Cisco 2004 Annual Report Download - page 61

12. SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company’s operations involve the design, development, manufacturing, marketing, and technical support of networking and
communications products and services. Cisco products include routers, switches, Advanced Technologies, and other networking equipment.
These products, primarily integrated by Cisco IOS Software, link geographically dispersed LANs and WANs.
The Company conducts business globally and is managed geographically. The Company’s management makes financial decisions and
allocates resources based on the information it receives from its internal management system. Prior to fiscal 2004, the Company’s
management relied on the internal management system to provide sales and standard cost information by geographic theater. Beginning
in fiscal 2004, production overhead and manufacturing variances and other related costs in the cost of sales information are attributed
to each geographic theater in the internal management system. As a result, effective in fiscal 2004, the Company’s management uses
gross margin by geographic theater, and prior period information has been reclassified to conform to the current period’s presentation.
Sales are attributed to a geographic theater based on the ordering location of the customer. The Company does not allocate research
and development, sales and marketing, or general and administrative expenses to its geographic theaters in this internal management
system, as management does not currently use the information to measure the performance of the operating segments. Based on
established criteria, the Company has four reportable segments: the Americas, EMEA, Asia Pacific, and Japan.
Summarized financial information by theater for fiscal 2004, 2003, and 2002, as taken from the internal management system
previously discussed, is as follows (in millions):
Years Ended July 31, 2004 July 26, 2003 July 27, 2002
Net sales:
Americas $12,233 $10,544 $10,654
EMEA 6,126 5,202 5,126
Asia Pacific 2,230 1,860 1,765
Japan 1,456 1,272 1,370
Total $22,045 $18,878 $18,915
Gross margin:
Americas $ 8,274 $ 7,340 $ 6,733
EMEA 4,244 3,659 3,269
Asia Pacific 1,532 1,313 1,121
Japan 1,076 921 890
Total $15,126 $13,233 $12,013
The Americas theater included non-U.S. net sales of $1.1 billion, $888 million, and $988 million for fiscal 2004, 2003, and 2002, respectively.
The following table presents net sales for groups of similar products and services (in millions):
Years Ended July 31, 2004 July 26, 2003 July 27, 2002
Net sales:
Routers $ 5,406 $ 4,859 $ 5,487
Switches 8,881 7,721 7,651
Advanced Technologies 3,435 2,004 1,556
Other 828 981 975
Product 18,550 15,565 15,669
Service 3,495 3,313 3,246
Total $ 22,045 $18,878 $18,915
The Company reclassified net sales for groups of similar products in fiscal 2003 and 2002 to conform to the current year’s presentation.
The reclassification was related to the separate classification of net sales of Advanced Technology products, which were previously included
in the “Access” and “Other” product categories, and the elimination of the separate classification of net sales of Access products.
The Company refers to some of its products and technologies as Advanced Technologies. The Company has currently identified
six Advanced Technologies for particular focus: home networking, IP telephony, optical networking, security, storage area networking,
and wireless technology. The Company may identify additional Advanced Technologies for focus and investment in the future, and
the Company’s investments in some previously identified Advanced Technologies may be curtailed or eliminated depending on
market developments.
64 CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS