Cisco 2015 Annual Report Download - page 4

2 Cisco Systems, Inc.
Annual Report 2015
Letter to Shareholders
Our portfolio of cloud assets, including Sourcere, Meraki,
WebEx, and Cisco Spark, is enabling us to deliver our
technology in the ways our customers want to buy it in the
future. We intend to take this foundation and replicate it
across our entire portfolio.
Solid Execution
At Cisco, we have always made the tough choices to be
positioned for where the market is going and challenged
ourselves to reinvent in order to create long-term value
for shareholders. Over the past year, we have continued to
drive change in our business as we prioritized the elements
of our portfolio—cloud, security, collaboration, automation,
and analytics—that are driving the most value for our
customers.
We have made signicant changes in our engineering
organization to foster cross-functional development, and we
have continued the integration of our product and services
sales teams into a unied sales force to create a more
solutions-centric approach in our go-to-market and partner
engagements. We are building more agile, small teams that
are working jointly with our customers to develop solutions
to help them achieve their business outcomes.
During the year, we continued to optimize our portfolio
with strategic acquisitions as well as some divestments. To
strengthen our security business, we acquired Neohapsis,
a provider of security consulting services, and, in the fourth
quarter, we announced our intention to acquire OpenDNS, a
cloud-based security company.
We also expanded our cloud oerings by acquiring
Metacloud and Piston Cloud Computing, which will help
us build our OpenStack capabilities. Our strategy with
Intercloud is to deliver integrated, secure, hybrid cloud
solutions to enable our customers to easily consume cloud
services on demand.
In the fourth quarter, we announced an exclusive agreement
to sell the client premises equipment portion of our Service
Provider Video business to Technicolor, as we refocus
our investments and accelerate our momentum in service
provider video toward cloud, security, and software-based
services.
We plan to continue to build, buy, partner, invest, and
co-innovate with our customers in order to seize market
transitions in new markets as well as extend our leadership
in our current business. Our mergers and acquisitions
approach will remain balanced: maintaining discipline in
light of market conditions while making key strategic moves
that cement our competitive dierentiation for the future.
Financial Highlights
For scal 2015, revenue was $49.2 billion, an increase
of 4% compared with scal 2014, reecting refreshes
across almost every product area and eective resource
reallocations to growth areas. Product revenue was $37.8
billion, and service revenue was $11.4 billion, both also
increasing 4% year over year. Deferred revenue was $15.2
billion, increasing 7%, due largely to increased software
and subscription oerings, which we expect will continue
to grow in the overall mix. At the end of the year, recurring
revenue accounted for 46% of our product deferred
revenue. Net income was $9.0 billion, up 14% from scal
2014, while earnings per share on a fully diluted basis were
$1.75, up 17% year over year.
Our balance sheet remains strong, with total assets at the
end of scal 2015 of $113.5 billion, representing an 8%
increase from scal 2014. Cash, cash equivalents, and
investments were $60.4 billion, and we generated $12.6
billion in cash ows from operating activities during the
year.
With respect to our scal 2015 revenue performance
by geographic segment, the Americas increased by
7% year over year; Europe, the Middle East, and Africa
(EMEA) increased by 3%; and Asia Pacic, Japan, and
China (APJC) declined by 2%. The challenges we have
been experiencing in emerging countries persisted, and
we expect this volatility to continue for some time. We
saw good growth in our Commercial, Public Sector, and
Enterprise customer markets throughout the year, with
particular strength in the United States. We also saw
an improvement in revenue from our Service Provider
customer market in the last half of scal 2015, following
more than a year of negative growth due to market
consolidation and regulatory challenges. We believe we are
well positioned with our service provider customers and are
focused on growing our wallet share with them.
From a technology perspective, we executed very well
in several key areas. Revenue in scal 2015 for the
Data Center category increased 22% year over year,
with the continued market leadership of the Cisco UCS
platform. Security was another area of strength, growing