10-KPeriod: FY2008

CISCO SYSTEMS, INC. Annual Report, Year Ended Jul 26, 2008

Filed September 15, 2008For Securities:CSCO

Summary

Cisco Systems, Inc.'s 2008 Form 10-K report details a robust business focused on IP-based networking products and services. The company's offerings span core routing and switching technologies, along with a growing portfolio of advanced technologies such as unified communications, security, and video systems. Cisco serves a diverse customer base, including large enterprises, service providers, and commercial businesses, with a global presence managed across five geographic segments. The report highlights Cisco's strategic emphasis on the evolution of the network as a platform for collaboration and information technology. Significant investments in research and development, totaling $5.2 billion in fiscal year 2008, underscore this commitment. The company also employs an outsourced manufacturing strategy, leveraging contract manufacturers, and actively pursues growth through strategic acquisitions, investments, and alliances to broaden its technological capabilities and market reach. While facing a competitive landscape, Cisco's business model appears well-positioned to capitalize on the increasing demand for integrated networking solutions.

Financial Highlights

35 data points
Beta

Revenue

$39.54B

64.1% Gross Margin

Net Income

$8.05B

20.4% Net Margin

EPS (Diluted)

$1.31

Cash & Equivalents

$5.19B

Free Cash Flow

$10.82B

Financial Statements
Beta
Revenue$39.54B
Cost of Revenue$14.19B
Gross Profit$25.35B
Operating Expenses$15.90B
Operating Income$9.44B
Interest Expense$319.00M
Net Income$8.05B
EPS (Basic)$1.35
EPS (Diluted)$1.31
Shares Outstanding (Basic)5.99B
Shares Outstanding (Diluted)6.16B

Key Highlights

  • 1Cisco's core business revolves around IP-based networking products and services, encompassing routers, switches, and advanced technologies like unified communications and security.
  • 2The company serves a diversified customer base across large enterprises, service providers, and commercial sectors globally, segmented into five geographical regions.
  • 3Significant investment in Research and Development (R&D) with expenditures of $5.2 billion in fiscal year 2008, demonstrating a commitment to innovation and new product development.
  • 4Cisco utilizes an outsourced manufacturing strategy, relying on third-party contract manufacturers for its production needs.
  • 5Growth is driven by a multi-faceted strategy including internal development, strategic alliances, investments in privately held companies, and a history of acquisitions.
  • 6The company faces intense competition from numerous vendors and acknowledges the dynamic nature of the networking and communications equipment markets.
  • 7Backlog increased to approximately $4.8 billion in fiscal 2008 from $3.9 billion in fiscal 2007, indicating strong order demand.

Frequently Asked Questions

Cisco's offerings are primarily categorized into core technologies like routing and switching, advanced technologies (including application networking services, home networking, security, storage area networking, unified communications, video systems, and wireless technology), and other products like optical networking and cable access. They also provide a broad range of service offerings, including technical support and advanced services.

Cisco primarily employs an outsourced manufacturing strategy, utilizing independent third-party contract manufacturers for services such as printed-circuit board assembly, testing, and product assembly. Proprietary software is used to configure products, and manufacturing processes are generally certified to ISO standards. The company also owns and operates a principal manufacturing facility in Juarez, Mexico, acquired through the Scientific-Atlanta acquisition.

Key risks highlighted include fluctuations in operating results due to demand, competition, and technological changes; adverse effects from unfavorable economic and geopolitical conditions; difficulty in predicting revenue; potential for volatile gross margins; risks associated with sales to the service provider market; disruptions in distribution channels; inventory management complexities; component supply shortages; intense competition; dependence on new product development; risks from acquisitions; and international operational risks.

Cisco invests heavily in research and development ($5.2 billion in FY2008) to develop new products and enhance existing ones. Their strategy includes internal development, joint ventures, and acquisitions of companies with complementary technologies. They are particularly focused on the evolution of the network as a platform for collaboration, including technologies like unified communications and Cisco TelePresence systems, and are also identifying and investing in emerging technologies.