Summary
Cisco Systems, Inc. (CSCO) reported its third quarter and nine-month results for fiscal year 2014, indicating a challenging period with a notable decline in revenue and profitability compared to the prior year. For the third quarter, revenue decreased by 5.5% year-over-year, primarily driven by an 8% drop in product revenue, while service revenue saw a modest 3% increase. This revenue decline impacted profitability, with net income falling by 12.0% and diluted EPS decreasing by 8.7%. The company cited several factors for the downturn, including reduced spending by service provider customers, weakness in emerging markets, ongoing product transitions, and a general conservatism in IT capital spending by customers. Looking at the nine-month period, the revenue decline was 3.9%, with product revenue down 5.8% and service revenue up 3.1%. The impact on profitability was more significant over the longer term, with net income down 27.3% and diluted EPS down 26.4%. This was partly due to a significant tax benefit recognized in the prior year's fiscal 2013. The company continues to invest in its strategic priorities, including core networking, collaboration, data center, video, and security, and is undergoing a workforce reduction of approximately 5% to rebalance its operations. Despite the headwinds, Cisco reported strong cash flow generation and continued its commitment to returning capital to shareholders through dividends and share repurchases.
Financial Highlights
58 data points| Revenue | $11.54B |
| Cost of Revenue | $4.54B |
| Gross Profit | $7.01B |
| R&D Expenses | $1.56B |
| Operating Expenses | $4.46B |
| Operating Income | $2.54B |
| Interest Expense | $146.00M |
| Net Income | $2.18B |
| EPS (Basic) | $0.42 |
| EPS (Diluted) | $0.42 |
| Shares Outstanding (Basic) | 5.14B |
| Shares Outstanding (Diluted) | 5.18B |
Key Highlights
- 1Total revenue for the third quarter of fiscal 2014 decreased by 5.5% to $11.5 billion compared to the prior year period, primarily due to an 8% decline in product revenue.
- 2Net income for the third quarter decreased by 12.0% to $2.18 billion, resulting in diluted earnings per share of $0.42, down 8.7% from $0.46 in the prior year.
- 3For the first nine months of fiscal 2014, revenue decreased by 3.9% to $34.8 billion, with net income down 27.3% to $5.6 billion.
- 4The company is undergoing a workforce reduction plan impacting approximately 4,000 employees (5% of its global workforce) to rebalance its operations and reinvest in growth areas.
- 5Cisco reported $7.77 billion in free cash flow for the first nine months of fiscal 2014, a slight decrease from $8.07 billion in the prior year period.
- 6The company repurchased approximately $8.0 billion of common stock under its repurchase program in the first nine months of fiscal 2014, compared to $1.6 billion in the prior year period.
- 7Acquisitions during the period included Composite Software, Inc., Sourcefire, Inc., and WhipTail Technologies, Inc., contributing $2.17 billion in goodwill.