Osprey Flyer: Cisco Financial Performance Rebounds (Financial Charts, Video) *Total Revenues Increase, Restructuring Charges Decrease* CSCO

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Cisco Systems reported QE October 2011 financial results on November 9, 2011

Cisco Financial Performance Rebounds: Total Revenues Increase, Restructuring Charges Decrease

Cisco Summary QE October 2011 The quarterly restructuring charge of $202M was lower than the prior quarter of $768M and financial performance rebounded accordingly. Total revenues reached a new high, while net income and earnings per share rebounded. Return on assets has continued decreasing which may reach a bottom as the quarterly restructuring charges subside. Cisco's problem has been described as "slow moving sales" and add to that debt of almost 20% of total assets. Financial position of adequate capital with moderate debt and reasonable liquidity continues. The bottom is probably in for Cisco and upcoming quarters will be stronger both YoY and QoQ sequentially.

Cisco Income Statement QE October 2011 Cisco reported total revenues of $11.26B, net income of $1.78B, and earnings per share of $0.33. From the prior quarter QE July 2011, total revenues were up +0.54%, net income up +44.24%, and earnings per share up +50.00%. From the prior year QE October 2010, these were up +4.71%, down -7.93%, and down -2.94%, respectively. The quarterly restructuring charge was $202M, down from $768M prior quarter. Gross, operating, and net margins were 61.21%, 19.63%, and 15.79%, respectively. Gross margin was flat QoQ while operating margin and net margin rebounded due to the smaller quarterly restructuring charge. Cash flow from operations of $0.43 per share dropped to the annual cyclical low and should increase next quarter. The average income tax rate jumped up to 20.85%, which is higher than the historical average.

Cisco Balance Sheet QE October 2011 Cisco's total assets decreased -0.15% QoQ to $86.96 billion from the prior quarter record of $87.10 billion. The capital to assets ratio (total stockholders' equity divided by total assets) of 54.29% is at the lower end of the historical range, but is stable. The current ratio (current assets divided by total assets) of 65.85% is at the higher end of the historical range The return on assets is low for a technology company, continues decreasing, and is now at a multi-quarter low +7.52%. Total debt is almost 20% of total assets and is the result of an embedded financing operation.

Cisco Outlook QE January 2011 CEO John Chambers estimated total revenues to grow 7% - 8% YoY.

Workforce Reduction, July 18, 2011
Cisco will layoff 6,500 employees and incur cash-based restructuring charges, consisting of severance and other one-time termination benefits, estimated at $1.3 billion over several quarters. Cisco estimates approximately $750 million of these charges will be incurred in QE July 2011, including approximately $500 million relating to the voluntary early retirement program. The remaining estimated $550 million of charges will be recognized in the subsequent 4 quarters, beginning with QE October 2011. Cisco Announces Additional Detail on Comprehensive Action Plan

Cisco Financial Performance by the Quarters (Charts)

Cisco Earnings Per Share Below is a chart of quarterly earnings per share. Current Earnings per Share of $0.33 is up +50% QoQ and down -3% YoY. The recent peaks have been the QE October 2008 and QE April 2010 at $0.37. The low has been $0.19 for QE July 2009. The EPS chart average is $0.30.

Cisco Cash Flow per Share Below is a chart of cash flow from operations per share. Cisco has a very striking cash flow cycle on the chart. Current Cash Flow per Share of $0.43 is another annual cyclical drop and presumably bottom. The peaks have been QE July 2009 of $1.65, QE July 2010 of $1.76, and QE 2011 of $1.83. The lows have been QE October 2009 of $0.25, QE October 2010 of $0.25, and QE October 2011 of $0.43. The CFS chart average is $1.05.

Cisco Total Revenues, Operating Income, and Net Income Below is a chart of quarterly total revenues, operating income, and net income. Current Total Revenues of $11.26B is a multi-year high, up +1% QoQ and +5% YoY. Total Revenues have been consistent and over $10B for 7 consecutive quarters. Current Operating Income of $2.21B is a 4-quarter high, rebounding from the prior quarter $768M restructuring charge. Net Income of $1.78B is the same as the historical average, up +44% QoQ, and down -8% YoY. The TR, OI, and NI chart averages are $10.50B, $2.12B, and $1.78B, respectively.

