Cisco 2012 Annual Report Download - page 42

a material adverse effect on our business, operating results, and financial condition. Efforts to limit the ability of
malicious third parties to disrupt the operations of the Internet or undermine our own security efforts may meet
with resistance. In addition, the continued threat of terrorism and heightened security and military action in
response to this threat, or any future acts of terrorism, may cause further disruptions to the economies of the
United States and other countries and create further uncertainties or otherwise materially harm our business,
operating results, and financial condition. Likewise, events such as widespread blackouts could have similar
negative impacts. To the extent that such disruptions or uncertainties result in delays or cancellations of customer
orders or the manufacture or shipment of our products, our business, operating results, and financial condition
could be materially and adversely affected.
WE ARE EXPOSED TO FLUCTUATIONS IN THE MARKET VALUES OF OUR PORTFOLIO
INVESTMENTS AND IN INTEREST RATES; IMPAIRMENT OF OUR INVESTMENTS COULD
HARM OUR EARNINGS
We maintain an investment portfolio of various holdings, types, and maturities. These securities are generally
classified as available-for-sale and, consequently, are recorded on our Consolidated Balance Sheets at fair value
with unrealized gains or losses reported as a component of accumulated other comprehensive income, net of tax.
Our portfolio includes fixed income securities and equity investments in publicly traded companies, the values of
which are subject to market price volatility to the extent unhedged. If such investments suffer market price
declines, as we experienced with some of our investments during fiscal 2009, we may recognize in earnings the
decline in the fair value of our investments below their cost basis when the decline is judged to be other than
temporary. For information regarding the sensitivity of and risks associated with the market value of portfolio
investments and interest rates, refer to the section titled “Quantitative and Qualitative Disclosures About Market
Risk.” Our investments in private companies are subject to risk of loss of investment capital. These investments
are inherently risky because the markets for the technologies or products they have under development are
typically in the early stages and may never materialize. We could lose our entire investment in these companies.
IF WE DO NOT SUCCESSFULLY MANAGE OUR STRATEGIC ALLIANCES, WE MAY NOT
REALIZE THE EXPECTED BENEFITS FROM SUCH ALLIANCES AND WE MAY EXPERIENCE
INCREASED COMPETITION OR DELAYS IN PRODUCT DEVELOPMENT
We have several strategic alliances with large and complex organizations and other companies with which we
work to offer complementary products and services and have established a joint venture to market services
associated with our Cisco Unified Computing System products. These arrangements are generally limited to
specific projects, the goal of which is generally to facilitate product compatibility and adoption of industry
standards. There can be no assurance we will realize the expected benefits from these strategic alliances or from
the joint venture. If successful, these relationships may be mutually beneficial and result in industry growth.
However, alliances carry an element of risk because, in most cases, we must compete in some business areas with
a company with which we have a strategic alliance and, at the same time, cooperate with that company in other
business areas. Also, if these companies fail to perform or if these relationships fail to materialize as expected,
we could suffer delays in product development or other operational difficulties. Joint ventures can be difficult to
manage, given the potentially different interests of joint venture partners.
OUR STOCK PRICE MAY BE VOLATILE
Historically, our common stock has experienced substantial price volatility, particularly as a result of variations
between our actual financial results and the published expectations of analysts and as a result of announcements
by our competitors and us. Furthermore, speculation in the press or investment community about our strategic
position, financial condition, results of operations, business, security of our products, or significant transactions
can cause changes in our stock price. In addition, the stock market has experienced extreme price and volume
fluctuations that have affected the market price of many technology companies, in particular, and that have often
been unrelated to the operating performance of these companies. These factors, as well as general economic and
political conditions and the announcement of proposed and completed acquisitions or other significant
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