Cisco Systems (CSCO) 10-Q 17 Feb 10 2010 Q2 Quarterly report Financial data

Consolidated Balance Sheets

Consolidated Balance Sheets (USD $)
In Millions	Jan. 23, 2010	Jul. 25, 2009
Current assets:
Cash and cash equivalents	$4,710	$5,718
Investments	34,928	29,283
Accounts receivable, net of allowance for doubtful accounts of $240 at January 23, 2010 and $216 at July 25, 2009	4,237	3,177
Inventories	1,215	1,074
Deferred tax assets	2,233	2,320
Other current assets	2,816	2,605
Total current assets	50,139	44,177
Property and equipment, net	3,958	4,043
Goodwill	14,423	12,925
Purchased intangible assets, net	2,661	1,702
Other assets	5,222	5,281
TOTAL ASSETS	76,403	68,128
Current liabilities:
Accounts payable	750	675
Income taxes payable	103	166
Accrued compensation	2,207	2,535
Deferred revenue	6,751	6,438
Other current liabilities	4,594	3,841
Total current liabilities	14,405	13,655
Long-term debt	15,194	10,295
Income taxes payable	1,941	2,007
Deferred revenue	2,906	2,955
Other long-term liabilities	425	539
Total liabilities	34,871	29,451
Cisco shareholders' equity:
Preferred stock, no par value: 5 shares authorized; none issued and outstanding	0	0
Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 5,734 and 5,785 shares issued and outstanding at January 23, 2010 and July 25, 2009, respectively	35,687	34,344
Retained earnings	5,086	3,868
Accumulated other comprehensive income	739	435
Total Cisco shareholders' equity	41,512	38,647
Noncontrolling interests	20	30
Total equity	41,532	38,677
TOTAL LIABILITIES AND EQUITY	$76,403	$68,128

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Per Share data	Jan. 23, 2010	Jul. 25, 2009
Accounts receivable, allowance for doubtful accounts	$240	$216
Preferred stock, par value	$0	$0
Preferred stock, shares authorized	5	5
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value	0.001	0.001
Common stock, shares authorized	20,000	20,000
Common stock, shares issued	5,734	5,785
Common stock, shares outstanding	5,734	5,785

Consolidated Statements of Oper

Consolidated Statements of Operations (USD $)
In Millions, except Per Share data	3 Months Ended Jan. 23, 2010	3 Months Ended Jan. 24, 2009	6 Months Ended Jan. 23, 2010	6 Months Ended Jan. 24, 2009
NET SALES:
Product	$7,976	$7,347	$15,176	$15,982
Service	1,839	1,742	3,660	3,438
Total net sales	9,815	9,089	18,836	19,420
COST OF SALES:
Product	2,815	2,737	5,301	5,718
Service	668	629	1,315	1,298
Total cost of sales	3,483	3,366	6,616	7,016
GROSS MARGIN	6,332	5,723	12,220	12,404
OPERATING EXPENSES:
Research and development	1,247	1,279	2,471	2,685
Sales and marketing	2,110	2,155	4,105	4,438
General and administrative	467	380	907	775
Amortization of purchased intangible assets	138	136	243	248
In-process research and development	0	0	0	3
Total operating expenses	3,962	3,950	7,726	8,149
OPERATING INCOME	2,370	1,773	4,494	4,255
Interest income	155	222	323	481
Interest expense	(158)	(63)	(272)	(127)
Other income (loss), net	(12)	(64)	49	(136)
Interest and other income (loss), net	(15)	95	100	218
INCOME BEFORE PROVISION FOR INCOME TAXES	2,355	1,868	4,594	4,473
Provision for income taxes	502	364	954	768
NET INCOME	$1,853	$1,504	$3,640	$3,705
Net income per share:
Basic	0.32	0.26	0.63	0.63
Diluted	0.32	0.26	0.62	0.63
Shares used in per-share calculation:
Basic	5,741	5,848	5,754	5,865
Diluted	5,862	5,864	5,866	5,901

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Millions	6 Months Ended Jan. 23, 2010	6 Months Ended Jan. 24, 2009
Cash flows from operating activities:
Net income	$3,640	$3,705
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other noncash items	942	818
Share-based compensation expense	692	602
Provision for doubtful accounts	36	59
Deferred income taxes	(117)	(293)
Excess tax benefits from share-based compensation	(49)	(21)
In-process research and development	0	3
Net (gains) losses on investments	(84)	123
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(994)	818
Inventories	(80)	113
Lease receivables, net	(137)	(109)
Accounts payable	58	(228)
Income taxes payable	(68)	467
Accrued compensation	(346)	(213)
Deferred revenue	190	544
Other assets	(202)	(470)
Other liabilities	493	(2)
Net cash provided by operating activities	3,974	5,916
Cash flows from investing activities:
Purchases of investments	(23,020)	(24,110)
Proceeds from sales of investments	6,282	12,545
Proceeds from maturities of investments	11,278	6,920
Acquisition of property and equipment	(408)	(585)
Acquisition of businesses, net of cash and cash equivalents acquired	(2,308)	(327)
Change in investments in privately held companies	(69)	(53)
Other	60	(54)
Net cash used in investing activities	(8,185)	(5,664)
Cash flows from financing activities:
Issuance of common stock	1,436	441
Repurchase of common stock	(3,244)	(1,603)
Issuance of long-term debt	4,944	0
Settlements of interest rate derivatives related to long-term debt	23	0
Excess tax benefits from share-based compensation	49	21
Other	(5)	(127)
Net cash provided by (used in) financing activities	3,203	(1,268)
Net decrease in cash and cash equivalents	(1,008)	(1,016)
Cash and cash equivalents, beginning of period	5,718	5,191
Cash and cash equivalents, end of period	$4,710	$4,175

