom-line performance can be attributed
to our balanced revenue growth across geographies, products, services
and customer segments, while maintaining our traditionally strong
gross margins."
Business Highlights
Acquisitions
-- Cisco announced a definitive agreement to purchase Navini Networks,
Inc., a leader in the Mobile WiMAX 802.16e-2005 broadband wireless
industry. Cisco expects that its broadband wireless solution portfolio,
including WiMAX products, will play a key role in Cisco's "Digital
Inclusion" initiative to drive broadband penetration to consumers and
businesses in emerging markets.
-- Cisco announced and closed the acquisitions of Cognio, Inc. and
Latigent, LLC. Cognio is the market leader in wireless spectrum analysis
and management for wireless networks. Latigent is a leading provider of Web-
based business intelligence and analytics reporting solutions, focused on
contact centers.
New Products
-- Cisco introduced the industry's only integrated 802.11n solution
designed to combine superior wireless performance and reliability with
simplicity of deployment.
-- Cisco introduced enhancements to the Carrier Ethernet portfolio in its
IP Next-Generation Network (IP NGN) architecture portfolio, extending fiber-
to-the-home to apartment buildings and other multi-tenant units and
allowing deployment of more services more quickly.
-- Cisco introduced new offerings for its Network Admission Control (NAC)
including the Cisco NAC Network Module for Integrated Services Routers, a
modular security solution that is completely integrated into the network
infrastructure, and the Cisco NAC Profiler, an endpoint-recognition
technology that maintains a detailed inventory of networked devices so they
can be evaluated before and during their connection to corporate networks.
-- Cisco announced the integration of Cisco VFrame Data Center with
VMware Virtual Infrastructure, a key solution for the Cisco vision of next-
generation data centers, called Data Center 3.0. The integration with
VMware Infrastructure 3 offers customers enhanced IT automation
capabilities, including added VMware ESX Server capacity on demand, as well
as orchestrated configuration of network services.
-- Cisco introduced the Industry Solutions Partner Network, which is
designed to engage, enable and reward a global community of channel
partners, application providers and device manufacturers to collaborate and
deliver industry-specific solutions that address the business needs of
customers.
-- Cisco announced that WebEx will offer Oracle's Siebel CRM On Demand
Service, a customer relationship management (CRM) application service,
through the WebEx Connect application ecosystem.
-- Linksys introduced eight new "smart switches" for small environments,
corporate workgroups or network edge applications that require simple Web
management, network security and easy installation.
Major Customer Announcements
-- Cisco Unified Contact Center has been certified by AT&T Labs for
compatibility and interoperability with AT&T's recently announced IP Toll-
Free service.
-- Bell Canada became the first Canadian service provider to achieve the
Cisco Powered TelePresence network status, enabling the delivery of the
Cisco TelePresence solution.
-- Hanaro Telecom, Korea's major broadband service provider, selected
Cisco's standards-based channel-bonding technology for the world's largest
deployment of 100-megabits-per-second broadband services, now reaching more
than 200,000 customers.
-- Free (Iliad Group), the leading triple-play-over-broadband operator in
Europe, doubled the capacity of its Cisco-based IP NGN in a drive to
enhance the quality of experience for its more than 2.5 million
subscribers. The operation was completed without any interruption to
subscriber services.
-- Belgium-based Accent Jobs For People, an employment and recruiting
agency, became Cisco's 200th Digital Media System customer. The company is
using Cisco Digital Signage to communicate in realtime in a dynamic and
user-friendly way with employees, job candidates and clients across 70 of
its offices.
-- Erste Bank Serbia implemented Cisco's Financial Services Intelligent
Network Solution and deployed a new unified voice, data and video network,
including 850 IP phones, that is designed to help accelerate the bank's
growth by connecting all of its 62 branch offices in Serbia.
Key Milestones
-- The Cisco Express Network on Wheels (NoW), a mobile showcase of
Cisco's IP networking technologies, started a year-long journey in
Singapore and will travel to 30 cities in Asia. The Cisco Express-NoW is
designed to extend Cisco's reach to organizations in vertical industries
such as healthcare, public sector, manufacturing, tourism, retail and
construction, small and medium-sized businesses, resellers, schools and
even consumers.
Editor's Note:
-- Q1 FY 2008 conference call to discuss Cisco's results along with its
business outlook to be held at 1:30 p.m. Pacific Time, Wednesday, November
7, 2007. 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 7, 2007 to 4:30 p.m. Pacific Time, November 14, 2007 at 866-357-
4205 (United States) or 203-369-0122 (international). The replay is also
available from November 7, 2007 through January 18, 2008 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 7,
2007. 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 about Q1 FY 2008 results will be
available at http://newsroom.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, visit 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 our vision, strategy and positioning, our ability to
act upon key market transitions, the future of networking and the
development of our industry and our markets) 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 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 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,
including risks related to our new manufacturing model; product
defects and returns; litigation involving patents, intellectual
property, antitrust, shareholder and other matters; natural
catastrophic events; a pandemic or epidemic; 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; risks related to the global nature
of our operations, including our operations in emerging markets;
currency fluctuations and other international factors; potential
volatility in operating results; and other factors listed in Cisco's
most recent report on Form 10-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 report on Form 10-K filed on September 18, 2007, as it may be
amended from time to time. Cisco's results of operations for the
three months ended October 27, 2007 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, shares used in non-GAAP net income per share calculation
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
net income per share data and shares used in non-GAAP net income per
share calculation, 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 employee share-based compensation
expense, impact to cost of sales from purchase accounting adjustments
to inventory, payroll tax on stock option exercises, compensation
expense related to acquisitions and investments, in-process research
and development, amortization of purchased intangible assets,
significant gains and losses on publicly traded equity securities,
the income tax effects of the foregoing, tax effects of
post-acquisition integration of purchased intangible assets from
significant acquisitions, and significant effects of retroactive tax
legislation. Cisco's management also uses the foregoing non-GAAP
measures, in addition to the corresponding GAAP measures, in
reviewing the financial results of Cisco.
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 with the Securities and
Exchange Commission.
Copyright Copyright2007 Cisco Systems, Inc. All rights reserved.
Cisco, the Cisco logo, Cisco Systems, Linksys and WebEx are
registered trademarks or trademarks of Cisco Systems, Inc. and/or its
affiliates in the United States 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. This
document is Cisco Public Information.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
Three Months Ended
--------------------------
October 27, October 28,
2007 2006
----------- -----------
NET SALES:
Product $ 8,015 $ 6,940
Service 1,539 1,244
---------- ----------
Total net sales 9,554 8,184
---------- ----------
COST OF SALES:
Product 2,823 2,499
Service 558 452
---------- ----------
Total cost of sales 3,381 2,951
---------- ----------
GROSS MARGIN 6,173 5,233
OPERATING EXPENSES:
Research and development 1,192 1,083
Sales and marketing 2,003 1,686
General and administrative 490 364
Amortization of purchased intangible assets 117 105
In-process research and development 3 4
---------- ----------
Total operating expenses 3,805 3,242
---------- ----------
OPERATING INCOME 2,368 1,991
Interest income, net 223 157
Other income, net 31 28
---------- ----------
Interest and other income, net 254 185
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,622 2,176
Provision for income taxes 417 568
---------- ----------
NET INCOME $ 2,205 $ 1,608
---------- ----------
Net income per share:
Basic $ 0.36 $ 0.27
---------- ----------
Diluted $ 0.35 $ 0.26
---------- ----------
Shares used in per-share calculation:
Basic 6,087 6,061
---------- ----------
Diluted 6,330 6,199
---------- ----------
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)
Three Months Ended
------------------------
October 27, October 28,
2007 2006
----------- -----------
GAAP net income $ 2,205 $ 1,608
Employee share-based compensation expense 226 225
Payroll tax on stock option exercises 11 6
Compensation expense related to acquisitions
and investments 39 21
In-process research and development 3 4
Amortization of purchased intangible assets 178 141
----------- -----------
Total adjustments to GAAP income before
provision for income taxes 457 397
----------- -----------
Income tax effect (160) (101)
----------- -----------
Non-GAAP net income $ 2,502 $ 1,904
----------- -----------
Diluted net income per share:
GAAP $ 0.35 $ 0.26
----------- -----------
Non-GAAP $ 0.40 $ 0.31
----------- -----------
Shares used in diluted net income per share
calculation:
GAAP 6,330 6,199
----------- -----------
Non-GAAP 6,317 6,202
----------- -----------
Additional reconciliations between GAAP and non-GAAP financial measures are
provided in the tables that follow on page 10.
