Cisco 2011 Annual Report Download - page 32

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inventory and technology-related write-offs, workforce reduction costs, charges relating to consolidation of
excess facilities, or claims from third parties who were resellers or users of discontinued products. Our estimates
with respect to the useful life or ultimate recoverability of our carrying basis of assets, including purchased
intangible assets, could change as a result of such assessments and decisions. Although in certain instances, our
supply agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business
needs prior to firm orders being placed, our loss contingencies may include liabilities for contracts that we cannot
cancel with contract manufacturers and suppliers. Further, our estimates relating to the liabilities for excess
facilities are affected by changes in real estate market conditions. Additionally, we are required to perform
goodwill impairment tests on an annual basis and between annual tests in certain circumstances, and future
goodwill impairment tests may result in a charge to earnings.
In fiscal 2011 we announced and began implementing restructuring activities designed to lower our operating
costs and to simplify our operating model and concentrate our focus on selected foundational priorities. We have
incurred in the fourth quarter of fiscal 2011 and will continue to incur in the near term significant restructuring
charges as a result of these activities. The changes to our business model may be disruptive, and the revised
model that we adopt may not be more efficient or effective than the aspects of our business model that are being
revised. Our restructuring activities, including any related charges and the impact of the related headcount
reductions, could have a material adverse effect on our business, operating results, and financial condition.
OVER THE LONG TERM WE INTEND TO INVEST IN ENGINEERING, SALES, SERVICE,
MARKETING AND MANUFACTURING ACTIVITIES, AND THESE INVESTMENTS MAY
ACHIEVE DELAYED, OR LOWER THAN EXPECTED BENEFITS WHICH COULD HARM OUR
OPERATING RESULTS
While we intend to focus on managing our costs and expenses, over the long term, we also intend to invest in
personnel and other resources related to our engineering, sales, service, marketing and manufacturing functions
as we focus on our foundational priorities, such as leadership in our core routing, switching and services,
including security and mobility solutions; collaboration; data center virtualization and cloud; video; and
architectures for business transformation. We are likely to recognize the costs associated with these investments
earlier than some of the anticipated benefits, and the return on these investments may be lower, or may develop
more slowly, than we expect. If we do not achieve the benefits anticipated from these investments, or if the
achievement of these benefits is delayed, our operating results may be adversely affected.
OUR BUSINESS SUBSTANTIALLY DEPENDS UPON THE CONTINUED GROWTH OF THE
INTERNET AND INTERNET-BASED SYSTEMS
A substantial portion of our business and revenue depends on growth and evolution of the Internet, including the
continued development of the Internet, and on the deployment of our products by customers who depend on such
continued growth and evolution. To the extent that an economic slowdown or economic uncertainty and related
reduction in capital spending adversely affect spending on Internet infrastructure we could experience material
harm to our business, operating results, and financial condition.
Because of the rapid introduction of new products and changing customer requirements related to matters such as
cost-effectiveness and security, we believe that there could be performance problems with Internet
communications in the future, which could receive a high degree of publicity and visibility. Because we are a
large supplier of networking products, our business, operating results, and financial condition may be materially
adversely affected, regardless of whether or not these problems are due to the performance of our own products.
Such an event could also result in a material adverse effect on the market price of our common stock independent
of direct effects on our business.
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