Consolidated Statements of Equi

Consolidated Statements of Equity (USD $)
In Millions	3 Months Ended Jan. 23, 2010	3 Months Ended Jan. 24, 2009	6 Months Ended Jan. 23, 2010	6 Months Ended Jan. 24, 2009	Jul. 25, 2009	Jul. 26, 2008
Beginning Balance			$38,677	$34,402
Net income	1,853	1,504	3,640	3,705
Change in unrealized gains and losses on investments			195	(178)
Change in derivative instruments			15	(151)
Change in cumulative translation adjustment and other			84	(434)
Comprehensive income (loss)			3,934	2,942
Issuance of common stock			1,436	441
Repurchase of common stock			(3,324)	(1,615)
Tax benefits from employee stock incentive plans			35	16
Purchase acquisitions			82	13
Share-based compensation expense			692	602
Ending Balance	41,532	36,801	41,532	36,801	38,677	34,402
Shares of Common Stock
Beginning Balance (in shares)			5,785	5,893
Issuance of common stock (in shares)			91	34
Repurchase of common stock (in shares)			(142)	(83)
Ending Balance (in shares)	5,734	5,844	5,734	5,844	5,785	5,893
Common Stock and Additional Paid-In Capital
Beginning Balance			34,344	33,505
Issuance of common stock			1,436	441
Repurchase of common stock			(902)	(485)
Tax benefits from employee stock incentive plans			35	16
Purchase acquisitions			82	13
Share-based compensation expense			692	602
Ending Balance	35,687	34,092	35,687	34,092	34,344	33,505
Retained Earnings
Beginning Balance			3,868	120
Net income			3,640	3,705
Repurchase of common stock			(2,422)	(1,130)
Ending Balance	5,086	2,695	5,086	2,695	3,868	120
Accumulated Other Comprehensive Income
Beginning Balance			435	728
Change in unrealized gains and losses on investments			205	(147)
Change in derivative instruments			15	(151)
Change in cumulative translation adjustment and other			84	(434)
Ending Balance	739	(4)	739	(4)	435	728
Total Cisco Shareholders' Equity
Beginning Balance			38,647	34,353
Net income			3,640	3,705
Change in unrealized gains and losses on investments			205	(147)
Change in derivative instruments			15	(151)
Change in cumulative translation adjustment and other			84	(434)
Comprehensive income (loss)			3,944	2,973
Issuance of common stock			1,436	441
Repurchase of common stock			(3,324)	(1,615)
Tax benefits from employee stock incentive plans			35	16
Purchase acquisitions			82	13
Share-based compensation expense			692	602
Ending Balance	41,512	36,783	41,512	36,783	38,647	34,353
Noncontrolling Interests
Beginning Balance			30	49
Change in unrealized gains and losses on investments			(10)	(31)
Comprehensive income (loss)			(10)	(31)
Ending Balance	$20	$18	$20	$18	$30	$49

Supplemental Information

Supplemental Information
	6 Months Ended Jan. 23, 2010 USD / shares
Supplemental Information	Supplemental Information In September 2001, the Companys Board of Directors authorized a stock repurchase program. As of January23, 2010, the Companys Board of Directors had authorized an aggregate repurchase of up to $72 billion of common stock under this program with no termination date. For additional information regarding stock repurchases, see Note 12 to the Consolidated Financial Statements. The stock repurchases since the inception of this program and the related impact on Cisco shareholders equity are summarized in the table below (in millions): Sharesof Common Stock CommonStock and Additional Paid-In Capital Retained Earnings Total Cisco Shareholders Equity Repurchases of common stock under the repurchase program 2,941 $ 11,571 $ 48,861 $ 60,432

Basis of Presentation

Basis of Presentation
	6 Months Ended Jan. 23, 2010 USD / shares
Basis of Presentation	1. Basis of Presentation The fiscal year for Cisco Systems, Inc. (the Company or Cisco) is the 52 or 53 weeks ending on the last Saturday in July. Fiscal 2010 is a 53-week fiscal year and fiscal 2009 was a 52-week fiscal year. The Consolidated Financial Statements include the accounts of Cisco and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company conducts business globally and is primarily managed on a geographic basis in the following theaters: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. The Emerging Markets theater consists of Eastern Europe, Latin America, the Middle East and Africa, and Russia and the Commonwealth of Independent States. The accompanying financial data as of January23, 2010 and for the three and six months ended January23, 2010 and January24, 2009 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. The July25, 2009 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto, included in the Companys Annual Report on Form 10-K for the fiscal year ended July25, 2009. In the opinion of management, all adjustments (which include normal recurring adjustments, except as disclosed herein) necessary to present fairly the statement of financial position as of January23, 2010, and results of operations for the three and six months ended January23, 2010 and January24, 2009, cash flows, and equity for the six months ended January23, 2010 and January24, 2009, as applicable, have been made. The results of operations for the three and six months ended January23, 2010 are not necessarily indicative of the operating results for the full fiscal year or any future periods. The Company has made certain reclassifications to prior period amounts relating to net sales for similar groups of products, and gross margin by theater, due to refinement of the respective categories. The Company has made certain other reclassifications to prior period amounts in order to conform to the current periods presentation. The Company has evaluated subsequent events through the date that the financial statements were issued, February 16, 2010, based on the accounting guidance for subsequent events.

