SAN JOSE, CA -- (MARKET WIRE) -- 02/04/09 -- Cisco (NASDAQ: CSCO)
-- Q2 Net Sales: $9.1 billion (decrease of 7.5% year over
year)
-- Q2 Net Income: $1.5 billion GAAP; $1.9 billion
non-GAAP
-- Q2 Earnings per Share: $0.26 GAAP (decrease of 21.2% year over
year); $0.32 non-GAAP (decrease of 15.8% year over year)
-- Q2 Cash Flows from Operations: $3.2 billion
-- Total Cash, Cash Equivalents and Investments: $29.5
billion
Cisco (NASDAQ: CSCO), the worldwide leader in networking that
transforms how people connect, communicate and collaborate, today
reported its second quarter results for the period ended January 24,
2009. Cisco reported second quarter net sales of $9.1 billion, net
income on a generally accepted accounting principles (GAAP) basis of
$1.5 billion or $0.26 per share, and non-GAAP net income of $1.9
billion or $0.32 per share.
"Cisco showcased solid financial strength during a period of
significant economic challenge," said John Chambers, chairman and
chief executive officer, Cisco. "We remain comfortable with our
long-term vision and strategy as we move into new market adjacencies
and prioritize our existing opportunities. We intend to accelerate
the
alignment of our resources to prioritize future growth opportunities,
gradually decrease our operating expenses, while building even
stronger customer relationships to position Cisco for ongoing,
long-term market leadership."
GAAP Results
Q2 2009 Q2 2008 Vs. Q2 2008
Net Sales $9.1 billion $9.8 billion -7.5%
Net Income $1.5 billion $2.1 billion -27.0%
Earnings per Share $0.26 $0.33 -21.2%
Non-GAAP Results
Q2 2009 Q2 2008 Vs. Q2 2008
Net Income $1.9 billion $2.4 billion -21.5%
Earnings per Share $0.32 $0.38 -15.8%
Net sales for both the first six months of fiscal 2009 and fiscal
2008 were $19.4 billion. Net income for the first six months of
fiscal 2009, on a GAAP basis, was $3.7 billion or $0.63 per share,
compared with $4.3 billion or $0.68 per share for the first six
months of fiscal 2008. Non-GAAP net income for the first six months
of fiscal 2009 was $4.4 billion or $0.74 per share, compared with
$4.9 billion or $0.78 per share for the first six months of fiscal
2008.
A reconciliation between net income on a GAAP basis and non-GAAP net
income is provided in the table on page 6.
Cisco will discuss second 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://www.cisco.com/go/investors.
Other Financial Highlights
-- Cash flows from operations were $3.2 billion for the second
quarter of fiscal 2009, compared with $2.4 billion for the second
quarter of fiscal 2008, and compared with $2.7 billion for the first
quarter of fiscal 2009.
-- Cash and cash equivalents and investments were $29.5 billion at
the end of the second quarter of fiscal 2009, compared with $26.2
billion at the end of fiscal 2008, and compared with $26.8 billion at
the end of the first quarter of fiscal 2009.
-- Deferred revenue was $9.3 billion at the end of the second quarter
of fiscal 2009, compared with $8.9 billion at the end of fiscal 2008,
and compared with $8.8 billion at the end of the first quarter of
fiscal 2009.
-- During the second quarter of fiscal 2009, Cisco repurchased 37
million shares of common stock at an average price of $16.40 per
share for an aggregate purchase price of $600 million. As of January
24, 2009, Cisco had repurchased and retired 2.7 billion shares of
Cisco common stock at an average price of $20.57 per share for an
aggregate purchase price of approximately $55.2 billion since the
inception of the stock repurchase program. The remaining authorized
repurchase amount as of January 24, 2009 was $6.8 billion with no
termination date.
-- Days sales outstanding in accounts receivable (DSO) at the end of
the second quarter of fiscal 2009 were 29 days, compared with 34 days
at the end of the fourth quarter of fiscal 2008, and compared with 29
days at the end of the first quarter of fiscal 2009.
-- Inventory turns on a GAAP basis were 11.6 in the second quarter of
fiscal 2009, compared with 11.9 in the fourth quarter of fiscal 2008,
and compared with 11.9 in the first quarter of fiscal 2009. Non-GAAP
inventory turns were 11.3 in the second quarter of fiscal 2009,
compared with 11.6 in the fourth quarter of fiscal 2008, and compared
with 11.6 in the first quarter of fiscal 2009.
