10-QPeriod: Q2 FY2008

CISCO SYSTEMS, INC. Quarterly Report for Q2 Ended Jan 26, 2008

Filed February 19, 2008For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) reported strong financial results for the second quarter and first six months of fiscal year 2008, demonstrating robust year-over-year growth in net sales, net income, and earnings per diluted share. Net sales increased by approximately 16.5% for the quarter and 16.6% for the six-month period, driven by broad-based growth across geographic theaters, customer markets, and product/service lines. The company highlighted a significant increase in revenue from Emerging Markets and continued strength in Advanced Technologies sales, particularly unified communications and video systems. Despite economic uncertainties and potential unfavorable market conditions, Cisco's strategic focus on end-to-end architecture, collaboration technologies, and diversification across its business segments appears to be yielding positive results. The company also reported a healthy operating margin, improved gross margins due to lower manufacturing costs and higher volumes, and substantial cash flow from operations. Cisco continued its aggressive share repurchase program, demonstrating a commitment to returning capital to shareholders while maintaining a strong liquidity position with over $22 billion in cash, cash equivalents, and investments.

Key Highlights

  • 1Net sales increased by 16.5% year-over-year in the second quarter and 16.6% in the first six months of fiscal 2008.
  • 2Net income grew by 7% year-over-year in the second quarter and 21% in the first six months of fiscal 2008.
  • 3Diluted EPS increased by 6% year-over-year in the second quarter and 21% in the first six months of fiscal 2008.
  • 4Advanced Technologies sales, a key growth driver, increased by approximately 25% in the quarter and 26% in the six-month period.
  • 5Gross margin percentage improved due to lower manufacturing costs and higher shipment volumes.
  • 6Operating expenses increased as a percentage of revenue, primarily due to continued investments in headcount.
  • 7Cash flow from operations was $5.5 billion for the first six months of fiscal 2008, and total cash and investments exceeded $22.6 billion.
  • 8The company repurchased $7.0 billion of common stock in the first six months of fiscal 2008.

Frequently Asked Questions

Cisco Systems, Inc. reported a 16.5% increase in net sales for the second quarter of fiscal year 2008 and a 16.6% increase for the first six months of fiscal year 2008, compared to the corresponding periods in fiscal year 2007.

Net income increased by 7% in the second quarter and 21% in the first six months of fiscal year 2008 compared to the prior year. Diluted earnings per share (EPS) saw a 6% increase in the second quarter and a 21% increase in the first six months of fiscal year 2008.

Revenue growth was driven by broad-based increases across geographic theaters (particularly Emerging Markets), customer markets (service provider, commercial, and enterprise), and product/service lines. Advanced Technologies sales, including unified communications and video systems, were a significant contributor, with sales increasing approximately 25% in the quarter.

Cisco maintained a strong financial position with over $22.6 billion in cash and investments as of January 26, 2008. The company generated $5.5 billion in cash flow from operations in the first six months of fiscal 2008 and continued its aggressive share repurchase program, repurchasing $7.0 billion of common stock in the same period.