10-QPeriod: Q2 FY2010

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

Filed February 17, 2010For Securities:CSCO

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.

Financial Highlights

52 data points
Beta

Revenue

$9.81B

64.5% Gross Margin

Net Income

$1.85B

18.9% Net Margin

EPS (Diluted)

$0.32

Total Assets

$76.40B

Cash & Equivalents

$4.71B

Free Cash Flow

$2.24B

Financial Statements
Beta
Revenue$9.81B
Cost of Revenue$3.48B
Gross Profit$6.33B
Operating Expenses$3.96B
Operating Income$2.37B
Interest Expense$158.00M
Net Income$1.85B
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)5.74B
Shares Outstanding (Diluted)5.86B

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.

Frequently Asked Questions

Cisco reported an 8% year-over-year increase in net sales for the second quarter of fiscal year 2010, reaching $9.815 billion. This was the third consecutive quarter of positive sequential revenue growth and the first quarter of positive year-over-year revenue growth since the first quarter of fiscal year 2009.

Net income increased by 23% year-over-year to $1.853 billion in the second quarter of fiscal year 2010. Diluted earnings per share also saw a 23% increase over the same period. However, for the first six months of fiscal 2010, net income decreased by 2% compared to the first six months of fiscal 2009.

As of January 23, 2010, Cisco had a strong liquidity position with $4.710 billion in cash and cash equivalents and $34.928 billion in investments, totaling $39.638 billion. The company also had $15.194 billion in long-term debt, having issued $5 billion in senior notes in November 2009. Cisco was in compliance with all its debt covenants.

The company's gross margin percentage improved to 64.5% in the second quarter of fiscal year 2010, up from 63.0% in the same quarter of the prior year. This improvement was primarily attributed to lower overall manufacturing costs, favorable product mix, and increased shipment volume, partially offset by sales discounts and rebates.