Summary of Significant Accounti

Summary of Significant Accounting Policies
	6 Months Ended Jan. 23, 2010 USD / shares
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies (a) New Accounting Standards Recently Adopted Revenue Recognition for Arrangements with Multiple Deliverables In October 2009, the Financial Accounting Standards Board (FASB) amended the accounting standards for revenue recognition to remove tangible products containing software components and nonsoftware components that function together to deliver the products essential functionality from the scope of industry-specific software revenue recognition guidance. In October 2009, the FASB also amended the accounting standards for multiple deliverable revenue arrangements to: (i) provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the consideration should be allocated; (ii) require an entity to allocate revenue in an arrangement using estimated selling prices (ESP) of deliverables if a vendor does not have vendor-specific objective evidence of selling price (VSOE) or third-party evidence of selling price (TPE); and (iii) eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method. The Company elected to early adopt this accounting guidance at the beginning of its first quarter of fiscal 2010 on a prospective basis for applicable transactions originating or materially modified after July25, 2009. This guidance does not generally change the units of accounting for the Companys revenue transactions. Most products and services qualify as separate units of accounting. Products are typically considered delivered upon shipment. In instances where final acceptance of the product, system, or solution is specified by the customer, revenue is deferred until all acceptance criteria have been met. Technical support services revenue is deferred and recognized ratably over the period during which the services are to be performed, which is typically from one to three years. Consulting services for specific customer networking needs, which the Company refers to as advanced services, are recognized upon delivery or completion of performance. Advanced service arrangements are typically short term in nature and are largely completed within 90 days from the start of service. The Companys arrangements generally do not include any provisions for cancellation, termination, or refunds that would significantly impact recognized revenue. Many of the Companys products have both software and nonsoftware components that function together to deliver the products essential functionality. The Companys product offerings fall into the following categories: routing, switching, advanced technologies, and other products, which include emerging technologies. In addition to its product offerings, the Company provides a broad range of technical support and advanced services, as discussed above. The Company has a broad customer base that encompasses virtually all types of public and private entities, including enterprise businesses, service providers, commercial customers, and consumers. The Company and its sales force are not organized by product divisions and a

Business Combinations

Business Combinations
	6 Months Ended Jan. 23, 2010 USD / shares
Business Combinations	3. Business Combinations (a) Business Combinations Completed During the Period A summary of the business combinations for the six months ended January23, 2010 is as follows (in millions): Purchase Consideration NetTangibleAssets Acquired/(Liabilities Assumed) (1) Purchased Intangible Assets Goodwill ScanSafe, Inc. $ 154 $ 2 $ 31 $ 121 Starent Networks, Corp. 2,636 (17 ) 1,274 1,379 Other 3 (5 ) 6 2 Total $ 2,793 $ (20 ) $ 1,311 $ 1,502 (1) Net liabilities assumed for business combinations completed during the six months ended January23, 2010 primarily consist of net deferred tax liabilities, partially offset by $403 million of cash and cash equivalents acquired. In December 2009, the Company acquired ScanSafe, Inc. (ScanSafe), a provider of hosted web security to help build a borderless network security architecture that combines network and cloud-based services for advanced security enforcement. In December 2009, the Company acquired Starent Networks, Corp. (Starent) a provider of IP-based mobile infrastructure for mobile and converged carriers, to enhance the Companys portfolio of products to provide an integrated architecture to offer rich, quality multimedia experiences to mobile subscribers. Under the terms of the definitive agreements related to the Companys business combinations completed during the six months ended January23, 2010, the total purchase consideration consisted of $2.7 billion of cash and $82 million for vested share-based awards assumed. The Consolidated Financial Statements include the operating results of each business from the date of acquisition. Pro forma results of operations for the acquisitions completed during the six months ended January23, 2010 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to the Companys financial results. During the three and six months ended January23, 2010, the Company recorded related to its business combinations transaction costs of $11 million and $23 million, respectively, within operating expenses. (b) Pending Business Combination On October1, 2009, the Company announced that it had entered into a definitive agreement with TANDBERG ASA (Tandberg) by which the Company has made a tender offer for all outstanding shares of Tandberg. Tandberg is a global leader in video communications, including a broad range of video endpoint and network infrastructure solutions that provide intercompany and multivendor interoperability. The proposed acquisition of Tandberg supports the Companys strategy in relation to its expansion of its collaboration portfolio to offer more solutions to a greater number of customers and to increase the use of video within and across enterprises. The purchase price for the acquisition is payable in Norwegian kroner, and the originally announced aggregate consideration had a U.S. dollar equivalent of approximately $3.0 billion.On November16, 2009, the Company extended the tender offe

