Cisco 2009 Annual Report Download - page 4

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LETTER TO SHAREHOLDERS / CISCO SYSTEMS, INC
2
The networking and information technology market
was clearly in transition, but capturing market
transitions is what Cisco does best. We believe
the network as a strategic asset has never been
more relevant. Cisco products and solutions enable
business and government transformation, healthcare
connections, improved education, and a richer
consumer experience. The Internet is everywhere.
Providing products and solutions to enable more
robust video delivery is key to Cisco’s differentiation.
It may have seemed a lofty statement years ago when
we said that the network will change the way people
work, live, play, and learn. Now more than ever, our
vision is becoming reality.
Strategy /
Reaching Market Adjacencies Through a New
Management Model
The next phase of the Internet and its potential
applications are fascinating. Our company is addressing
no fewer than 30 market adjacencies, mostly in areas
where networking technology and protocols have
not seen widespread adoption. Industries such as
healthcare, sports, entertainment, and utilities, as well
as emerging geographic markets like China and India,
provide significant opportunity to provide growth for
Cisco and value to customers and shareholders.
Capturing these opportunities requires that Cisco
move with speed, internal alignment, and thought
leadership. To accomplish this, we are pioneering
a new management model based on Councils and
Boards. Councils and Boards collaborate to set
long-term direction for Cisco business strategies.
They champion investments and prioritize market
adjacencies based on go-to-market opportunities.
Council and Board members represent diverse
functions within the company, and are empowered
to make decisions at the organizational level to help
ensure that initiatives and goals are aligned throughout
the company.
Involving leaders across the organization is designed
to produce balanced results across product lines and
customer segments. In fiscal 2009, routing accounted
for approximately 17% of total revenue, switching
was approximately 33%, advanced technologies
totaled 26%, and other revenue was approximately
5%. Service revenue grew to approximately 19%
of total revenue in fiscal 2009. In terms of customer
segments, Enterprise represents approximately 40%
of our business, Service Provider is approximately
30%, Commercial provides approximately 25%, and
Consumer provides approximately 5%. Balance across
product lines and customer segments has historically
allowed Cisco’s overall financial performance to better
withstand downturns in any one particular business
segment.
Execution /
Operational Efficiency that Drives Innovation
Cisco recorded near record quarterly revenue of
$10.3 billion in the first quarter of fiscal year 2009, yet
the remainder of the year was affected by monumental
global recession. We are pleased with our overall
performance in fiscal 2009 given the global recession.
Revenue in fiscal 2009 was $36.1 billion, a decrease of
9% year over year from our highest annual revenue ever.
In the fourth quarter of fiscal 2009, we experienced our
only quarterly sequential increase in revenue during
fiscal 2009. While the stabilization of fourth quarter
results was encouraging, we are unable to determine
whether or not this possible improvement in the global
macroeconomic environment is sustainable.
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