"Despite a clearly challenging macro-economic environment, Cisco
generated $3.2 billion in cash flows from operations in our second
quarter, resulting in total cash and investments of $29.5 billion,"
said Frank Calderoni, chief financial officer, Cisco. "I believe our
business model and financial position provide us with two key
capabilities: speed and flexibility. We believe we have been able to
minimize risk to our business, while still positioning Cisco to take
advantage of new opportunities."
Select Global Business Highlights
-- Cisco achieved the first major milestone in its investment into
South Africa under the National Industrial Participation Programme
with the first graduates of Cisco's Global Talent Acceleration
Program.
-- Cisco celebrated the first anniversary of its Globalisation Centre
East, which has emerged as a world-class model for technology growth,
innovation and talent.
Acquisitions and Investments
-- Cisco completed the acquisition of Denver-based Jabber, Inc., a
provider of presence and messaging software. Jabber is now part of
the Cisco Collaboration Software Group.
-- Cisco announced an increased equity stake in VMware, Inc., taking
Cisco's holding to approximately 1.7 percent of VMware's total
outstanding common stock.
Cisco Innovation
-- Cisco announced the new Cisco(R) Aironet(R) 1140 Series Access
Point, taking 802.11n to the enterprise mainstream with new solutions
that are designed to offer ease of deployment, reliability and
performance.
-- Cisco outlined its strategy for bringing Unified Computing to the
Data Center.
-- Cisco extended its web conferencing and collaboration capabilities
to the Apple iPhone 3G user experience, with the Cisco WebEx(TM)
meetings iPhone application.
-- Cisco introduced the Cisco 9000 Series Aggregation Services Router
designed to meet service providers' need to increase the speed,
longevity, services richness and efficiency of the network edge.
-- Cisco announced the Linksys(R) by Cisco Wireless Home Audio
solution which uses Wireless-N technology to deliver a rich audio
experience to any room in the home and the Linksys by Cisco Media Hub
designed to simplify access and interaction with digital content by
gathering, organizing and presenting all the digital video, photos
and music that users have spread among various devices in the home.
-- Cisco announced the Cisco Eos(TM) software platform, a hosted,
white-label software platform that allows media and entertainment
companies to create, manage and grow online communities around their
content.
Select Customer Announcements
-- Cisco brings high-definition video and advanced communications
technology to the new Yankee Stadium, creating the ultimate fan
experience.
-- Cisco, the National Hockey League and the National Hockey League
Players' Association announced a new strategic agreement whereby
Cisco will support the league's strategic digital media initiatives
with Cisco technology designed to help the league serve millions of
avid hockey fans across North America with digital video of their
favorite teams and players.
-- Deutsche Telekom expanded its broadband infrastructure with the
implementation of the Cisco IP Service Engine technology to help meet
customer demand.
-- Hungarian service provider Magyar Telekom implemented Cisco
TelePresence(TM) virtual meeting rooms to connect its head office
with the company's southeast European subsidiaries.
-- In Malaysia, YTL e-Solutions Berhad entered into a strategic
collaboration with Cisco to establish a WiMAX core network in
Peninsular Malaysia.
-- TRUST National Bank in Russia completed the upgrade of its
country-wide communications network with Cisco Unified Communications
to offer highly secure, uninterrupted, multiservice communications
across Russia.
-- In Japan, Capcom Co., Ltd. deployed the Cisco Unified
Communications solution to improve employee efficiency through
coordination of phones, PCs, and presence.
-- SENA, the Colombian National Learning Service, selected Cisco to
upgrade and integrate its 175 offices, offering more Colombian
citizens access to education and training programs virtually.
Editor's Note:
-- Q2 FY09 conference call to discuss Cisco's results along with its
business outlook will be held at 1:30 p.m. Pacific Time, Wednesday,
February 4, 2009. 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, February 4, 2009 to 4:30 p.m. Pacific Time, February 11, 2009
at 866-357-4205 (United States) or 203-369-0122 (international). The
replay also will be available via webcast from February 4, 2009
through April 17, 2009 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, February 4, 2009. 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 Chairman and CEO John Chambers and CFO Frank
Calderoni about Q2 FY09 results will be available at
http://newsroom.cisco.com.
