01—Abstract
Summary
Summary of the 10-K filed September 7, 2017. Cited figures are marked; the original filing is the authoritative source.
Cisco Systems, Inc. (CSCO) reported its fiscal year 2017 results, concluding July 29, 2017.
The company experienced a revenue decline of 2.5% year-over-year to $48.0 billiona, largely driven by weaker performance in its Switching and NGN Routing segments, as well as a slowdown in the service provider market and emerging countries. Despite the top-line pressure, Cisco demonstrated resilience in its profitability, with operating income as a percentage of revenue largely stable and a strong focus on operational efficiencies and cost management, including restructuring efforts. Key strategic initiatives for fiscal year 2017 included accelerating innovation in areas like intent-based networking with the launch of the Catalyst 9000 series, strengthening its security portfolio, and shifting towards software and subscription-based offerings.
The company continued to invest in growth areas such as Security and Wireless, which showed positive revenue growth. Cisco also maintained a strong liquidity position, generating substantial operating cash flow and returning significant capital to shareholders through dividends and stock repurchases.
02—Key points
Key Highlights
- Total revenue for fiscal year 2017 decreased by 2.5% to $48.0 billion, reflecting challenges in key segments like Switching and NGN Routing, and weakness in the service provider market.
- Product revenue declined by 4.2%, while service revenue saw a modest increase of 2.6%, indicating a continued shift towards services.
- Despite revenue pressures, gross margin remained strong at 63.0% for the year, with product gross margin at 61.6% and service gross margin at 66.8%.
- Research and Development (R&D) expenses decreased slightly by 3.8% year-over-year, while Sales and Marketing expenses decreased by 4.5%, demonstrating cost control measures.
- The company announced a significant restructuring plan in August 2016, incurring $756 million in charges during fiscal year 2017, aimed at reinvesting in priority growth areas.
- Cisco continued its strategic focus on innovation, highlighting the introduction of the Catalyst 9000 series and advancements in security and wireless technologies.
- The company generated strong operating cash flow of $13.9 billion and returned $9.2 billion to shareholders through dividends and stock repurchases, underscoring its commitment to capital return.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Cisco Systems, Inc. kept $0.20.
- Revenue$48.01B100.0%
- Cost of revenue−$17.78B37.0%
- Gross profit$30.22B63.0%
- Operating costs−$18.25B38.0%
- Operating income$11.97B24.9%
- Interest, other & tax−$2.36B4.9%
- Net income$9.61B20.0%
Where FY2017 revenue went
$48.01B- Cost of revenue: $17.78B, 37% of revenue
- Other operating costs: $12.19B, 25% of revenue
- Net income: $9.61B, 20% of revenue
- R&D: $6.06B, 13% of revenue
- Interest, other & tax: $2.36B, 4.9% of revenue
Kept 20% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed September 7, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $48.01B$49.25B | −2.5% |
| Cost of Revenue | $17.78B$18.29B | −2.8% |
| Gross Profit | $30.22B$30.96B | −2.4% |
| R&D Expenses | $6.06B$6.30B | −3.8% |
| Operating Expenses | $18.25B$18.30B | −0.3% |
| Operating Income | $11.97B$12.66B | −5.4% |
| Interest Expense | $861.00M$676.00M | +27.4% |
| Net Income | $9.61B$10.74B | −10.5% |
| EPS (Basic) | $1.92$2.13 | −9.9% |
| EPS (Diluted) | $1.90$2.11 | −10.0% |
| Shares Outstanding (Basic) | 5.01B5.05B | −0.9% |
| Shares Outstanding (Diluted) | 5.05B5.09B | −0.8% |
05—Questions
Frequently Asked Questions
What was Cisco's overall financial performance in fiscal year 2017?
In fiscal year 2017, Cisco Systems reported a total revenue of $48.0 billion, a decrease of 2.5% compared to the previous year. While product revenue saw a decline of 4.2%, service revenue grew by 2.6%. The company maintained strong profitability with a gross margin of 63.0% and generated robust operating cash flow of $13.9 billion. Cisco also continued to execute on its strategic priorities, including innovation and a shift towards software and subscriptions.
Which product segments experienced the most significant changes in revenue?
The most significant revenue declines were seen in the Service Provider Video segment, down 45.4%, largely due to the divestiture of the SP Video CPE Business. Switching revenue decreased by 5.1%, and NGN Routing revenue decreased by 3.7%. Conversely, Security revenue grew by 9.3%, and Wireless revenue increased by 4.8%, indicating growth in these strategic areas.
How is Cisco addressing its strategic priorities and future growth?
Cisco's strategy focuses on accelerating innovation, increasing the value of the network, and delivering technology in ways that customers prefer. Key initiatives include developing intent-based networking with the Catalyst 9000 series, enhancing security offerings, and transitioning to more software and subscription-based models. The company is investing in growth areas like Security, IoT, Collaboration, Data Center, and Cloud to drive long-term profitable growth.
What is Cisco's approach to returning capital to shareholders?
Cisco demonstrated a strong commitment to returning capital to shareholders in fiscal year 2017. The company returned $9.2 billion to shareholders through dividends ($5.5 billion) and stock repurchases ($3.7 billion). This aligns with its capital allocation strategy of returning a minimum of 50% of its free cash flow annually to shareholders.
06—Continue