Cisco 2014 Annual Report Download - page 18

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For information regarding risks relating to our international operations, see “Item 1A. Risk Factors,” including the risk factors
entitled “Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain
geopolitical environment”; “Entrance into new or developing markets exposes us to additional competition and will likely
increase demands on our service and support operations”; “Due to the global nature of our operations, political or economic
changes or other factors in a specific country or region could harm our operating results and financial condition”; “We are
exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows”; and
“Man-made problems such as computer viruses or terrorism may disrupt our operations and harm our operating results,”
among others.
Our service offerings complement our products through a range of consulting, technical, project, quality, and software
maintenance services, including 24-hour online and telephone support through technical assistance centers.
Financing Arrangements
We provide financing arrangements for certain qualified customers to build, maintain, and upgrade their networks. We believe
customer financing is a competitive factor in obtaining business, particularly in serving customers involved in significant
infrastructure projects. Our financing arrangements include the following:
Leases:
• Sales-type
• Direct financing
• Operating
Loans
Financed service contracts
For additional information regarding these financing arrangements, see Note 7 to the Consolidated Financial Statements.
Product Backlog
Our product backlog at July 26, 2014, the last day of fiscal 2014, was approximately $5.4 billion, compared with product
backlog of approximately $4.9 billion at July 27, 2013, the last day of fiscal 2013. The product backlog includes orders
confirmed for products scheduled to be shipped within 90 days to customers with approved credit status. Because of the
generally short cycle between order and shipment and occasional customer changes in delivery schedules or cancellation of
orders (which are made without significant penalty), we do not believe that our product backlog, as of any particular date, is
necessarily indicative of actual product revenue for any future period.
Acquisitions, Investments, and Alliances
The markets in which we compete require a wide variety of technologies, products, and capabilities. Our growth strategy is
based on the three components of innovation, which we sometimes refer to as our “build, buy, and partner” approach. The
foregoing is a way of describing how we strive to innovate: we can internally develop, or build, our own innovative solutions;
we can acquire, or buy, companies with innovative technologies; and we can partner with companies to jointly develop and/or
resell product technologies and innovations. The combination of technological complexity and rapid change within our
markets makes it difficult for a single company to develop all of the technological solutions that it desires to offer within its
family of products and services. We work to broaden the range of products and services we deliver to customers in target
markets through acquisitions, investments, and alliances. To summarize, we employ the following strategies to address the
need for new or enhanced networking and communications products and services:
• Developing new technologies and products internally
• Acquiring all or parts of other companies
• Entering into joint development efforts with other companies
• Reselling other companies’ products
Acquisitions
We have acquired many companies, and we expect to make future acquisitions. Mergers and acquisitions of high-technology
companies are inherently risky, especially if the acquired company has yet to ship a product. No assurance can be given that our
previous or future acquisitions will be successful or will not materially adversely affect our financial condition or operating results.
Prior acquisitions have resulted in a wide range of outcomes, from successful introduction of new products and technologies to an
inability to do so. The risks associated with acquisitions are more fully discussed in “Item 1A. Risk Factors,” including the risk
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