-- To view videos of Cisco's CEO and CFO discussing Q2 FY09 results,
visit Cisco's blog site, The Platform, at http://blogs.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 long-term vision and strategy, the acceleration
of our resource alignment, our intent to gradually decrease operating
expenses, our movement into market adjacencies and prioritization of
our existing opportunities, and the positioning of our business to
take advantage of new opportunities and for ongoing, long-term market
leadership) 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 market adjacencies and geographical locations
during the current economic downturn; 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; 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; our ability
to achieve 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, and to manage
expenses during the current economic downturn; 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 reports on Form 10-K and Form 10-Q. 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, as each may be amended from time to time. Cisco's results of
operations for the three and six months ended January 24, 2009 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 acquisition-related 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 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 to the Securities and Exchange
Commission.
Copyright Copyright2009 Cisco Systems, Inc. All rights reserved.
Cisco, the Cisco logo, Cisco Systems, Aironet, Catalyst, Cisco Eos,
Cisco TelePresence, Cisco WebEx, Linksys, WebEx and WebEx Connect 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 Six Months Ended
------------------------- -------------------------
January 24, January 26, January 24, January 26,
2009 2008 2009 2008
----------- ------------ ----------- ------------
NET SALES:
Product $ 7,347 $ 8,245 $ 15,982 $ 16,260
Service 1,742 1,586 3,438 3,125
----------- ------------ ----------- ------------
Total net sales 9,089 9,831 19,420 19,385
----------- ------------ ----------- ------------
COST OF SALES:
Product 2,737 2,890 5,718 5,720
Service 629 636 1,298 1,220
----------- ------------ ----------- ------------
Total cost of sales 3,366 3,526 7,016 6,940
----------- ------------ ----------- ------------
GROSS MARGIN 5,723 6,305 12,404 12,445
OPERATING EXPENSES:
Research and
development 1,279 1,260 2,685 2,492
Sales and marketing 2,155 2,158 4,438 4,236
General and
administrative 380 367 775 709
Amortization of
purchased intangible
assets 136 116 248 233
In-process research and
development -- -- 3 3
----------- ------------ ----------- ------------
Total operating
expenses 3,950 3,901 8,149 7,673
----------- ------------ ----------- ------------
OPERATING INCOME 1,773 2,404 4,255 4,772
Interest income, net 159 212 354 435
Other income (loss),
net (64) 22 (136) 53
----------- ------------ ----------- ------------
Interest and other
income (loss), net 95 234 218 488
----------- ------------ ----------- ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,868 2,638 4,473 5,260
Provision for income
taxes 364 578 768 995
----------- ------------ ----------- ------------
NET INCOME $ 1,504 $ 2,060 $ 3,705 $ 4,265
----------- ------------ ----------- ------------
Net income per share:
Basic $ 0.26 $ 0.34 $ 0.63 $ 0.71
----------- ------------ ----------- ------------
Diluted $ 0.26 $ 0.33 $ 0.63 $ 0.68
----------- ------------ ----------- ------------
Shares used in
per-share calculation:
Basic 5,848 6,010 5,865 6,049
----------- ------------ ----------- ------------
Diluted 5,864 6,202 5,901 6,273
----------- ------------ ----------- ------------
Certain reclassifications have been made to prior period amounts to conform
to the current period's presentation.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)
Three Months Ended Six Months Ended
------------------------ ------------------------
January 24, January 26, January 24, January 26,
2009 2008 2009(1) 2008
----------- ----------- ----------- -----------
GAAP net income $ 1,504 $ 2,060 $ 3,705 $ 4,265
Employee share-based
compensation
expense 276 273 558 499
Payroll tax on stock
option exercises -- 8 1 19
Compensation expense
related to
acquisitions and
investments 59 34 203 73
In-process research
and development -- -- 3 3
Amortization of
acquisition-related
intangible assets 190 177 356 355
----------- ----------- ----------- -----------
Total adjustments to
GAAP income before
provision for
income taxes 525 492 1,121 949
----------- ----------- ----------- -----------
Income tax effect (162) (173) (356) (333)
Effect of
retroactive tax
legislation (1) -- -- (106) --
----------- ----------- ----------- -----------
Total adjustments
to GAAP provision
for income taxes (162) (173) (462) (333)
----------- ----------- ----------- -----------
Non-GAAP net income $ 1,867 $ 2,379 $ 4,364 $ 4,881
----------- ----------- ----------- -----------
Diluted net income per
share:
GAAP $ 0.26 $ 0.33 $ 0.63 $ 0.68
----------- ----------- ----------- -----------
Non-GAAP $ 0.32 $ 0.38 $ 0.74 $ 0.78
----------- ----------- ----------- -----------
Shares used in diluted
net income per share
calculation:
GAAP 5,864 6,202 5,901 6,273
----------- ----------- ----------- -----------
Non-GAAP 5,885 6,197 5,919 6,267
----------- ----------- ----------- -----------
(1) In the first quarter of fiscal 2009, the Tax Extenders and Alternative
Minimum Tax Relief Act of 2008 reinstated the U.S. federal R&D tax
credit, retroactive to January 1, 2008. GAAP net income for the first
six months of fiscal 2009 included a $106 million tax benefit related
to fiscal 2008 R&D expenses. Non-GAAP net income for the first six
months of fiscal 2009 excluded the $106 million tax benefit related to
fiscal 2008 R&D expenses.
