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2 Cisco Systems, Inc.
Annual Report 2012
Letter to Shareholders
Olympic Games. Cisco technology and
solutions helped connect an estimated 10
million spectators, 76,000 volunteers, and
22,000 athletes and coaches in a way
never before possible.
One of Cisco’s key differentiators over
the years has been our ability to capture
market transitions which drive innovation
that enables our customers’ long-term
success. Market transitions have never
occurred at a faster pace than we are
seeing today. At the heart of each of
these transitions—cloud, mobility, video,
any device, social networking, and
virtual networks—is the network. Make
no mistake about it: Cisco is focused on
driving the opportunities created by these
transitions, and in our view we have never
been more relevant than we are today.
A key market transition currently
underway is the evolution towards
more programmable, flexible, and
virtual networks. We believe customers
understand that optimizing the hardware,
ASICs, and software elements of their
networks together will drive consistent
experience, policy, security, and mobility.
In our view, this market transition plays
directly to our expertise: Cisco pioneered
network virtualization in 2009 with the
introduction of the Nexus 1000V Series,
the first virtualized switch that today has
more than 6,000 production customers.
Cisco almost always leads the way as
these transitions develop. We intend to
lead this transition through a combination
of internal development, internal
start-ups, acquisitions, and partnering.
From a technology standpoint, in fiscal
2012 we continued to prioritize our
actions and investments around our five
foundational priorities, which consist of
leadership in the core business (routing,
switching, and services); data center
(virtualization/cloud); collaboration;
video; and architectures for business
transformation. By catching market
transitions and listening to our customers,
we continue to execute on our goal
of driving innovation and sustainable
differentiation, which is the lifeblood of
Cisco.
EXECUTION
We are all aware of the challenges
associated with the uncertain
macroeconomic climate during the fiscal
2012 period, and that makes us even
more pleased with our record revenue
and earnings per share during this time.
The company also grew profits faster
than revenue, as we had committed
to do with our operating model of
disciplined decision making, sound
portfolio management, strong operational
execution, and a focus on driving
profitable growth.
For fiscal 2012, Cisco reported net
sales of $46.1 billion, an increase of 7%
compared to fiscal 2011. Fiscal 2012
product sales were $36.3 billion, up
5% compared to fiscal 2011. Illustrating
the value of Cisco’s role as a strategic
business partner to customers worldwide,
our service revenue grew 12% in fiscal
2012 to $9.7 billion.
Net income for fiscal 2012 was $8.0
billion, representing an increase of 24%
from fiscal 2011. Earnings per share
on a fully-diluted basis were $1.49, an
increase of 27% compared to the prior
fiscal year.
During periods of uncertainty, our
strong balance sheet continues to be
a competitive advantage. Total assets
were $91.8 billion at the end of fiscal