Cisco 2009 Annual Report Download - page 5

LETTER TO SHAREHOLDERS / ANNUAL REPORT 2009
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In fiscal 2009, product revenue declined by approxi-
mately 12% due in large part to reduced enterprise
and service provider spending across our geographic
theaters. The Public Sector performed better than
other customer markets in fiscal 2009. Service revenue
grew in each of the four quarters of fiscal 2009 to
reach total annual revenue of $7 billion, an increase
of approximately 8% over fiscal 2008. We continue to
believe in the strategic value of our products, services,
and customer relationships.
History has taught us that you don’t change long-term
strategy based upon (what we hope will be) a relatively
short-term economic downturn. However, we believed
that we needed to work differently in order to execute
our strategy of moving into multiple market adjacencies
during such a tenuous time in the global economy. We
forged ahead by reallocating over $1 billion in resources
into market adjacencies in an effort to fuel growth over
the long term. From an operational standpoint, we
pursued a relentless focus on organizational efficiency
and expense management to enable these investments.
We clearly exceeded even our stretch goal for reduced
operating expenses. Earnings per share on a fully
diluted basis for fiscal 2009 were $1.05.
Clearly our ability to reduce expenses in this environ-
ment met a financial priority. We viewed it as prioritizing
our investments in innovation as well. By drawing
hard lines to reduce discretionary expenses, including
travel and meeting costs, we avoided the need
for expense reductions in other areas, specifically
companywide headcount reductions that would have
affected product development and other efforts. Cisco
invested $5.2 billion in research and development
during fiscal 2009. We announced significant, industry-
changing solutions, including the expansion of our
line of Aggregation Services Routers and the Unified
Computing System, our first entry into the server
market. Our unified computing platform is being hailed
by customers and analysts as technology capable of
completely transforming enterprise data centers.
We view our balance sheet as a source of strength and
competitive advantage, especially during economic
downturns. We believe inventory and accounts
receivable levels are appropriate and well managed.
Total assets surpassed $68 billion at the end of fiscal
2009, including $35 billion in cash and investments held
on a global basis. Cash generated from operations was
$9.9 billion in fiscal 2009, a portion of which was used
to repurchase 202 million shares of our common stock.
In fiscal 2009, we completed several acquisitions that
underscore our commitment to build a comprehensive
collaboration portfolio. Fiscal 2009 acquisitions included
Post Path, Inc., a leader in email and calendaring
software; Jabber, Inc., a principal provider of presence
and messaging software; and Pure Digital Technologies,
Inc., creator of the Flip Video family of cameras and
a pioneer in developing consumer-friendly video
solutions. Cisco also acquired Tidal Software, Inc., a
developer of intelligent application management and
automation solutions designed to advance our data
center strategy.
We believe that technology can have a positive effect
on the environment. Through the use of our own
TelePresence technology alone, we saved thousands
of hours of employee and customer travel, resulting in
a dramatically reduced carbon footprint. As part of a
larger ecosystem of customers and suppliers, we are
proud of our ability to influence an even broader carbon
footprint reduction on a global basis.
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