Goodwill and Purchased Intangib

Goodwill and Purchased Intangible Assets
	6 Months Ended Jan. 23, 2010 USD / shares
Goodwill and Purchased Intangible Assets	4. Goodwill and Purchased Intangible Assets (a) Goodwill The following table presents the goodwill allocated to the Companys reportable segments as of and during the six months ended January23, 2010 (in millions): Balanceat July25,2009 Acquisitions Other Balanceat January23,2010 United States and Canada $ 9,512 $ 684 $ (1 ) $ 10,195 European Markets 1,669 381 (4 ) 2,046 Emerging Markets 437 147 1 585 Asia Pacific 506 217 723 Japan 801 73 874 Total $ 12,925 $ 1,502 $ (4 ) $ 14,423 In the table above, Other primarily includes foreign currency translation. (b) Purchased Intangible Assets The following table presents details of the Companys purchased intangible assets acquired through business combinations during the six months ended January23, 2010 (in millions, except years): FINITE LIVES INDEFINITE LIVES TECHNOLOGY CUSTOMER RELATIONSHIPS OTHER IPRD TOTAL Weighted- Average UsefulLife (in Years) Amount Weighted- Average UsefulLife (inYears) Amount Weighted- Average UsefulLife (inYears) Amount Amount Amount ScanSafe, Inc. 5.0 $ 14 6.0 $ 11 3.0 $ 6 $ $ 31 Starent Networks, Corp. 6.0 691 7.0 434 0.3 35 114 1,274 Other 6 6 Total $ 705 $ 445 $ 41 $ 120 $ 1,311 The following tables present details of the Companys purchased intangible assets (in millions): January23, 2010 Gross Accumulated Amortization Net Intangible assets with finite lives: Technology $ 1,987 $ (797 ) $ 1,190 Customer relationships 2,166 (895 ) 1,271 Other 223 (143 ) 80 Total intangible assets with finite lives 4,376 (1,835 ) 2,541 IPRD, with indefinite lives 120 120 Total intangible assets $ 4,496 $ (1,835 ) $ 2,661 July25, 2009 Gross Accumulated Amortization Net Intangible assets: Technology $ 1,469 $ (803 ) $ 666 Customer relationships 1,730 (768 ) 962 Other 184 (110 ) 74 Total intangible assets $ 3,383 $ (1,681 ) $ 1,702 Purchased intangible assets include technology intangible assets acquired through business combinations as well as through technology licenses. Effective the first quarter of fiscal 2010, with the adoption of revised accounting guidance for business combinations, IPRD has been capitalized at fair value as an intangible asset with an indefinite life and will be assessed for impairment thereafter. Upon completion of the development of the underlying marketable products, the capitalized IPRD asset wil

Balance Sheet Details

Balance Sheet Details
	6 Months Ended Jan. 23, 2010 USD / shares
Balance Sheet Details	5. Balance Sheet Details The following tables provide details of selected balance sheet items (in millions): January23, 2010 July25, 2009 Inventories: Raw materials $ 248 $ 165 Work in process 36 33 Finished goods: Distributor inventory and deferred cost of sales 487 382 Manufactured finished goods 258 310 Total finished goods 745 692 Service-related spares 146 151 Demonstration systems 40 33 Total $ 1,215 $ 1,074 Property and equipment, net: Land, buildings, and building leasehold improvements $ 4,505 $ 4,618 Computer equipment and related software 1,602 1,823 Production, engineering, and other equipment 4,974 5,075 Operating lease assets 251 227 Furniture and fixtures 475 465 11,807 12,208 Less accumulated depreciation and amortization (7,849 ) (8,165 ) Total $ 3,958 $ 4,043 Other assets: Deferred tax assets $ 1,786 $ 2,122 Investments in privately held companies 769 709 Lease receivables, net(1) 1,044 966 Financed service contracts, net(1) 588 676 Loan receivables, net(1) 726 537 Other 309 271 Total $ 5,222 $ 5,281 Deferred revenue: Service $ 6,338 $ 6,496 Product: Unrecognized revenue on product shipments and other deferred revenue 2,789 2,490 Cash receipts related to unrecognized revenue from two-tier distributors 530 407 Total product deferred revenue 3,319 2,897 Total $ 9,657 $ 9,393 Reported as: Current $ 6,751 $ 6,438 Noncurrent 2,906 2,955 Total $ 9,657 $ 9,393 (1) Amounts represent the noncurrent portions of the respective balances. See Note 6 for the current portions of the respective balances.

Financing Receivables and Guara

Financing Receivables and Guarantees
	6 Months Ended Jan. 23, 2010 USD / shares
Financing Receivables and Guarantees	6. Financing Receivables and Guarantees (a) Lease Receivables Lease receivables represent sales-type and direct-financing leases resulting from the sale of the Companys and complementary third-party products. These lease arrangements typically have terms of up to three years and are generally collateralized by a security interest in the underlying assets. The net lease receivables are summarized as follows (in millions): January23, 2010 July25, 2009 Gross lease receivables $ 2,169 $ 1,996 Unearned income (203 ) (191 ) Allowances (208 ) (213 ) Lease receivables, net $ 1,758 $ 1,592 Reported as: Current $ 714 $ 626 Noncurrent 1,044 966 Lease receivables, net $ 1,758 $ 1,592 Contractual maturities of the gross lease receivables at January23, 2010 are as follows (in millions): Fiscal Year Amount 2010 (remaining six months) $ 489 2011 756 2012 508 2013 283 2014 120 Thereafter 13 Total $ 2,169 Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults. (b) Financed Service Contracts Financed service contracts are summarized as follows (in millions): January23, 2010 July25, 2009 Gross financed service contracts $ 1,594 $ 1,642 Allowances (24 ) (26 ) Financed service contracts, net $ 1,570 $ 1,616 Reported as: Current $ 982 $ 940 Noncurrent 588 676 Financed service contracts, net $ 1,570 $ 1,616 The revenue related to financed service contracts, which primarily relates to technical support services, is deferred and included in deferred service revenue. The revenue is recognized ratably over the period during which the related services are to be performed, which is typically from one to three years. (c) Loan Receivables Loan receivables are summarized as follows (in millions): January23, 2010 July25, 2009 Gross loan receivables $ 1,207 $ 861 Allowances (116 ) (88 ) Loan receivables, net $ 1,091 $ 773 Reported as: Current $ 365 $ 236 Noncurrent 726 537 Loan receivables, net $ 1,091 $ 773 A portion of the revenue related to loan receivables is deferred and included in deferred product revenue based on revenue recognition criteria. (d) Financing Guarantees In the ordinary course of business, the Company provides financing guarantees that are generally for various third-party financing arrangements extended to channel partners and end-user customers. Channel Partner Financing Guarantees The Company facilitates arrangements for third-party financing extended to channel partners, consisting of revolving short-ter

