Cisco 2014 Annual Report Download - page 5

Cisco Systems, Inc. 3
Annual Report 2014
Letter to Shareholders
fiscal 2013. Cash, cash equivalents, and investments were
$52.1 billion, and we generated $12.3 billion in cash flows
from operating activities during the fiscal year.
With respect to our fiscal 2014 revenue performance
by geographic segment, the Americas declined by
3%;Europe, the Middle East, and Africa (EMEA) declined
by 2%; and Asia Pacific, Japan, and China (APJC) declined
by 5% as compared with the prior fiscal year. Early in the
year, we called out the challenges in emerging countries,
and those challenges persisted throughout the year.
Economic and geopolitical challenges in Brazil, Russia,
India, China and Mexico (BRICM countries), as well as the
next 15 largest emerging countries, affected our revenue
performance in each of our geographic segments. We saw
growth across our enterprise and commercial segments
throughout the year, with particular strength in the United
States. These are the customer markets that have seen the
early success of our transformation, successfully selling
integrated architectures, solutions, and outcomes. We did
see continued challenges in our Service Provider customer
market. We have identified and tracked these challenges
and are working hard to address them.
From a technology perspective, we have executed very well
in several key areas. Revenue in fiscal 2014 for the Data
Center category increased 27% year over year. Less than
five years after entering the server market with an innovative
architectural approach in our Cisco Unified Computing
System (Cisco UCS), we gained the number-one position
in revenue share for x86 blade servers in the United States,
and we currently have the number-two position worldwide.
Security was another area of strength, growing revenue
by 16% during the year. Our Sourcefire acquisition has
helped accelerate our growth in Security, demonstrating the
relevance and power of an integrated security architecture in
the market today.
Switching revenue fell 5% compared with the prior fiscal
year, driven by declines in our campus switching business,
especially at the high end. In data center switching,
although we see great momentum with our Cisco Nexus
9000 and ACI products, we continue to manage through
product transitions. Similarly, revenue for Next-Generation
Network (NGN) Routing was lower by 7%, but demand for
our new high-end routing product platforms, the Cisco NCS
6000 Series and the CRS-X, has continued to ramp, and
we are focused on continuing to manage the transition to
new platforms in fiscal 2015.
Service revenue increased 4% from the prior fiscal year,
driven by strong renewals, large multiyear service wins,
strong technical services performance, and growth in
new business such as consulting and managed services.
We continue to focus on the integration of our product
and services businesses to deliver the solutions and new
business models our customers are seeking.
LOOKING FORWARD
In our view, the innovations that we have driven in fiscal
2014 in our business model as well as our portfolio—
including new high-end switching and routing products
along with developments in wireless, security, and
collaboration — position us strongly for the future. Today,
we are delivering solutions, not just technology, in a way
we haven’t done in the past. But we still have more to do.
In fiscal 2015 you will see us continue to take actions to
accelerate our transformation in every possible aspect –
from how we are organized, to how we develop products,
to how customers buy from us. Our transformation is about
ensuring we change and accelerate more quickly than
the market, so we can help our customers embrace both
the change and opportunities that come from the market
disruption. We will lean forward in every way to position
Cisco to capitalize on our growth opportunities profitably
and to ensure we are making the decisions to ensure our
long term success. We are investing to lead through market
transitions that will drive value to our customers and to you,
our shareholders.
As we close calendar year 2014 by celebrating Cisco’s
30th anniversary, we have our sights set rmly on becoming
the number one IT company, measured by relevance to
our customers. We believe we will achieve this through
our architectural approach, delivering solutions for our
customers and helping them achieve their desired
outcomes. I would like to take this opportunity to thank all of
you for your unwavering support as we take the bold steps
necessary in pursuit of this goal.
John T. Chambers
Chairman & CEO, Cisco
September 9, 2014