Cisco 2011 Annual Report Download - page 77

and channel partners to enable sales of our products, services, and networking solutions. These financing
arrangements include leases, financed service contracts, and loans. Arrangements related to leases are generally
collateralized by a security interest in the underlying assets. Lease receivables include sales-type and direct-
financing leases. We also provide certain qualified customers financing for long-term service contracts, which
primarily relate to technical support services. Our loan financing arrangements may include not only financing
the acquisition of our products and services but also providing additional funds for other costs associated with
network installation and integration of our products and services. We expect to continue to expand the use of our
financing programs in the near term.
Financing Guarantees In the normal course of business, third parties may provide financing arrangements to our
customers and channel partners under financing programs. The financing arrangements to customers provided by
third parties are related to leases and loans and typically have terms of up to three years. In some cases, we
provide guarantees to third parties for these lease and loan arrangements. The financing arrangements to channel
partners consist of revolving short-term financing provided by third parties, generally with payment terms
ranging from 60 to 90 days. In certain instances, these financing arrangements result in a transfer of our
receivables to the third party. The receivables are de-recognized upon transfer, as these transfers qualify as true
sales, and we receive payments for the receivables from the third party based on our standard payment terms.
These financing arrangements facilitate the working capital requirements of the channel partners, and in some
cases, we guarantee a portion of these arrangements. We could be called upon to make payments under these
guarantees in the event of nonpayment by the channel partners or end-user customers. Historically, our payments
under these arrangements have been immaterial. Where we provide a guarantee, we defer the revenue associated
with the channel partner and end-user financing arrangement in accordance with revenue recognition policies, or
we record a liability for the fair value of the guarantees. In either case, the deferred revenue is recognized as
revenue when the guarantee is removed. During fiscal 2011, the level of guarantees required by our financing
partners decreased, resulting in lower deferred revenue associated with our financing guarantees.
Deferred Revenue Related to Financing Receivables and Guarantees The majority of the deferred revenue in the
preceding table is related to financed service contracts. The revenue related to financed service contracts, which
primarily relates to technical support services, is deferred and included in deferred service revenue. The revenue
related to financed service contracts is recognized ratably over the period during which the related services are to
be performed. A portion of the revenue related to lease and loan receivables is also deferred and included in
deferred product revenue based on revenue recognition criteria.
Borrowings
Senior Notes The following table summarizes the principal amount of our senior notes (in millions):
July 30, 2011 July 31, 2010
Increase
(Decrease)
Senior notes:
Floating-rate notes, due 2014 .............. $ 1,250 $ — $ 1,250
5.25% fixed-rate notes, due 2011 ........... —3,000 (3,000)
2.90% fixed-rate notes, due 2014 ........... 500 500 —
1.625% fixed-rate notes, due 2014 .......... 2,000 — 2,000
5.50% fixed-rate notes, due 2016 ........... 3,000 3,000 —
3.15% fixed-rate notes, due 2017 ........... 750 — 750
4.95% fixed-rate notes, due 2019 ........... 2,000 2,000 —
4.45% fixed-rate notes, due 2020 ........... 2,500 2,500 —
5.90% fixed-rate notes, due 2039 ........... 2,000 2,000 —
5.50% fixed-rate notes, due 2040 ........... 2,000 2,000 —
Total ............................. $16,000 $15,000 $ 1,000
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