Cisco 2011 Annual Report Download - page 16

strategy for serving the consumer market is through its service provider customers, and to a lesser extent through
major consumer channels, including through both traditional and online retailers, through our website, and
through value added resellers.
Sales Overview
As of the end of fiscal 2011, our worldwide sales and marketing department consisted of approximately 25,898
employees, including managers, sales representatives, and technical support personnel. We have field sales
offices in approximately 95 countries, and we sell our products and services both directly and through a variety
of channels with support from our salesforce. A substantial portion of our products and services is sold through
our channel partners, and the remainder is sold through direct sales. Our channel partners include systems
integrators, service providers, other resellers, distributors, and retail partners.
Systems integrators and service providers typically sell directly to end users and often provide system
installation, technical support, professional services, and other support services in addition to network equipment
sales. Systems integrators also typically integrate our products into an overall solution. Some service providers
are also systems integrators.
Distributors hold inventory and typically sell to systems integrators, service providers, and other resellers. In
addition, home networking products are generally sold through distributors and retail partners. We refer to sales
through distributors and retail partners as our two-tier system of sales to the end customer. Revenue from
distributors and retail partners generally is recognized based on a sell-through method using information
provided by them. These distributors and retail partners are generally given business terms that allow them to
return a portion of inventory, receive credits for changes in selling prices, and participate in various cooperative
marketing programs.
For information regarding risks related to our channels, see “Item 1A. Risk Factors,” including the risk factors
entitled “Disruption of or changes in our distribution model could harm our sales and margins” and “Our
inventory management relating to our sales to our two-tier distribution channel is complex, and excess inventory
may harm our gross margins.”
For information regarding risks relating to our international operations, see “Item 1A. Risk Factors,” including
the risk factors entitled “Our operating results may be adversely affected by unfavorable economic and market
conditions and the uncertain geopolitical environment”; “Entrance into new or developing markets exposes us to
additional competition and will likely increase demands on our service and support operations”; “Due to the
global nature of our operations, political or economic changes or other factors in a specific country or region
could harm our operating results and financial condition”; “We are exposed to fluctuations in currency exchange
rates that could negatively impact our financial results and cash flows”; and “Man-made problems such as
computer viruses or terrorism may disrupt our operations and harm our operating results”, among others.
Our service offerings complement our products through a range of consulting, technical, project, quality, and
maintenance services, including 24-hour online and telephone support through technical assistance centers.
We provide financing arrangements, such as leases, financed service contracts, and loans, for certain qualified
customers to build, maintain, and upgrade their networks. We believe customer financing is a competitive factor
in obtaining business, particularly in serving customers involved in significant infrastructure projects. Leases
include sales-type, direct financing, and operating leases. We also provide certain qualified customers with the
option of financing long-term service contracts, which primarily relate to technical support services and typically
range from one to three years. Our loan financing arrangements may include not only financing for the
acquisition of our products and services, but also may provide additional funds for other costs associated with
network installation and integration of our products and services. For additional information regarding these
financing arrangements, see Note 7 to the Consolidated Financial Statements.
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