Cisco 2011 Annual Report Download - page 20

capacity, quality, and cost management; oversight of manufacturing; and conditions for use of our intellectual
property. We have not entered into any significant long-term contracts with any manufacturing service provider.
We generally have the option to renew arrangements on an as-needed basis, primarily annually. These
arrangements generally do not commit us to purchase any particular amount or any quantities beyond certain
amounts covered by orders or forecasts that we submit covering discrete periods of time, defined as less than one
year.
Although we employ an outsourced manufacturing strategy, as of July 30, 2011 we operated manufacturing
facilities in Juarez, Mexico for the manufacture of set-top boxes. We have entered into an agreement to sell these
manufacturing operations to a contract manufacturer, consistent with our strategic objective of simplifying our
operating model. The transaction is expected to be completed in fiscal 2012.
Patents, Intellectual Property, and Licensing
We seek to establish and maintain our proprietary rights in our technology and products through the use of
patents, copyrights, trademarks, and trade secret laws. We have a program to file applications for and obtain
patents, copyrights, and trademarks in the United States and in selected foreign countries where we believe filing
for such protection is appropriate. We also seek to maintain our trade secrets and confidential information by
nondisclosure policies and through the use of appropriate confidentiality agreements. We have obtained a
substantial number of patents and trademarks in the United States and in other countries. There can be no
assurance, however, that the rights obtained can be successfully enforced against infringing products in every
jurisdiction. Although we believe the protection afforded by our patents, copyrights, trademarks, and trade
secrets has value, the rapidly changing technology in the networking industry and uncertainties in the legal
process make our future success dependent primarily on the innovative skills, technological expertise, and
management abilities of our employees rather than on the protection afforded by patent, copyright, trademark,
and trade secret laws.
Many of our products are designed to include software or other intellectual property licensed from third parties.
While it may be necessary in the future to seek or renew licenses relating to various aspects of our products, we
believe, based upon past experience and standard industry practice, that such licenses generally could be obtained
on commercially reasonable terms. Nonetheless, there can be no assurance that the necessary licenses would be
available on acceptable terms, if at all. Our inability to obtain certain licenses or other rights or to obtain such
licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could have a
material adverse effect on our business, operating results, and financial condition. Moreover, inclusion in our
products of software or other intellectual property licensed from third parties on a nonexclusive basis can limit
our ability to protect our proprietary rights in our products.
The industry in which we compete is characterized by rapidly changing technology, a large number of patents,
and frequent claims and related litigation regarding patent and other intellectual property rights. There can be no
assurance that our patents and other proprietary rights will not be challenged, invalidated, or circumvented; that
others will not assert intellectual property rights to technologies that are relevant to us; or, that our rights will
give us a competitive advantage. In addition, the laws of some foreign countries may not protect our proprietary
rights to the same extent as the laws of the United States. The risks associated with patents and intellectual
property are more fully discussed in “Item 1A. Risk Factors,” including the risk factors entitled “Our proprietary
rights may prove difficult to enforce,” “We may be found to infringe on intellectual property rights of others,”
and “We rely on the availability of third-party licenses.”
Employees
As of July 30, 2011, we employed approximately 71,825 employees, including approximately 18,368 in service
and manufacturing, approximately 21,112 in engineering, approximately 25,898 in sales and marketing, and
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