10-QPeriod: Q3 FY2004

CISCO SYSTEMS, INC. Quarterly Report for Q3 Ended May 1, 2004

Filed May 27, 2004For Securities:CSCO

Summary

Cisco Systems, Inc. reported strong financial results for the third quarter and the first nine months of fiscal year 2004, demonstrating robust growth and profitability. Total net sales increased significantly year-over-year, driven by a substantial rise in product sales, particularly in the Americas and EMEA regions. The company's gross margin remained strong, reflecting effective cost management and product mix. Investments in research and development continue, supporting innovation in advanced technologies like IP telephony, security, and home networking. Key financial highlights include a notable increase in operating income and net income. The company also maintained a healthy liquidity position, with substantial cash and cash equivalents. Cisco continued its aggressive share repurchase program, underscoring its commitment to returning value to shareholders. The acquisition strategy remains active, with several strategic acquisitions completed during the period to enhance its product portfolio and market reach.

Key Highlights

  • 1Total net sales for the third quarter increased by 21.7% to $5.62 billion, and for the first nine months increased by 13.7% to $16.12 billion compared to the prior year periods.
  • 2Product sales saw a significant increase of 24.5% in the third quarter and 15.7% in the first nine months, indicating strong demand for Cisco's core offerings.
  • 3Gross margin remained robust, with total gross margin at 68.8% for the third quarter and 68.7% for the first nine months.
  • 4Net income for the third quarter increased to $1.21 billion ($0.17 per diluted share), up from $987 million ($0.14 per diluted share) in the prior year quarter.
  • 5Operating income showed strong growth, increasing to $1.55 billion in the third quarter from $1.25 billion in the prior year quarter.
  • 6Cisco continued its aggressive share repurchase program, repurchasing $7.1 billion of common stock in the first nine months of fiscal 2004.
  • 7The company adopted FIN 46(R) in the second quarter, leading to a non-cash cumulative stock compensation charge of $567 million related to the consolidation of Andiamo Systems, Inc.

Frequently Asked Questions

Cisco Systems, Inc. reported total net sales of $5.62 billion for the third quarter ended May 1, 2004, representing a significant increase of 21.7% compared to $4.62 billion in the same period of the prior year. This growth was primarily driven by a 24.5% increase in product sales.

Profitability improved considerably. Net income for the third quarter of fiscal 2004 was $1.21 billion, or $0.17 per diluted share, an increase from $987 million, or $0.14 per diluted share, in the third quarter of fiscal 2003. Operating income also saw robust growth, rising to $1.55 billion from $1.25 billion year-over-year.

Cisco completed several acquisitions, including Latitude Communications, Inc., Riverhead Networks, Inc., and Twingo Systems, Inc., which were integrated into its product portfolio. The adoption of FIN 46(R) also led to a non-cash charge of $567 million due to the consolidation of Andiamo Systems, Inc., impacting net income for the nine-month period but presented as a cumulative effect of accounting change.

Cisco demonstrated a strong commitment to returning value to shareholders through an active share repurchase program. In the first nine months of fiscal 2004, the company repurchased $7.1 billion of its common stock. Furthermore, a new $5 billion stock repurchase program was authorized in May 2004, indicating continued confidence in the company's financial strength and future prospects.