Cisco 2012 Annual Report Download - page 80

Other Purchase Obligations Other purchase obligations represent an estimate of all contractual obligations in the
ordinary course of business, other than operating leases and commitments with contract manufacturers and
suppliers, for which we have not received the goods or services. Purchase orders are not included in the
preceding table as they typically represent our authorization to purchase rather than binding contractual purchase
obligations.
Long-Term Debt The amount of long-term debt in the preceding table represents the principal amount of the
respective debt instruments. See Note 10 to the Consolidated Financial Statements.
Other Long-Term Liabilities Other long-term liabilities primarily include noncurrent income taxes payable,
accrued liabilities for deferred compensation, noncurrent deferred tax liabilities, and certain other long-term
liabilities. Due to the uncertainty in the timing of future payments, our noncurrent income taxes payable of
approximately $1.8 billion and noncurrent deferred tax liabilities of $133 million were presented as one
aggregated amount in the total column on a separate line in the preceding table. Noncurrent income taxes payable
include uncertain tax positions (see Note 15 to the Consolidated Financial Statements) partially offset by
payments.
Other Commitments
In connection with our business combinations and asset purchases, we have agreed to pay certain additional
amounts contingent upon the achievement of agreed-upon technology, development, product, or other milestones
or continued employment with us of certain employees of acquired entities. See Note 12 to the Consolidated
Financial Statements.
We also have certain funding commitments primarily related to our investments in privately held companies and
venture funds, some of which are based on the achievement of certain agreed-upon milestones, and some of
which are required to be funded on demand. The funding commitments were $120 million as of July 28, 2012,
compared with $192 million as of July 30, 2011.
Insieme Networks, Inc. In the third quarter of fiscal 2012, we made an investment in Insieme Networks, Inc.
(“Insieme”), an early-stage company focused on research and development in the data center market. This
investment includes $100 million of funding and a license to certain of our technology. As a result of this
investment, we own approximately 86% of Insieme and have consolidated the results of Insieme in our
Consolidated Financial Statements beginning in the third quarter of fiscal 2012.
In connection with this investment, Insieme and we have entered into a put/call option agreement that provides us
with the right to purchase the remaining interests in Insieme. In addition, the noncontrolling interest holders can
require us to purchase their shares upon the occurrence of certain events. If we acquire the remaining interests of
Insieme, the noncontrolling interest holders are eligible to receive two milestone payments, which will be
determined using agreed-upon formulas based on revenue for certain of Insieme’s products. We will begin
recognizing the amounts due under the milestone payments when it is determined that such payments are
probable of being earned, which we expect may be in fiscal 2014. When such a determination is made, the
milestone payments will then be recorded as compensation expense by us based on an estimate of the fair value
of the amounts probable of being earned, pursuant to a vesting schedule. Subsequent changes to the fair value of
the amounts probable of being earned and the continued vesting will result in adjustments to the recorded
compensation expense. The maximum amount that could be recorded as compensation expense by us is
approximately $750 million. The milestone payments, if earned, are expected to be paid primarily during fiscal
2016 and fiscal 2017.
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