10-QPeriod: Q1 FY2009

CISCO SYSTEMS, INC. Quarterly Report for Q1 Ended Oct 25, 2008

Filed November 18, 2008For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) reported a quarter ending October 25, 2008, marked by a slight increase in net sales of 8% year-over-year, reaching $10.33 billion. However, the company noted a significant downturn in business during the last month of the quarter due to the escalating global economic crisis, impacting enterprise, service provider, and commercial markets. While net income remained flat at $2.20 billion, reflecting higher operating expenses and reduced interest income, diluted EPS saw a modest increase to $0.37. Despite the challenging macroeconomic environment, Cisco's balance sheet remained robust, with total assets at $58.89 billion and shareholders' equity at $35.04 billion. The company also highlighted strong operating cash flow of $2.72 billion and a substantial cash and investments balance of $26.76 billion, providing financial flexibility.

Financial Highlights

30 data points
Beta

Revenue

$10.33B

64.7% Gross Margin

Net Income

$2.20B

21.3% Net Margin

EPS (Diluted)

$0.37

Cash & Equivalents

$4.20B

Free Cash Flow

$2.36B

Financial Statements
Beta
Revenue$10.33B
Cost of Revenue$3.65B
Gross Profit$6.68B
Operating Expenses$4.20B
Operating Income$2.48B
Interest Expense$64.00M
Net Income$2.20B
EPS (Basic)$0.37
EPS (Diluted)$0.37
Shares Outstanding (Basic)5.88B
Shares Outstanding (Diluted)5.97B

Key Highlights

  • 1Net sales increased by 8% to $10.33 billion, driven by growth in product sales (up 7.7%) and service revenue (up 10.2%).
  • 2A notable downturn in business was observed in the final month of the quarter due to the worsening global economic conditions.
  • 3Net income was stable at $2.20 billion, impacted by increased operating expenses and lower interest income, despite improved gross margins.
  • 4Diluted earnings per share rose to $0.37, up from $0.35 in the prior year's comparable quarter.
  • 5The company generated strong operating cash flow of $2.72 billion.
  • 6Cash and cash equivalents, along with investments, totaled $26.76 billion, underscoring a strong liquidity position.
  • 7Cisco repurchased approximately 46 million shares of common stock for $1.0 billion during the quarter.

Frequently Asked Questions

Cisco's net sales increased by 8% year-over-year to $10.33 billion. This growth was primarily driven by a 7.7% increase in product sales to $8.64 billion and a 10.2% increase in service revenue to $1.70 billion.

Cisco experienced a noticeable downturn in its business during the last month of the quarter due to the escalating global economic crisis. This slowdown affected its global enterprise, service provider, and commercial markets, starting in the United States and spreading to other regions. The company anticipates this downturn will persist.

Cisco maintained a strong liquidity position, with cash and cash equivalents and investments totaling $26.76 billion as of October 25, 2008. The company generated $2.72 billion in operating cash flow during the quarter and continued its share repurchase program, buying back approximately 46 million shares for $1.0 billion. Cisco believes its financial strength provides a competitive advantage to navigate the economic downturn.

Given the decline in business observed in October 2008, Cisco anticipates that its net product sales will be impacted by the unfavorable economic environment and expects revenue to decline on a year-over-year basis in the second quarter of fiscal 2009.