10-QPeriod: Q3 FY2012

CISCO SYSTEMS, INC. Quarterly Report for Q3 Ended Apr 28, 2012

Filed May 23, 2012For Securities:CSCO

Summary

Cisco Systems, Inc. reported its third-quarter fiscal year 2012 results, showcasing robust growth and improved profitability. Total net sales reached $11.59 billion, a 6.6% increase year-over-year, driven by a 5.0% rise in product sales and a significant 13.0% increase in service revenue. This growth was broad-based across geographic segments, with the Asia Pacific, Japan, and China (APJC) region showing particularly strong performance with a 24.1% increase in net product sales. The company also saw improvements in its operating margin, which rose to 23.7% from 20.1% in the prior year's quarter, reflecting strong sales execution, improved gross margins, and effective expense management. Diluted earnings per share increased by 21.2% to $0.40, outpacing revenue growth and demonstrating Cisco's ability to translate top-line growth into enhanced profitability. Financially, Cisco maintained a strong liquidity position, with cash, cash equivalents, and investments totaling $48.4 billion. The company generated substantial cash flow from operations, amounting to $8.4 billion for the first nine months of fiscal 2012. Cisco continued its commitment to returning capital to shareholders through dividends and share repurchases, paying $1.1 billion in dividends and repurchasing $2.6 billion of common stock during the nine-month period. The company also announced a definitive agreement to acquire NDS Group Limited for approximately $5 billion, signaling a strategic move to enhance its video software and content security offerings.

Financial Statements
Beta
Revenue$11.59B
Cost of Revenue$4.42B
Gross Profit$7.17B
Operating Expenses$4.42B
Operating Income$2.75B
Interest Expense$151.00M
Net Income$2.17B
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)5.39B
Shares Outstanding (Diluted)5.46B

Key Highlights

  • 1Net sales increased by 6.6% year-over-year to $11.59 billion.
  • 2Service revenue grew by 13.0%, significantly outpacing product sales growth.
  • 3APJC geographic segment experienced strong growth of 24.1% in net product sales.
  • 4Operating margin improved to 23.7% from 20.1% in the prior year quarter.
  • 5Diluted earnings per share increased by 21.2% to $0.40.
  • 6Company maintained a strong liquidity position with $48.4 billion in cash, cash equivalents, and investments.
  • 7Announced acquisition of NDS Group Limited for approximately $5 billion to bolster video offerings.

Frequently Asked Questions

Cisco's total net sales grew by 6.6% year-over-year to $11.59 billion in the third quarter of fiscal 2012. Product sales increased by 5.0%, while service revenue saw a more substantial increase of 13.0%.

Profitability improved significantly, with operating margin increasing from 20.1% in the prior year's third quarter to 23.7% in the current quarter. This was driven by sales growth, improved gross margins, and effective expense management. Diluted earnings per share rose by 21.2% to $0.40.

Cisco is focusing on five foundational priorities: leadership in core business (routing, switching, and services), collaboration, data center virtualization and cloud, video, and architectures for business transformation. The company is also strategically investing in areas like optical connectivity and video software, as evidenced by the planned acquisition of NDS Group Limited.

Cisco maintains a strong financial position with $48.4 billion in cash, cash equivalents, and investments as of April 28, 2012. The company generated $8.4 billion in cash flow from operations for the first nine months of fiscal 2012. Cisco is actively returning capital to shareholders through dividends and a substantial ongoing stock repurchase program, indicating confidence in its financial stability and future prospects.