Investments

Investments
	6 Months Ended Jan. 23, 2010 USD / shares
Investments	7. Investments (a) Summary of Investments The following tables summarize the Companys investments (in millions): January23, 2010 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed income securities: Government securities $ 19,117 $ 49 $ (1 ) $ 19,165 Government agency securities (1) 12,541 102 (2 ) 12,641 Corporate debt securities 1,827 66 (17 ) 1,876 Asset-backed securities 174 5 (5 ) 174 Total fixed income securities 33,659 222 (25 ) 33,856 Publicly traded equity securities 875 239 (42 ) 1,072 Total $ 34,534 $ 461 $ (67 ) $ 34,928 July25, 2009 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed income securities: Government securities $ 10,266 $ 23 $ (5 ) $ 10,284 Government agency securities (1) 16,029 116 (2 ) 16,143 Corporate debt securities 1,740 51 (86 ) 1,705 Asset-backed securities 252 5 (34 ) 223 Total fixed income securities 28,287 195 (127 ) 28,355 Publicly traded equity securities 824 193 (89 ) 928 Total $ 29,111 $ 388 $ (216 ) $ 29,283 (1) In Note 7 and Note 8, government agency securities as of January23, 2010 and July25, 2009 include bank-issued securities that are guaranteed by the Federal Deposit Insurance Corporation (FDIC). (b) Gains and Losses on Investments The following table summarizes the realized net gains (losses) associated with the Companys investments (in millions): Three Months Ended Six Months Ended January23, 2010 January24, 2009 January23, 2010 January24, 2009 Net gains (losses) on investments in publicly traded equity securities $ 17 $ (23 ) $ 28 $ 68 Net gains (losses) on investments in fixed income securities 14 (7 ) 20 (159 ) Net gains (losses) on investments $ 31 $ (30 ) $ 48 $ (91 ) There were no impairment charges on investments in fixed income securities and publicly traded equity securities during the second quarter and first six months of fiscal 2010. For the second quarter and first six months of fiscal 2009, net gains (losses) on investments in fixed income securities included impairment charges of $19 million and $202 million, respectively, and net gains (losses) on investments in publicly traded equity securities included impairment charges of $18 million and $35 million, respectively. All such impairment charges were due to a decline in the fair value of the investments below their cost basis that were judged to be other than temporary and were recorded as a reduction to the amortized cost of the respective investments.

Fair Value

Fair Value
	6 Months Ended Jan. 23, 2010 USD / shares
Fair Value	8. Fair Value Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. (a) Fair Value Hierarchy The accounting guidance for fair value measurement also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. (b) Assets and Liabilities Measured at Fair Value on a Recurring Basis Assets and liabilities measured at fair value on a recurring basis as of January23, 2010 and July25, 2009 were as follows (in millions): January23, 2010 July25, 2009 Fair Value Measurements Fair Value Measurements Level 1 Level 2 Level3 Total Balance Level 1 Level 2 Level3 Total Balance Assets: Money market funds $ 2,844 $ $ $ 2,844 $ 4,514 $ $ $ 4,514 Government securities 19,165 19,165 10,345 10,345 Government agency securities(1) 13,587 13,587 16,455 16,455 Corporate debt securities 1,892 1,892 1,741 1,741 Asset-backed securities 174 174 223 223 Publicly traded equity securities 1,072 1,072 928 928 Derivative instruments and other assets (2) 55 14 69 109 4 113

Borrowings

Borrowings
	6 Months Ended Jan. 23, 2010 USD / shares
Borrowings	9. Borrowings (a) Long-Term Debt The following table summarizes the Companys long-term debt (in millions, except percentages): January23, 2010 July25, 2009 Amount Effective Rate Amount Effective Rate Senior notes: 5.25% fixed-rate notes, due 2011 (2011 Notes) $ 3,000 3.12 % $ 3,000 3.12 % 2.90% fixed-rate notes, due 2014 (2014 Notes) 500 3.11 % 5.50% fixed-rate notes, due 2016 (2016 Notes) 3,000 4.34 % 3,000 4.34 % 4.95% fixed-rate notes, due 2019 (2019 Notes) 2,000 5.08 % 2,000 5.08 % 4.45% fixed-rate notes, due 2020 (2020 Notes) 2,500 4.50 % 5.90% fixed-rate notes, due 2039 (2039 Notes) 2,000 6.11 % 2,000 6.11 % 5.50% fixed-rate notes, due 2040 (2040 Notes) 2,000 5.67 % Total senior notes 15,000 10,000 Other notes 1 2 Unaccreted discount (75 ) (21 ) Hedge accounting adjustment of the carrying amount of the 2011 and 2016 Notes 268 314 Total $ 15,194 $ 10,295 In November 2009, the Company issued senior unsecured notes in aggregate principal amount of $5.0 billion. Of these notes, $500 million will mature in 2014 and bear interest at a fixed rate of 2.90%per annum (the 2014 Notes), $2.5 billion will mature in 2020 and bear interest at a fixed rate of 4.45%per annum (the 2020 Notes), and $2.0 billion will mature in 2040 and bear interest at a fixed rate of 5.50%per annum (the 2040 Notes). The effective rates for the fixed-rate debt include the interest on the notes, the accretion of the discount, and adjustments related to hedging, if applicable. Based on market prices, the fair value of the Companys long-term debt was $15.5 billion and $10.5 billion as of January23, 2010 and July25, 2009, respectively. Interest is payable semi-annually on each class of the senior notes. The notes are redeemable by the Company at any time, subject to a make-whole premium. The Company was in compliance with all debt covenants as of January23, 2010. Interest expense and cash paid for interest are summarized as follows (in millions): Three Months Ended Six Months Ended January23, 2010 January24, 2009 January23, 2010 January24, 2009 Interest expense $ 158 $ 63 $ 272 $ 127 Cash paid for interest $ 36 $ 4 $ 305 $ 169 (b) Credit Facility The Company has a credit agreement with certain institutional lenders providing for, as of February16, 2010, a $3.0 billion unsecured revolving credit facility that is scheduled to expire on August17, 2012. Any advances under the credit agreement will accrue interest at rates that are equal to, based on certain conditions, either (i)the higher of the Federal Funds rate plus 0.50% or Bank of Americas prime rate as announced from time to time or (ii)the London Interbank Offered Rate (LIBOR) plus a margin that is based on the