Cisco Gross Margin, Operating Margin, and Net Margin Below is a chart of quarterly gross margin, operating margin, and net margin. Current Gross Margin of 61.21% is level QoQ, down YoY, and continues below the historical 62.58% area. Current Operating Margin of 19.63% rebounded QoQ, after the prior quarter $768M restructuring charge. Current Net Margin of 15.79% also rebounded, but is below the historical average. The GM, OM, and NM chart averages are 62.58%, 20.28%, 17.08%, respectively.

Cisco Return on Assets Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. Cisco has a historically low ROA for a technology company and the ROA continues decreasing. Current Return on Assets of +7.52% is another low, well below the QE July 2010 of 10.39% and decreased for the 6th consecutive quarter on the chart. The overall general decline in ROA is because net income is relatively stable while total assets is increasing. The past 2 quarters included restructuring charges, which further decreased ROA. The ROA chart average is 9.05%.

Cisco Growth Rates Below is a chart of the annual (YoY, Y/Y, annual change) growth rates for total revenues and earnings per share. Current Total Revenues Growth of +5% continues the mult-year string of YoY increases, but is the 4th consecutive quarter less than 7%. Current Earnings per Share Growth of -3% reflects the restructuring charges of the most recent 2 quarters. Earnings per share have decreased 4 consecutive quarters. The TRG and EPSG chart averages are +12.50% and +13.53% respectively, but EPSG has been negative 4 consecutive quarters.

Cisco Revenue Sources Below is a chart of quarterly revenue sources. Cisco changed the reporting of these segments beginning the QE October 2011, but did not restate prior quarters. Therefore, only this most recent quarter is provided below.

Cisco Geographic Revenues Below is a chart of quarterly geographic revenues. Cisco changed the reporting of these segments beginning the QE October 2011, but did not restate prior quarters. Therefore, only this most recent quarter is provided below. EMEA is Europe, Middle East, Africa. APJC is Asia Pacific, Japan, China.

Cisco Operating Expense Ratio Below is a chart of quarterly operating expense ratio, which is operating expenses divided by total revenues. The current Operating Expense Ratio of 41.58% has dropped below the historical average, after a spike upwards due to the $768M restructuring charge last quarter. This indicates an increased efficiency plus a higher proportion of revenues is reaching the bottom line, net income and earnings per share. The OER chart average is 42.77%.

Cisco CEO Chambers on Earnings, Market Share

Nov. 10 (Bloomberg) -- John Chambers, chief executive officer of Cisco Systems Inc., talks about the company's fiscal first-quarter profit and U.S. corporate tax policy. Excluding some costs, profit climbed to 43 cents a share, the world's largest maker of networking equipment said yesterday in a statement. Chambers speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

Cisco Reports First Quarter Earnings

SAN JOSE, CA - November 9, 2011 - Cisco (NASDAQ: CSCO)

* Q1 Net Sales: $11.3 billion

* Q1 Net Income: $1.8 billion GAAP; $2.3 billion non-GAAP

* Q1 Earnings per Share: $0.33 GAAP; $0.43 non-GAAP

Cisco (NASDAQ: CSCO), the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its first quarter results for the period ended October 29, 2011. Cisco reported first quarter net sales of $11.3 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.8 billion or $0.33 per share, and non-GAAP net income of $2.3 billion or $0.43 per share.

"We delivered a solid quarter," said John Chambers, Cisco Chairman and CEO. "We've completed the majority of our restructuring and have organized Cisco to successfully execute against our strategy of providing intelligent networks, architectures and integrated products that solve customers' business problems. Even in times of limited capital spending, intelligent networks are being deployed to drive new business, revenue and consumption models, enable new customer and employee experiences, and drive efficiencies. Cisco's leadership in networking, video, collaboration and cloud, offered together in an integrated architectural approach, uniquely positions Cisco as a strategic business partner."

About Cisco

Cisco (NASDAQ: CSCO) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com/.

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