Summary
Cisco Systems, Inc. (CSCO) reported its second quarter fiscal year 2011 results on February 22, 2011, for the period ending January 29, 2011. The company demonstrated revenue growth, with total net sales increasing by 6% year-over-year to $10.4 billion. This growth was driven by a strong 18% increase in service revenue, while product revenue saw a more modest 3% increase. The company highlighted that service revenue experienced double-digit growth across all geographic segments. However, the gross margin percentage declined by 4.3 percentage points year-over-year, primarily due to higher sales discounts, unfavorable product mix, and increased amortization and impairment charges from purchased intangible assets. Operating expenses as a percentage of revenue also increased, driven by higher headcount-related costs. Consequently, net income decreased by 17.9% to $1.52 billion, and diluted earnings per share fell by 15.6% to $0.27. Despite the pressure on margins and profitability, Cisco's balance sheet remains strong, with cash and cash equivalents and investments totaling $40.2 billion. The company continued its share repurchase program, buying back $4.3 billion of stock in the first six months of fiscal 2011. Management noted a deceleration in business momentum in certain markets, including challenges in the European Markets, public sector, and portions of the service provider markets, expecting slower growth and continued margin pressure in the second half of fiscal 2011. The company is focusing on cost control initiatives and resource reallocation to navigate these challenging conditions.
Financial Highlights
52 data points| Revenue | $10.41B |
| Cost of Revenue | $4.15B |
| Gross Profit | $6.26B |
| Operating Expenses | $4.58B |
| Operating Income | $1.68B |
| Interest Expense | $161.00M |
| Net Income | $1.52B |
| EPS (Basic) | $0.27 |
| EPS (Diluted) | $0.27 |
| Shares Outstanding (Basic) | 5.53B |
| Shares Outstanding (Diluted) | 5.59B |
Key Highlights
- 1Total net sales increased 6% year-over-year to $10.4 billion for the second quarter of fiscal 2011.
- 2Service revenue saw significant growth, up 18% year-over-year, with double-digit growth across all geographic segments.
- 3Product revenue grew by a more modest 3% year-over-year.
- 4Gross margin percentage declined by 4.3 percentage points to 60.2%, impacted by pricing, product mix, and intangible asset charges.
- 5Net income decreased by 17.9% to $1.52 billion, and diluted EPS fell 15.6% to $0.27.
- 6The company maintained a strong liquidity position with $40.2 billion in cash and cash equivalents and investments.
- 7Cisco repurchased $4.3 billion of its common stock in the first six months of fiscal 2011.