Derivative Instruments

Derivative Instruments
	6 Months Ended Jan. 23, 2010 USD / shares
Derivative Instruments	10. Derivative Instruments (a) Summary of Derivative Instruments The Company uses derivative instruments primarily to manage exposures to foreign currency exchange rate, interest rate, and equity price risks. The Companys primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates, interest rates, and equity prices. The Companys derivatives expose it to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. The Company does, however, seek to mitigate such risks by limiting its counterparties to major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counterparties. The fair values of the Companys derivative instruments and the line items on the Consolidated Balance Sheets to which they were recorded are summarized as follows (in millions): DERIVATIVE ASSETS DERIVATIVE LIABILITIES BalanceSheetLineItem January23, 2010 July25, 2009 BalanceSheetLineItem January23, 2010 July25, 2009 Derivatives designated as hedging instruments: Foreign currency derivatives Othercurrentassets $ 47 $ 87 Othercurrentliabilities $ 16 $ 36 Equity derivatives Other current assets Other current liabilities 1 Total 47 87 17 36 Derivatives not designated as hedging instruments: Foreign currency derivatives Other current assets 8 22 Other current liabilities 7 30 Equity derivatives Other current assets 2 Other current liabilities Equity derivatives Other assets 2 2 Other long-term liabilities Total 10 26 7 30 Total $ 57 $ 113 $ 24 $ 66 The effect of the Companys cash flow hedging instruments on other comprehensive income (OCI) and the Consolidated Statement of Operations is summarized as follows (in millions): GAINS(LOSSES)RECOGNIZEDINOCI ON DERIVATIVES (EFFECTIVE PORTION) GAINS (LOSSES) RECLASSIFIED FROM AOCI INTO INCOME (EFFECTIVE PORTION) Three Months Ended January23, 2010 January24, 2009 January23, 2010 January24, 2009 Derivatives Designated as Cash Flow Hedging Instruments LineIteminStatements of Operations Foreign currency derivatives $ (35 ) $ (41 ) Operating expenses $ 13 $ (28 ) Cost of sales-service 2 (4 ) Interest rate derivatives 8 Interest expense Total $ (27 ) $ (41 ) $ 15 $ (32 ) GAINS(LOSSES)RECOGNIZEDINOCI ON DERIVATIVES

Commitments and Contingencies

Commitments and Contingencies
	6 Months Ended Jan. 23, 2010 USD / shares
Commitments and Contingencies	11. Commitments and Contingencies (a) Operating Leases The Company leases office space in several U.S. locations. Outside the United States, larger leased sites include sites in Australia, Belgium, China, France, Germany, India, Israel, Italy, Japan, and the United Kingdom. The Company also leases equipment and vehicles. Future minimum lease payments under all noncancelable operating leases with an initial term in excess of one year as of January23, 2010 are as follows (in millions): Fiscal Year Amount 2010 (remaining six months) $ 194 2011 284 2012 195 2013 143 2014 109 Thereafter 424 Total $ 1,349 (b) Purchase Commitments with Contract Manufacturers and Suppliers The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that either allow them to procure inventory based upon criteria as defined by the Company or that establish the parameters defining the Companys requirements. A significant portion of the Companys reported purchase commitments arising from these agreements consists of firm, noncancelable, and unconditional commitments. In certain instances, these agreements allow the Company the option to cancel, reschedule, and adjust the Companys requirements based on its business needs prior to firm orders being placed. As of January23, 2010 and July25, 2009, the Company had total purchase commitments for inventory of $3.3 billion and $2.2 billion, respectively. The Company records a liability for firm, noncancelable, and unconditional purchase commitments for quantities in excess of its future demand forecasts consistent with the valuation of the Companys excess and obsolete inventory. As of January23, 2010 and July25, 2009, the liability for these purchase commitments was $162 million and $175 million, respectively, and was included in other current liabilities. (c) Other Commitments In connection with the Companys business combinations and asset purchases, the Company has agreed to pay certain additional amounts contingent upon the achievement of certain agreed-upon technology, development, product, or other milestones, or the continued employment with the Company of certain employees of acquired entities. See Note 3. The Company also has certain funding commitments primarily related to its 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 approximately $307 million and $313 million as of January23, 2010 and July25, 2009, respectively. (d) Variable Interest Entities In the ordinary course of business, the Company has investments in privately held companies and provides financing to certain customers. These privately held companies and customers may be considered t

