01—Abstract
Summary
Summary of the 10-K filed September 9, 2014. Cited figures are marked; the original filing is the authoritative source.
Cisco Systems, Inc.'s 2014 10-K filing reveals a challenging fiscal year marked by a 3% revenue decline to $47.1 billiona, primarily driven by a 5% drop in product revenue.
This downturn was influenced by reduced IT spending from service providers, weakness in emerging markets, and the impact of product transitions. The company also incurred a significant $655 millionb charge related to memory component remediation in certain older products. Despite these headwinds, Cisco continued to invest in growth areas like data center, security, and cloud, with Data Center product revenue showing a robust 27% increase.
The company announced a significant restructuring plan impacting up to 6,000 employees (approximately 8% of its global workforce) to reinvest savings into key growth initiatives. Management anticipates that challenges in emerging markets, the service provider segment, and specific product transitions will persist into the near future. Cisco ended the fiscal year with a strong cash and investments position of $52.1 billionc and generated $12.3 billion in operating cash flow, while also executing a substantial stock repurchase program of $9.5 billion.
02—Key points
Key Highlights
- Total revenue decreased by 3% to $47.1 billion in fiscal year 2014 compared to fiscal year 2013.
- Product revenue declined by 5%, impacted by weakness in emerging markets and reduced spending by service providers, while service revenue grew by 4%.
- A significant pre-tax charge of $655 million was recorded for memory component remediation in certain products sold in prior fiscal years.
- Data Center product revenue saw a substantial increase of 27% year-over-year, indicating strong growth in this segment.
- The company announced a restructuring plan affecting approximately 6,000 employees (8% of the global workforce) to reinvest savings into growth areas like data center, software, security, and cloud.
- Cisco maintained a strong liquidity position with $52.1 billion in cash and cash equivalents and investments at fiscal year-end.
- The company repurchased $9.5 billion of its common stock under its stock repurchase program during fiscal year 2014.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Cisco Systems, Inc. kept $0.17.
- Revenue$47.14B100.0%
- Cost of revenue−$19.37B41.1%
- Gross profit$27.77B58.9%
- Operating costs−$18.42B39.1%
- Operating income$9.35B19.8%
- Interest, other & tax−$1.49B3.2%
- Net income$7.85B16.7%
Where FY2014 revenue went
$47.14B- Cost of revenue: $19.37B, 41% of revenue
- Other operating costs: $12.13B, 26% of revenue
- Net income: $7.85B, 17% of revenue
- R&D: $6.29B, 13% of revenue
- Interest, other & tax: $1.49B, 3.2% of revenue
Kept 17% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed September 9, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $47.14B$48.61B | −3.0% |
| Cost of Revenue | $19.37B$19.17B | +1.1% |
| Gross Profit | $27.77B$29.44B | −5.7% |
| R&D Expenses | $6.29B$5.94B | +5.9% |
| Operating Expenses | $18.42B$18.24B | +1.0% |
| Operating Income | $9.35B$11.20B | −16.5% |
| Interest Expense | $564.00M$583.00M | −3.3% |
| Net Income | $7.85B$9.98B | −21.3% |
| EPS (Basic) | $1.50$1.87 | −19.8% |
| EPS (Diluted) | $1.49$1.86 | −19.9% |
| Shares Outstanding (Basic) | 5.23B5.33B | −1.8% |
| Shares Outstanding (Diluted) | 5.28B5.38B | −1.8% |
05—Questions
Frequently Asked Questions
What were the primary drivers for Cisco's revenue decline in fiscal year 2014?
Cisco's revenue declined by 3% in fiscal year 2014, primarily due to a 5% decrease in product revenue. Key factors contributing to this decline included reduced IT spending by service providers, weakness experienced in emerging markets, and the impact of ongoing product transitions in core areas like routing and switching. A significant charge for memory component remediation also impacted product costs.
How is Cisco addressing its workforce and investing in future growth?
Cisco announced a major restructuring plan impacting approximately 6,000 employees (8% of its global workforce). The company plans to reinvest the cost savings generated from this restructuring into key growth areas such as data center, software, security, and cloud initiatives to drive future innovation and market leadership.
What is Cisco's financial health and liquidity position as of July 2014?
As of July 26, 2014, Cisco maintained a strong financial position with $52.1 billion in cash and cash equivalents and investments. The company also generated $12.3 billion in net cash from operating activities during fiscal year 2014 and actively returned capital to shareholders through a $9.5 billion stock repurchase program and $3.8 billion in dividends.
06—Continue