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CISCO SYSTEMS, INC. Annual Report, Year Ended Jul 28, 2007

Filing Date
Filed September 18, 2007
Period End
July 28, 2007
Security
CSCO
In the record · 2016–202610-K1110-Q328-K146

CSCO filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 146 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Mar ’17Mar ’17
  2. FY2019 annual report10-K · Sep ’19Sep ’19
  3. Leadership change8-K · Feb ’22Feb ’22
  4. Leadership change8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed September 18, 2007. Cited figures are marked; the original filing is the authoritative source.

Cisco's fiscal 2007 10-K (fiscal year ended July 28, 2007) reported record results: net sales rose 22.6% to $34.9 billiona, net income rose 31% to $7.3 billion, and diluted EPS reached $1.17 versus $0.89.

Growth was broad-based across the four largest theaters and product families. Acquisitions, especially Scientific-Atlanta (full-year contribution of $2.8 billionb in sales) and WebEx, drove much of the top-line expansion, and advanced technologies grew about 44% to $8.1 billion. Emerging Markets was the fastest-growing theater at 39% growth, and service revenue grew about 20%.

Profitability showed a mixed picture. Gross margin percentage fell to 64.0% from 65.8%, mainly because Scientific-Atlanta carries a lower-margin model, along with higher sales discounts and rebates. Operating expenses grew 17.4% to $13.2 billionc, though they declined as a percentage of revenue.

Share-based compensation under SFAS 123(R) remained a drag at roughly $965 milliond total. The effective tax rate dropped to 22.5% from 26.9%, which helped net income. Cash generation was strong, with operating cash flow of $10.1 billion and cash and investments of $22.3 billion.

The company repurchased 297 million shares for $7.8 billion, leaving $8.8 billion authorized, while spending $3.3 billion on acquisitions. Key risks flagged in the filing include lumpy service provider demand, price competition from Asian rivals (especially China), component supply constraints, reliance on a single Juarez, Mexico facility for Scientific-Atlanta products, and the integration risk from acquisitions. The company also disclosed that CFO Dennis Powell will retire around February 2008, with Frank Calderoni named as successor, and it took on $6.5 billion of senior notes in 2006 to fund the Scientific-Atlanta deal.

02—Key points

Key Highlights

  1. Record fiscal 2007: net sales up 22.6% to $34.9B and net income up 31% to $7.3B; diluted EPS $1.17 vs. $0.89 in fiscal 2006
  2. Scientific-Atlanta (acquired Feb 2006) contributed $2.8B in full-year sales and expanded Cisco's video and service provider footprint
  3. Advanced technologies revenue rose ~44% to $8.1B, now 27.4% of product sales and larger than routing; switches grew 15% to $12.5B
  4. Gross margin percentage declined to 64.0% from 65.8%, driven by lower-margin Scientific-Atlanta mix and higher sales discounts and rebates
  5. Strong cash generation: $10.1B operating cash flow; $22.3B cash and investments; $7.8B in buybacks during the year with $8.8B authorization remaining
  6. Effective tax rate fell to 22.5% from 26.9%, a meaningful contributor to the earnings growth
  7. CFO Dennis Powell to retire around February 2008; Frank Calderoni named as successor

03—Questions

Frequently Asked Questions

  1. How did Cisco perform financially in fiscal 2007?

    Cisco reported record results. Net sales grew 22.6% to $34.9 billion, net income grew 31% to $7.3 billion, and diluted EPS rose to $1.17 from $0.89. Growth was driven by the full-year inclusion of Scientific-Atlanta, strong advanced technology sales, and a 20% increase in service revenue.

  2. Why did gross margin decline even as profits rose?

    Gross margin percentage fell to 64.0% from 65.8%, primarily because Scientific-Atlanta's business model carries a lower gross margin than Cisco's core products. Higher sales discounts, rebates, and product pricing also contributed, partly offset by lower manufacturing costs and higher shipment volume. Gross margin dollars still increased to $22.3 billion.

  3. What are the main risks investors should watch?

    Key risks include volatile service provider purchasing, intense price-focused competition from Asia (especially China), component shortages and supply concentration, reliance on the Juarez, Mexico facility for Scientific-Atlanta products, and the execution risk of integrating large acquisitions such as Scientific-Atlanta and WebEx. The company also faces ongoing patent litigation and the cost of growing headcount, which rose by 11,609 in fiscal 2007.

  4. How is Cisco returning capital to shareholders?

    Cisco does not pay cash dividends. Instead it repurchased 297 million shares for $7.8 billion in fiscal 2007 at an average price of $26.12. As of July 28, 2007, the company had $8.8 billion remaining under its repurchase authorization, which has no expiration date.

04—Continue

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