Cisco 2007 Annual Report Download - page 16

2007 Annual Report 19
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding
future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and
the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts are statements that could
be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about
the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,”
“goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words and similar expressions are
intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance,
our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking
statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties,
and assumptions that are difficult to predict, including those identified below, as well as on the inside back cover of this Annual Report to
Shareholders and under Part I, Item 1A. Risk Factors and elsewhere in our Annual Report on Form 10-K. Therefore, actual results may differ
materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any
forward-looking statements for any reason.
Overview
We sell Internet Protocol (IP)-based networking and other products and services related to the communications and information technology
industry. Our products and services are designed to address a wide range of customers’ business needs, including improving productivity,
reducing costs, and gaining a competitive advantage. Our corresponding technology focus is on delivering networking products and
solutions that simplify and secure customers’ infrastructures and offer integrated services. Our products and services help customers
build their own network infrastructures that support tools and applications that allow them to communicate with key stakeholders, including
customers, prospects, business partners, suppliers, and employees. Our product offerings fall into several categories: our core technologies,
routing and switching; advanced technologies; and other products. In addition to our product offerings, we provide a broad range of service
offerings, including technical support services and advanced services. Our customer base spans virtually all types of public and private
agencies and businesses, comprising large enterprise companies, service providers, commercial customers, and consumers.
In fiscal 2007, we achieved record financial results. Our results for fiscal 2007 reflected increases in net sales, net income, and net
income per diluted share from fiscal 2006, as we have continued to achieve balance in year-over-year revenue growth from our four largest
geographic theaters, our customer markets, and our product families. We believe this balance is attributable in part to the successful
implementation of our strategy. Net income and net income per diluted share both increased by 31% in fiscal 2007 compared with fiscal 2006.
The results for fiscal 2007 include the full fiscal year results of our acquisition of Scientific-Atlanta, while the results for fiscal 2006
only reflect Scientific-Atlanta’s contribution subsequent to the February 2006 acquisition date. With the acquisition of Scientific-Atlanta,
we have enhanced our video capabilities to help enable the convergence of data, voice and video technologies. In addition, we seek to
form and strengthen strategic business relationships with key service provider customers, and to reach a broad range of consumers with
our enhanced product line as a result of the acquisition. We believe that video applications, including our unified communications and
TelePresence products, have the potential to accelerate the growth of bandwidth demands and to increase loads on networks, which may
require upgrades to existing networks.
Revenue
Net sales increased by 23% in fiscal 2007 compared with fiscal 2006. Revenue increased in our four largest geographic theaters in fiscal
2007 compared with fiscal 2006, primarily in the service provider, commercial, and enterprise markets. The increase in our revenue also
reflects good balance across our product lines. The largest proportion of the increase in net product sales was related to higher sales of
advanced technologies. Sales of our advanced technologies, which represented a larger proportion of our net product sales than routing,
increased by approximately 44% over fiscal 2006 due to the additional contribution of Scientific-Atlanta, and also due to strength in sales
of our unified communications, security, wireless, and storage products. The increase in our sales of advanced technologies reflects our
balanced product portfolio and our efforts to constantly evolve into new markets and product adjacencies.
In fiscal 2007, we also experienced strength in routing, led primarily by our high-end routers, and in switching, led by our fixed-configuration
and modular switches. We also have been focused on expanding our service model. In fiscal 2007, our net service revenue increased
by approximately 20% compared with fiscal 2006. Our service and support strategy seeks to capitalize on increased globalization, and
we believe this strategy, along with our architectural approach, has the potential to further differentiate us from competitors.