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
October 27, July 28,
2007 2007
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,413 $ 3,728
Investments 20,266 18,538
Accounts receivable, net of allowance for
doubtful accounts of $179 at October 27, 2007
and $166 at July 28, 2007 3,418 3,989
Inventories 1,315 1,322
Deferred tax assets 1,916 1,953
Prepaid expenses and other current assets 2,127 2,044
------------ ------------
Total current assets 33,455 31,574
Property and equipment, net 3,956 3,893
Goodwill 12,158 12,121
Purchased intangible assets, net 2,379 2,540
Other assets 3,754 3,212
------------ ------------
TOTAL ASSETS $ 55,702 $ 53,340
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 820 $ 786
Income taxes payable 439 1,740
Accrued compensation 1,920 2,019
Deferred revenue 5,381 5,391
Other current liabilities 3,660 3,422
------------ ------------
Total current liabilities 12,220 13,358
Long-term debt 6,582 6,408
Income taxes payable 682 ---
Deferred revenue 1,726 1,646
Other long-term liabilities 489 438
------------ ------------
Total liabilities 21,699 21,850
------------ ------------
Minority interest 131 10
Shareholders' equity 33,872 31,480
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 55,702 $ 53,340
------------ ------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
------------------------
October 27, October 28,
2007 2006
----------- -----------
Cash flows from operating activities:
Net income $ 2,205 $ 1,608
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 421 348
Employee share-based compensation expense 226 225
Share-based compensation expense related to
acquisitions and investments 24 10
Provision for doubtful accounts 18 6
Deferred income taxes (491) 60
Excess tax benefits from share-based
compensation (252) (151)
In-process research and development 3 4
Net gains and impairment charges on
investments (54) (48)
Change in operating assets and liabilities, net
of effects of acquisitions:
Accounts receivable 554 206
Inventories 7 (106)
Prepaid expenses and other current assets 81 (16)
Lease receivables, net (127) (22)
Accounts payable 32 (11)
Income taxes payable and receivable 394 48
Accrued compensation (99) (29)
Deferred revenue 70 116
Other liabilities 77 23
----------- -----------
Net cash provided by operating activities 3,089 2,271
----------- -----------
Cash flows from investing activities:
Purchases of investments (4,360) (4,771)
Proceeds from sales and maturities of
investments 3,526 4,268
Acquisition of property and equipment (296) (214)
Acquisition of businesses, net of cash and
cash equivalents acquired (45) (121)
Change in investments in privately held
companies (20) (48)
Other (65) (41)
----------- -----------
Net cash used in investing activities (1,260) (927)
----------- -----------
Cash flows from financing activities:
Issuance of common stock 1,539 1,019
Repurchase of common stock (2,993) (1,500)
Excess tax benefits from share-based
compensation 252 151
Other 58 2
----------- -----------
Net cash used in financing activities (1,144) (328)
----------- -----------
Net increase in cash and cash equivalents 685 1,016
Cash and cash equivalents, beginning of period 3,728 3,297
----------- -----------
Cash and cash equivalents, end of period $ 4,413 $ 4,313
----------- -----------
ADDITIONAL FINANCIAL INFORMATION
(In millions)
(Unaudited)
October 27, July 28,
2007 2007
----------- -----------
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents $ 4,413 $ 3,728
Fixed income securities 18,050 17,297
Publicly traded equity securities 2,216 1,241
