01—Abstract
Summary
Summary of the 10-K filed September 12, 2012. Cited figures are marked; the original filing is the authoritative source.
Cisco Systems, Inc.'s 10-K filing for the fiscal year ended July 27, 2012, reveals a company experiencing solid growth despite a challenging global economic environment.
Net sales increased by 7% to $46.1 billiona, driven by a 5% rise in product revenue and a significant 12% increase in service revenue. This growth was observed across all geographic segments, with particular strength in the Americas and Asia Pacific, Japan, and China (APJC). The company's strategic focus on five key priorities—leadership in core business, collaboration, data center virtualization and cloud, video, and architectures for business transformation—appears to be driving performance, especially in the rapidly growing Data Center segment, which saw an 87% increase in sales.
Profitability also improved, with net income up 24% to $8.04 billionb and diluted earnings per share increasing by 27% to $1.49. This was supported by effective expense management, leading to lower operating expenses as a percentage of revenue, and a decrease in restructuring charges. Cisco's strong financial position is further evidenced by its substantial cash and investments, which increased to $48.7 billion, enabling continued investment in innovation, strategic acquisitions (notably NDS Group Limited for $5 billion), and shareholder returns through repurchases and dividends.
02—Key points
Key Highlights
- Net sales grew 7% to $46.1 billion, driven by strong performance in both product (5% increase) and service (12% increase) revenue.
- Net income increased by a robust 24% to $8.04 billion, with diluted EPS rising 27% to $1.49, reflecting improved profitability and expense management.
- The Data Center product category was a key growth driver, with sales increasing by 87% to $1.3 billion.
- The company completed a significant acquisition of NDS Group Limited for $5 billion to bolster its video offerings.
- Operating expenses as a percentage of revenue decreased by 2.7 percentage points, showcasing effective cost control and efficiency gains.
- Cisco's cash and cash equivalents and investments grew to $48.7 billion, providing strong liquidity and financial flexibility.
- Shareholder returns were supported by $4.4 billion in stock repurchases and $1.5 billion in dividends paid during the fiscal year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Cisco Systems, Inc. kept $0.17.
- Revenue$46.06B100.0%
- Cost of revenue−$17.85B38.8%
- Gross profit$28.21B61.2%
- Operating costs−$18.14B39.4%
- Operating income$10.06B21.9%
- Interest, other & tax−$2.02B4.4%
- Net income$8.04B17.5%
Where FY2012 revenue went
$46.06B- Cost of revenue: $17.85B, 39% of revenue
- Other operating costs: $12.66B, 27% of revenue
- Net income: $8.04B, 17% of revenue
- R&D: $5.49B, 12% of revenue
- Interest, other & tax: $2.02B, 4.4% of revenue
Kept 17% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed September 12, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $46.06B$43.22B | +6.6% |
| Cost of Revenue | $17.85B$16.68B | +7.0% |
| Gross Profit | $28.21B$26.54B | +6.3% |
| R&D Expenses | $5.49B$5.82B | −5.8% |
| Operating Expenses | $18.14B$18.86B | −3.8% |
| Operating Income | $10.06B$7.67B | +31.2% |
| Interest Expense | $596.00M$628.00M | −5.1% |
| Net Income | $8.04B$6.49B | +23.9% |
| EPS (Basic) | $1.50$1.17 | +28.2% |
| EPS (Diluted) | $1.49$1.17 | +27.4% |
| Shares Outstanding (Basic) | 5.37B5.53B | −2.9% |
| Shares Outstanding (Diluted) | 5.40B5.56B | −2.9% |
05—Questions
Frequently Asked Questions
What were Cisco's key strategic priorities for fiscal year 2012?
Cisco's five foundational priorities for fiscal year 2012 were: leadership in its core business (routing, switching, and associated services, including security and mobility); collaboration; data center virtualization and cloud; video; and architectures for business transformation.
How did Cisco's acquisition of NDS Group Limited impact its business?
The acquisition of NDS Group Limited, completed in July 2012 for approximately $5 billion, was expected to complement and accelerate Cisco's Videoscape platform, enabling next-generation entertainment experiences for service providers and media companies. It also aimed to expand Cisco's reach into emerging markets where NDS had an established presence.
What were the main factors contributing to the increase in Cisco's net income in fiscal year 2012?
The increase in net income was primarily driven by a 7% increase in net sales, effective expense management that reduced operating expenses as a percentage of revenue, lower amortization of purchased intangible assets, reduced restructuring and other charges, and a decrease in share-based compensation expense.
How did Cisco's product segment sales perform in fiscal year 2012?
Key product segments showing strong performance included Data Center (up 87%), Wireless (up 19%), and Security (up 12%). NGN Routing and Collaboration also saw modest growth, while Switching sales increased by 3%. Other Products saw a decline, largely due to the exit from the Flip Video camera business.
06—Continue