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)
January 24, July 26,
2009 2008
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,175 $ 5,191
Investments 25,356 21,044
Accounts receivable, net of allowance for
doubtful accounts of $230 at January 24,
2009 and $177 at July 26, 2008 2,893 3,821
Inventories 1,107 1,235
Deferred tax assets 2,134 2,075
Prepaid expenses and other current assets 2,330 2,333
------------ ------------
Total current assets 37,995 35,699
Property and equipment, net 4,141 4,151
Goodwill 12,572 12,392
Purchased intangible assets, net 1,792 2,089
Other assets 4,857 4,403
------------ ------------
TOTAL ASSETS $ 61,357 $ 58,734
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 500 $ 500
Accounts payable 625 869
Income taxes payable 108 107
Accrued compensation 2,078 2,428
Deferred revenue 6,592 6,197
Other current liabilities 3,701 3,757
------------ ------------
Total current liabilities 13,604 13,858
Long-term debt 6,348 6,393
Income taxes payable 1,198 749
Deferred revenue 2,708 2,663
Other long-term liabilities 698 669
------------ ------------
Total liabilities 24,556 24,332
------------ ------------
Minority interest 18 49
Shareholders' equity 36,783 34,353
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 61,357 $ 58,734
------------ ------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended
-------------------------
January 24, January 26,
2009 2008
------------ ------------
Cash flows from operating activities:
Net income $ 3,705 $ 4,265
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 818 878
Employee share-based compensation expense 558 499
Share-based compensation expense related to
acquisitions and investments 44 45
Provision for doubtful accounts 59 29
Deferred income taxes (293) (632)
Excess tax benefits from share-based
compensation (21) (338)
In-process research and development 3 3
Net losses (gains) on investments 123 (104)
Change in operating assets and liabilities, net
of effects of acquisitions:
Accounts receivable 818 (196)
Inventories 113 66
Lease receivables, net (109) (260)
Accounts payable (228) (33)
Income taxes payable and receivable 467 220
Accrued compensation (213) (38)
Deferred revenue 544 946
Other assets (470) 38
Other liabilities (2) 144
----------- -----------
Net cash provided by operating activities 5,916 5,532
----------- -----------
Cash flows from investing activities:
Purchases of investments (24,110) (7,846)
Proceeds from sales of investments 12,545 8,235
Proceeds from maturities of investments 6,920 1,218
Acquisition of property and equipment (585) (591)
Acquisition of businesses, net of cash and
cash equivalents acquired (327) (385)
Change in investments in privately held
companies (53) (55)
Other (54) (111)
----------- -----------
Net cash (used in) provided by investing
activities (5,664) 465
----------- -----------
Cash flows from financing activities:
Issuance of common stock 441 2,165
Repurchase of common stock (1,603) (7,120)
Excess tax benefits from share-based
compensation 21 338
Other (127) 94
----------- -----------
Net cash used in financing activities (1,268) (4,523)
----------- -----------
Net (decrease) increase in cash and cash
equivalents (1,016) 1,474
Cash and cash equivalents, beginning of period 5,191 3,728
----------- -----------
Cash and cash equivalents, end of period $ 4,175 $ 5,202
----------- -----------
Certain reclassifications have been made to prior period amounts to
conform to the current period's presentation.