----------- -----------
Total $ 24,679 $ 22,266
----------- -----------
INVENTORIES
Raw materials $ 130 $ 173
Work in process 45 45
Finished goods:
Distributor inventory and deferred cost of
sales 556 544
Manufactured finished goods 338 314
----------- -----------
Total finished goods 894 858
Service-related spares 211 211
Demonstration systems 35 35
----------- -----------
Total $ 1,315 $ 1,322
----------- -----------
PROPERTY AND EQUIPMENT, NET
Land, buildings, and leasehold improvements $ 4,095 $ 4,022
Computer equipment and related software 1,684 1,605
Production, engineering, and other equipment 4,428 4,264
Operating lease assets 176 181
Furniture and fixtures 407 394
----------- -----------
10,790 10,466
Less accumulated depreciation and amortization (6,834) (6,573)
----------- -----------
Total $ 3,956 $ 3,893
----------- -----------
LEASE RECEIVABLES, NET (1)
Current $ 427 $ 389
Noncurrent 628 539
----------- -----------
Total $ 1,055 $ 928
----------- -----------
OTHER ASSETS
Deferred tax assets $ 1,612 $ 1,060
Investments in privately held companies 660 643
Income tax receivable --- 277
Lease receivables, net 628 539
Other 854 693
----------- -----------
Total $ 3,754 $ 3,212
----------- -----------
DEFERRED REVENUE
Service $ 4,651 $ 4,840
Product
Unrecognized revenue on product shipments and
other deferred revenue 1,930 1,769
Cash receipts related to unrecognized revenue
from two-tier distributors 526 428
----------- -----------
Total product deferred revenue 2,456 2,197
----------- -----------
Total $ 7,107 $ 7,037
----------- -----------
Reported as:
Current $ 5,381 $ 5,391
Noncurrent 1,726 1,646
----------- -----------
Total $ 7,107 $ 7,037
----------- -----------
Note:
(1) 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.
SUMMARY OF EMPLOYEE SHARE-BASED COMPENSATION EXPENSE
(In millions)
Three Months Ended
-------------------------
October 27, October 28,
2007 2006
------------ ------------
Cost of sales--product $ 9 $ 11
Cost of sales--service 23 24
------------ ------------
Employee share-based compensation expense in cost
of sales 32 35
------------ ------------
Research and development 65 74
Sales and marketing 99 94
General and administrative 30 22
------------ ------------
Employee share-based compensation expense in
operating expenses 194 190
------------ ------------
Total employee share-based compensation expense $ 226 $ 225
------------ ------------
The income tax benefit for employee share-based compensation expense was
$74 million and $58 million for the first quarter of fiscal 2008 and fiscal
2007, respectively.
RECONCILIATION OF SHARES USED IN THE GAAP AND NON-GAAP
DILUTED NET INCOME PER SHARE CALCULATION
(In millions)
Three Months Ended
------------------------
October 27, October 28,
2007 2006
----------- ------------
Shares used in diluted net income per share
calculation--GAAP 6,330 6,199
Effect of SFAS 123(R) (13) 3
----------- ------------
Shares used in diluted net income per share
calculation--Non-GAAP 6,317 6,202
----------- ------------
RECONCILIATION OF GAAP TO NON-GAAP COST OF SALES
USED IN INVENTORY TURNS
(In millions)
Three Months Ended
------------------------
October 27, July 28,
2007 2007
----------- -----------
GAAP cost of sales $ 3,381 $ 3,365
Employee share-based compensation expense (32) (31)
Amortization of purchased intangible assets (61) (48)
----------- -----------
Non-GAAP cost of sales $ 3,288 $ 3,286
----------- -----------
Press Contact:
John Noh
Cisco
(408) 853-8445
jnoh@cisco.com
Investor Relations Contact:
Laura Graves
Cisco
(408) 526-6521
lagraves@cisco.com