Shareholders' Equity

Shareholders' Equity
	6 Months Ended Jan. 23, 2010 USD / shares
Shareholders' Equity	12. Shareholders Equity (a) Stock Repurchase Program In September 2001, the Companys Board of Directors authorized a stock repurchase program. As of January23, 2010, the Companys Board of Directors had authorized an aggregate repurchase of up to $72 billion of common stock under this program and the remaining authorized repurchase amount was $11.6 billion with no termination date. The stock repurchase activity under the stock repurchase program during the six months ended January23, 2010 is summarized as follows (in millions, except per-share amounts): Six Months Ended January23, 2010 Shares Repurchased Weighted- AveragePrice per Share Amount Repurchased Cumulative balance at July25, 2009 2,802 $ 20.41 $ 57,179 Repurchase of common stock under the stock repurchase program 139 23.43 3,253 Cumulative balance at January23, 2010 2,941 $ 20.55 $ 60,432 The purchase price for the shares of the Companys stock repurchased is reflected as a reduction to shareholders equity. The Company is required to allocate the purchase price of the repurchased shares as (i)a reduction to retained earnings until retained earnings are zero and then as an increase to accumulated deficit and (ii)a reduction of common stock and additional paid-in capital. Issuance of common stock and the tax benefit related to employee stock incentive plans are recorded as an increase to common stock and additional paid-in capital. (b) Other Repurchases of Common Stock For the six months ended January23, 2010 and January24, 2009, the Company repurchased approximately 3.1million and 0.7million shares, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock or stock units. (c) Comprehensive Income The components of comprehensive income are as follows (in millions): Three MonthsEnded Six Months Ended January23, 2010 January24, 2009 January23, 2010 January24, 2009 Net income $ 1,853 $ 1,504 $ 3,640 $ 3,705 Other comprehensive income: Change in unrealized gains and losses on investments, net of tax benefit (expense) of $4 and $(26), for the three and six months ended January23, 2010, respectively and $(8) and $94 for the corresponding periods of fiscal 2009 15 294 195 (178 ) Change in derivative instruments, net of tax expense of $3 and $9, for the three and six months ended January23, 2010, respectively (46 ) (9 ) 15 (151 ) Change in cumulative translation adjustment and other (79 ) 41 84 (434 ) Comprehensive income 1,743 1,830 3,934 2,942 Comprehensive loss attributable to noncontrolling interests 4 6 10 31 Comprehensive income attributable to Cisco Systems, Inc. $ 1,747 $ 1,836 $ 3,944 $ 2,973 The Company consolidates its investment in a venture fund managed by SOFTBANK Corp. and its affiliates (SOFTBA

Employee Benefit Plans

Employee Benefit Plans
	6 Months Ended Jan. 23, 2010 USD / shares
Employee Benefit Plans	13. Employee Benefit Plans (a) Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan, which includes its subplan, the International Employee Stock Purchase Plan (together, the Purchase Plan), under which 471.4million shares of the Companys common stock had been reserved for issuance as of January23, 2010. Effective July1, 2009, eligible employees are offered shares through a 24-month offering period, which consists of four consecutive 6-month purchase periods. Employees may purchase a limited number of shares of the Companys stock at a discount of up to 15% of the lesser of the market value at the beginning of the offering period or the end of each 6-month purchase period. Prior to July1, 2009 the offering period was six months. The purchase plan is scheduled to terminate on January3, 2020. For the six months ended both January23, 2010 and January24, 2009, the Company issued 14million shares under the Purchase Plan. As of January23, 2010, 169million shares were available for issuance under the Purchase Plan. (b) Employee Stock Incentive Plans Stock Incentive Plan Program Description As of January23, 2010, the Company had five stock incentive plans: the 2005 Stock Incentive Plan (the 2005 Plan); the 1996 Stock Incentive Plan (the 1996 Plan); the 1997 Supplemental Stock Incentive Plan (the Supplemental Plan); the Cisco Systems, Inc. SA Acquisition Long-Term Incentive Plan (the SA Acquisition Plan); and the Cisco Systems, Inc. WebEx Acquisition Long-Term Incentive Plan (the WebEx Acquisition Plan). In addition, the Company has, in connection with the acquisitions of various companies, assumed the share-based awards granted under stock incentive plans of the acquired companies or issued share-based awards in replacement thereof. Share-based awards are designed to reward employees for their long-term contributions to the Company and provide incentives for them to remain with the Company. The number and frequency of share-based awards are based on competitive practices, operating results of the Company, government regulations, and other factors. Since the inception of the stock incentive plans, the Company has granted share-based awards to a significant percentage of its employees, and the majority has been granted to employees below the vice president level. The Companys primary stock incentive plans are summarized as follows: 2005 Plan As amended on November15, 2007, the maximum number of shares issuable under the 2005 Plan over its term is 559million shares plus the amount of any shares underlying awards outstanding on November15, 2007 under the 1996 Plan, the SA Acquisition Plan, and the WebEx Acquisition Plan that are forfeited or are terminated for any other reason before being exercised or settled. If any awards granted under the 2005 Plan are forfeited or are terminated for any other reason before being exercised or settled, then the shares underlying the awards will again be available under the 2005 Plan. Prior to November12, 2009, the number of shares available for issuance under the 2005 Plan was reduced by 2.5 shares for each share awarded as a stock grant or stock unit. Pursuant to an amen