ADDITIONAL FINANCIAL INFORMATION
(In millions)
(Unaudited)
January 24, July 26,
2009 2008
----------- -----------
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents $ 4,175 $ 5,191
Fixed income securities 24,641 19,869
Publicly traded equity securities 715 1,175
----------- -----------
Total $ 29,531 $ 26,235
----------- -----------
INVENTORIES
Raw materials $ 142 $ 111
Work in process 50 53
Finished goods:
Distributor inventory and deferred cost of
sales 431 452
Manufactured finished goods 277 381
----------- -----------
Total finished goods 708 833
Service-related spares 169 191
Demonstration systems 38 47
----------- -----------
Total $ 1,107 $ 1,235
----------- -----------
PROPERTY AND EQUIPMENT, NET
Land, buildings, and leasehold improvements $ 4,499 $ 4,445
Computer equipment and related software 1,785 1,770
Production, engineering, and other equipment 4,975 4,839
Operating lease assets 217 209
Furniture and fixtures 451 439
----------- -----------
11,927 11,702
Less accumulated depreciation and amortization (7,786) (7,551)
----------- -----------
Total $ 4,141 $ 4,151
----------- -----------
OTHER ASSETS
Deferred tax assets $ 2,139 $ 1,770
Investments in privately held companies 716 706
Lease receivables, net (1) 874 862
Financed service contracts (2) 550 588
Other 578 477
----------- -----------
Total $ 4,857 $ 4,403
----------- -----------
DEFERRED REVENUE
Service $ 6,073 $ 6,133
Product
Unrecognized revenue on product shipments
and other deferred revenue 2,315 2,152
Cash receipts related to unrecognized
revenue from two-tier distributors 912 575
----------- -----------
Total product deferred revenue 3,227 2,727
----------- -----------
Total $ 9,300 $ 8,860
----------- -----------
Reported as:
Current $ 6,592 $ 6,197
Noncurrent 2,708 2,663
----------- -----------
Total $ 9,300 $ 8,860
----------- -----------
Note:
(1) The current portion of lease receivables, net, which was $550 million
and $554 million as of January 24, 2009 and July 26, 2008,
respectively, is recorded in prepaid expenses and other current assets.
(2) The current portion of financed service contracts, which was
$751 million and $730 million as of January 24, 2009 and July 26,
2008, respectively, is recorded in prepaid expenses and other
current assets. These financed service contracts primarily relate to
technical support services, and the associated revenue is deferred and
recognized ratably over the period during which the services are to be
performed, which is typically from one to three years.
SUMMARY OF EMPLOYEE SHARE-BASED COMPENSATION EXPENSE
(In millions)
Three Months Ended Six Months Ended
----------------------- -----------------------
January 24, January 26, January 24, January 26,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Cost of sales--product $ 10 $ 11 $ 21 $ 20
Cost of sales--service 32 30 63 53
----------- ----------- ----------- -----------
Employee share-based
compensation expense in
cost of sales 42 41 84 73
----------- ----------- ----------- -----------
Research and development 84 81 166 146
Sales and marketing 104 111 217 210
General and administrative 46 40 91 70
----------- ----------- ----------- -----------
Employee share-based
compensation expense in
operating expenses 234 232 474 426
----------- ----------- ----------- -----------
Total employee share-based
compensation expense $ 276 $ 273 $ 558 $ 499
----------- ----------- ----------- -----------
The income tax benefit for employee share-based compensation expense was
$73 million and $150 million for the second quarter and first six months of
fiscal 2009, respectively, and $86 million and $160 million for the second
quarter and first six months of fiscal 2008, respectively.
RECONCILIATION OF SHARES USED IN THE GAAP AND NON-GAAP
DILUTED NET INCOME PER SHARE CALCULATION
(In millions)
Three Months Ended Six Months Ended
---------------------- ----------------------
January 24, January 26, January 24, January 26,
2009 2008 2009 2008
----------- ---------- ----------- ----------
Shares used in diluted net
income per share
calculation--GAAP 5,864 6,202 5,901 6,273
Effect of SFAS 123(R) 21 (5) 18 (6)
----------- ---------- ----------- ----------
Shares used in diluted net
income per share
calculation--Non-GAAP 5,885 6,197 5,919 6,267
----------- ---------- ----------- ----------
RECONCILIATION OF GAAP TO NON-GAAP COST OF SALES
USED IN INVENTORY TURNS
(In millions)
Three Months Ended
----------------------------------------------
January 24, October 25, July 26, January 26,
2009 2008 2008 2008
---------- ---------- ---------- ----------
GAAP cost of sales $ 3,366 $ 3,650 $ 3,733 $ 3,526
Employee share-based
compensation expense (42) (42) (38) (41)
Amortization of
acquisition-related
intangible assets (54) (54) (54) (61)
---------- ---------- ---------- ----------
Non-GAAP cost of sales $ 3,270 $ 3,554 $ 3,641 $ 3,424
---------- ---------- ---------- ----------
Press Contact:
Robyn Jenkins-Blum
Cisco
+1 (408) 853-9848
rojenkin@cisco.com
Investor Relations Contact:
Laura Graves
Cisco
+1 (408) 526-6521
lagraves@cisco.com
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