10-QPeriod: Q3 FY2010

CISCO SYSTEMS, INC. Quarterly Report for Q3 Ended May 1, 2010

Filed May 26, 2010For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) reported strong financial results for the third quarter and nine months ended May 1, 2010. Total net sales increased by 27% year-over-year for the quarter and 5.9% for the nine months, driven by broad-based growth across geographic theaters and product categories. Net income saw a significant 62.6% increase in the third quarter, with diluted earnings per share rising by 60.9%, reflecting improved revenue and expense management, as well as a tax benefit. The company's strategic focus on market adjacencies like virtualization, video, and collaboration, coupled with acquisitions such as Tandberg, appears to be paying off. Cisco ended the quarter with a robust cash position of $39.1 billion, demonstrating strong liquidity and financial flexibility. The company continued its aggressive share repurchase program, underscoring its commitment to returning capital to shareholders.

Key Highlights

  • 1Total net sales increased by 27% year-over-year to $10.37 billion in Q3 FY10, and by 5.9% for the first nine months to $29.20 billion.
  • 2Net income surged by 62.6% to $2.19 billion in Q3 FY10, and by 15.4% for the nine months to $5.83 billion.
  • 3Diluted earnings per share grew by 60.9% to $0.37 in Q3 FY10, and by 15.1% for the nine months to $0.99.
  • 4Gross margin percentage remained strong at 63.9% for the quarter, with product gross margin improving to 64.3%.
  • 5The company completed significant acquisitions, including Tandberg ASA, Starent Networks, Corp., and ScanSafe, Inc., bolstering its portfolio in video communications and mobile infrastructure.
  • 6Cash and cash equivalents, along with investments, totaled $39.1 billion, indicating a very strong liquidity position.
  • 7Cisco repurchased $2.25 billion of common stock in the third quarter, with $9.3 billion remaining authorization under its ongoing repurchase program.

Frequently Asked Questions

Cisco reported total net sales of $10.37 billion for the third quarter of fiscal year 2010, representing a 27% increase compared to $8.16 billion in the same period last year. This growth was broad-based across geographic theaters and product categories, signaling a recovery in the market.

Profitability saw a significant improvement. Net income rose by 62.6% year-over-year to $2.19 billion in the third quarter of fiscal year 2010. Diluted earnings per share increased by 60.9% to $0.37 for the quarter, aided by revenue growth, expense management, and a favorable tax benefit.

Cisco maintained a very strong financial position, with total cash and cash equivalents and investments amounting to $39.1 billion as of May 1, 2010. The company also had $15.2 billion in total debt outstanding, primarily consisting of senior notes, and maintained compliance with all debt covenants.

Yes, Cisco made significant acquisitions during the period, including Tandberg ASA (a leader in video communications), Starent Networks, Corp. (mobile infrastructure provider), and ScanSafe, Inc. (web security provider). These acquisitions are expected to enhance Cisco's strategic positioning in key growth areas.