Income Taxes

Income Taxes
	6 Months Ended Jan. 23, 2010 USD / shares
Income Taxes	14. Income Taxes The following table provides details of income taxes (in millions, except percentages): Three MonthsEnded Six Months Ended January23, 2010 January24, 2009 January23, 2010 January24, 2009 Effective tax rate 21.3 % 19.5 % 20.8 % 17.2 % Cash paid for income taxes $ 489 $ 133 $ 1,138 $ 593 During the six months ended January24, 2009, the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 reinstated the U.S. federal RD tax credit, retroactive to January1, 2008. As a result, the effective tax rate for the six months ended January24, 2009 reflected a $106 million tax benefit related to fiscal 2008 RD expenses. The U.S. federal RD tax credit expired on December31, 2009. In the fourth quarter of fiscal 2009, the U.S. Court of Appeals for the Ninth Circuit overturned a 2005 U.S. Tax Court ruling in Xilinx, Inc. v. Commissioner. The decision impacted the tax treatment of share-based compensation expenses for the purpose of determining intangible development costs under a companys research and development cost sharing arrangement. While the Company was not a named party to the case, the decision resulted in the Company reducing, in the fourth quarter of 2009, tax benefits previously recognized in its financial statements, which included a tax charge of $174 million in the provision for income taxes and a decrease in additional paid-in capital for $550 million. On January13, 2010, the U.S. Court of Appeals for the Ninth Circuit withdrew its decision in Xilinx, Inc. v. Commissioner without providing guidance on how it will ultimately rule on the matter. As a result of the uncertainty, the Company did not adjust its tax benefits recognized in its financial statements during the three months ended January23, 2010. While the Company is unable to determine the outcome of the case, it is reasonably possible that the reduction in tax benefits recorded in the fourth quarter of fiscal 2009 may be reversed within the next 12 months. As of January23, 2010, the Company had $2.9 billion of unrecognized tax benefits, of which $2.3 billion, if recognized, would favorably impact the effective tax rate. With regard to the treatment of share-based compensation expenses discussed above, the Company believes it is reasonably possible that approximately $200 million of unrecognized tax benefits may be recognized within the next 12 months.

Segment Information and Major C

Segment Information and Major Customers
	6 Months Ended Jan. 23, 2010 USD / shares
Segment Information and Major Customers	15. Segment Information and Major Customers The Companys operations involve the design, development, manufacturing, marketing, and technical support of networking and other products and services related to the communications and information technology industry. Cisco products include routers, switches, advanced technologies, and other products. These products, primarily integrated by Cisco IOS Software, link geographically dispersed local-area networks (LANs), metropolitan-area networks (MANs) and wide-area networks (WANs). (a) Net Sales and Gross Margin by Theater The Company conducts business globally and is primarily managed on a geographic basis. The Companys management makes financial decisions and allocates resources based on the information it receives from its internal management system. Sales are attributed to a geographic theater based on the ordering location of the customer. The Company does not allocate research and development, sales and marketing, or general and administrative expenses to its geographic theaters in this internal management system because management does not include the information in its measurement of the performance of the operating segments. In addition, the Company does not allocate amortization of acquisition-related intangible assets, share-based compensation expense, and certain other items to the gross margin for each theater because management does not include this information in its measurement of the performance of the operating segments. Summarized financial information by theater for the three and six months ended January23, 2010 and January24, 2009, based on the Companys internal management system and as utilized by the Companys Chief Operating Decision Maker (CODM), is as follows (in millions): Three Months Ended Six Months Ended January23, 2010 January24, 2009 January23, 2010 January24, 2009 Net sales: United States and Canada (1) $ 5,324 $ 4,736 $ 10,314 $ 10,285 European Markets 1,939 2,008 3,761 4,161 Emerging Markets 1,104 1,089 1,967 2,318 Asia Pacific 1,075 923 2,034 1,945 Japan 373 333 760 711 Total $ 9,815 $ 9,089 $ 18,836 $ 19,420 Gross margin (2): United States and Canada $ 3,446 $ 3,027 $ 6,744 $ 6,706 European Markets 1,319 1,345 2,563 2,760 Emerging Markets 727 648 1,269 1,428 Asia Pacific 679 571 1,291 1,220 Japan 271 228 552 482 Theater total 6,442 5,819 12,419 12,596 Unallocated corporate items (3) (110 ) (96 ) (199 ) (192 ) Total $ 6,332 $ 5,723 $ 12,220 $ 12,404 (1) Net sales in the United States were $5.0 billion and $4.5 billion for the three months ended January23, 2010

Net Income per Share

Net Income per Share
	6 Months Ended Jan. 23, 2010 USD / shares
Net Income per Share	16. Net Income per Share The following table presents the calculation of basic and diluted net income per share (in millions, except per-share amounts): Three Months Ended Six Months Ended January23, 2010 January24, 2009 January23, 2010 January24, 2009 Net income $ 1,853 $ 1,504 $ 3,640 $ 3,705 Weighted-average sharesbasic 5,741 5,848 5,754 5,865 Effect of dilutive potential common shares 121 16 112 36 Weighted-average sharesdiluted 5,862 5,864 5,866 5,901 Net income per sharebasic $ 0.32 $ 0.26 $ 0.63 $ 0.63 Net income per sharediluted $ 0.32 $ 0.26 $ 0.62 $ 0.63 Antidilutive employee share-based awards, excluded 347 963 396 823 Employee equity share options, unvested shares, and similar equity instruments granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share. Diluted shares outstanding include the dilutive effect of in-the-money options and nonvested restricted stock and restricted stock units which is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible are assumed to be used to repurchase shares.

Document Information

Document Information
	6 Months Ended Jan. 23, 2010 USD / shares
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-01-23

Entity Information

Entity Information (USD $)
	6 Months Ended Jan. 23, 2010	Feb. 11, 2010
Trading Symbol	CSCO
Entity Registrant Name	CISCO SYSTEMS INC
Entity Central Index Key	0000858877
Current Fiscal Year End Date	--07-28
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		5,725,636,151