CISCO SYSTEMS, INC. Quarterly Report for Q2 Ended Jan 23, 2010

Summary

Cisco Systems, Inc. (CSCO) reported an 8% year-over-year increase in net sales for the second quarter of fiscal year 2010, marking the first quarter of positive year-over-year revenue growth since Q1 FY09. This growth was driven by improving economic conditions and increased capital expenditures across enterprise, commercial, and service provider markets. Net income saw a 23% increase year-over-year for the quarter, though it decreased by 2% for the six-month period. The company also announced a $5 billion senior notes issuance to fund general corporate purposes. Investments in advanced technologies and market adjacencies continue to be a strategic focus. The company's balance sheet showed a solid cash position, with cash and cash equivalents and investments totaling $39.6 billion. While inventories and purchase commitments increased, reflecting higher demand and longer lead times, Cisco maintained a strong liquidity position and compliance with debt covenants. The company's outlook suggests continued focus on innovation, market expansion, and operational efficiency.

Key Highlights

• 1Net sales increased 8% year-over-year to $9.815 billion in Q2 FY10, indicating a recovery from the economic downturn.
• 2Net income increased 23% year-over-year to $1.853 billion in Q2 FY10.
• 3The company issued $5 billion in senior notes in November 2009 to fund general corporate purposes.
• 4Cash and cash equivalents and investments totaled $39.6 billion at the end of Q2 FY10, demonstrating a strong liquidity position.
• 5Gross margin percentage improved to 64.5% in Q2 FY10 from 63.0% in Q2 FY09, driven by lower manufacturing costs and favorable product mix.
• 6Operating expenses remained relatively flat in Q2 FY10 compared to Q2 FY09, decreasing as a percentage of revenue.
• 7The company repurchased $3.3 billion of its common stock during the first six months of fiscal year 2010.

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