Cisco 2011 Annual Report Download - page 46

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Annual Report on Form 10-K, including this 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,” “endeavors,” “strives,” “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, under “Part I, Item 1A. Risk
Factors,” and elsewhere herein. 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 design, manufacture, and sell Internet Protocol (IP)-based networking and other products related to the
communications and information technology (IT) industry and provide services associated with these products
and their use. Our products and services are designed to address a wide range of customers’ needs, including
improving productivity, reducing costs, and gaining a competitive advantage. In addition, our products and
services are designed to 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. We focus on delivering networking products and solutions that are designed
to simplify and secure customers’ network infrastructures. We believe that integrating multiple network services
into our products helps our customers reduce their total cost of network ownership. Our product offerings fall
into the following four categories: our two core technology categories, Routing and Switching; New Products;
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, including enterprise businesses (including public sector entities), service
providers, commercial customers, and consumers.
A summary of our results is as follows (in millions, except percentages and per-share amounts):
Fiscal 2011 Fiscal 2010 Variance
Net sales ............................................ $43,218 $40,040 7.9%
Gross margin percentage ............................... 61.4% 64.0% (2.6)pts
Research and development ............................. $ 5,823 $ 5,273 10.4%
Sales and marketing ................................... $ 9,812 $ 8,782 11.7%
General and administrative ............................. $ 1,908 $ 1,933 (1.3)%
TotalR&D,salesandmarketing,generalandadministrative .... $17,543 $15,988 9.7%
Total as a percentage of revenue ......................... 40.6% 39.9% 0.7pts
Amortization of purchased intangible assets ................ $ 520 $ 491 5.9%
Restructuring and other charges ......................... $ 799 $— NM
Operating margin percentage ............................ 17.8% 22.9% (5.1)pts
Net income .......................................... $ 6,490 $ 7,767 (16.4)%
Net income as a percentage of revenue .................... 15.0% 19.4% (4.4)pts
Earnings per share – diluted ............................ $ 1.17 $ 1.33 (12.0)%
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