10-KPeriod: FY2009

CISCO SYSTEMS, INC. Annual Report, Year Ended Jul 25, 2009

Filed September 11, 2009For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) filed its 10-K for the fiscal year ended July 25, 2009, providing a comprehensive overview of its business, financial condition, and risk factors. The company, a leader in IP-based networking, offers a wide range of products and services including routing, switching, and advanced technologies like unified communications and video systems. Despite a challenging global economic environment, Cisco continued to invest in market adjacencies and emerging technologies, aiming to capitalize on evolving market transitions such as the convergence in enterprise data centers and the growth of video and collaboration. While the company's diverse product portfolio and global reach are strengths, the report highlights significant risks associated with economic downturns, intense competition, rapid technological changes, and supply chain disruptions. Cisco's strategy involves a mix of internal development, acquisitions, and strategic alliances to maintain its competitive edge. Investors should note the company's focus on innovation and adaptation to market shifts, alongside its proactive management of various business risks, including currency fluctuations and intellectual property challenges.

Financial Statements
Beta
Revenue$36.12B
Cost of Revenue$13.02B
Gross Profit$23.09B
Operating Expenses$15.77B
Operating Income$7.32B
Interest Expense$346.00M
Net Income$6.13B
EPS (Basic)$1.05
EPS (Diluted)$1.05
Shares Outstanding (Basic)5.83B
Shares Outstanding (Diluted)5.86B

Key Highlights

  • 1Cisco's core business revolves around designing, manufacturing, and selling IP-based networking products and related services, catering to a broad customer base across enterprise, service provider, commercial, and consumer markets.
  • 2The company is actively pursuing 'market adjacencies' and emerging technologies, including enterprise data center solutions (like the Unified Computing System), video systems, unified communications, and home networking, to drive future growth.
  • 3A significant portion of Cisco's sales is conducted through channel partners, including systems integrators, service providers, resellers, and distributors, with a 'two-tier' system for home networking products.
  • 4Research and development expenditures remained substantial, totaling $5.2 billion in fiscal year 2009, underscoring the company's commitment to innovation in a rapidly evolving technological landscape.
  • 5The company faced increased price competition, particularly from Asian competitors, and highlighted risks related to global economic conditions, supply chain stability, and the successful integration of acquisitions.
  • 6Cisco's backlog at the end of fiscal 2009 was $3.9 billion, a decrease from the prior year's $4.8 billion, reflecting shifting order patterns and market dynamics.
  • 7The company's executive leadership team, headed by CEO John T. Chambers, is focused on navigating a complex market by leveraging strategic alliances, internal development, and targeted acquisitions.

Frequently Asked Questions

Cisco's primary revenue comes from its broad range of IP-based networking products and related services. The company organizes its business globally into five segments: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. Key product categories include routing, switching, and advanced technologies such as application networking services, home networking, security, storage area networking, unified communications, and video systems.

Key risks and challenges include fluctuations in demand due to global economic conditions, intense competition (including from Asian vendors), rapid technological changes requiring continuous innovation, reliance on channel partners, supply chain disruptions, currency exchange rate fluctuations, and the inherent risks associated with acquisitions. The company also noted potential impacts from legal proceedings, such as the investigation in Brazil.

Cisco is focusing on 'market adjacencies' and 'emerging technologies' to adapt to market transitions. This includes investments in areas like enterprise data center virtualization, video/visual networking, and collaboration architectures. The company employs a strategy of internal product development, strategic alliances with other companies, and acquisitions to broaden its product and service offerings and maintain a competitive edge.

Cisco invests heavily in R&D to develop new products and enhance existing ones. In fiscal year 2009, R&D expenditures were $5.2 billion. The company allocates these resources across its product areas, with specific focuses on emerging and advanced technologies like Cisco TelePresence systems, the Unified Computing System, and security solutions, aiming to stay ahead of technological developments and customer needs.