Cisco Layoffs And Guidance Send Stock Down Despite Earnings Hit

GAAP net income and GAAP earnings per share for the fourth quarter and fiscal year ended July 27, 2013 include the previously disclosed charge of $0.03 per share for the TiVo, Inc. (“TiVo”) patent litigation settlement. This charge was excluded from non-GAAP earnings per share. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table below.

Cisco will discuss fourth quarter and fiscal year 2013 results and business outlook on a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.

Cash and Cash Equivalents and Investments

• Cash flows from operations were $4.0 billion for the fourth quarter of fiscal 2013, compared with $3.1 billion for the third quarter of fiscal 2013, and compared with $3.1 billion for the fourth quarter of fiscal 2012. Cash flows from operations were $12.9 billion for fiscal 2013, compared with $11.5 billion for fiscal 2012.
• Cash and cash equivalents and investments were $50.6 billion at the end of the fourth quarter of fiscal 2013, compared with $47.4 billion at the end of the third quarter of fiscal 2013, and compared with $48.7 billion at the end of the fourth quarter of fiscal 2012.

Dividends and Stock Repurchase Program

• During the fourth quarter of fiscal 2013:
  • Cisco paid a cash dividend of $0.17 per common share, or $918 million.
  • Cisco repurchased approximately 47 million shares of common stock under the stock repurchase program at an average price of $24.80 per share for an aggregate purchase price of $1.2 billion.
• During fiscal year 2013:
  • Cisco paid cash dividends in the aggregate amount of $0.62 per common share, or $3.3 billion.
  • Cisco repurchased approximately 128 million shares of common stock under the stock repurchase program at an average price of $21.63 per share for an aggregate purchase price of $2.8 billion. As of July 27, 2013, Cisco had repurchased and retired 3.9 billion shares of Cisco common stock at an average price of $20.40 per share for an aggregate purchase price of approximately $78.9 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $3.1 billion with no termination date.

“Our financial strategy is working as our profits grew faster than revenue for the full fiscal year,” stated Frank Calderoni, executive vice president and chief financial officer. “Our fourth quarter also delivered solid financial results as we continued to deliver profitable growth to maximize shareholder value for the long-term.”

Select Global Business Highlights

• Cisco completed its acquisition of privately held Ubiquisys Limited, a leading provider of intelligent 3G and long-term evolution (LTE) small-cell technologies designed to provide seamless connectivity across mobile heterogeneous networks for service providers.
• Cisco completed its acquisition of privately held JouleX, Inc. a leader in enterprise IT energy management for network-attached and data center assets.
• Cisco announced its intent to acquire privately held Composite Software, Inc., a leader in data virtualization software and services.
• Cisco announced a definitive agreement to acquire Sourcefire, Inc. a leader in intelligent cybersecurity solutions, with the goal of integrating world-class products, technologies and research teams to provide continuous and pervasive advanced threat protection.
• Cisco completed its acquisition of SolveDirect Service Management GmbH, a privately held company headquartered in Vienna, Austria that provides innovative, cloud-delivered services management integration software and services.
• At the Microsoft Worldwide Partner Conference, Cisco announced it would team with Microsoft to accelerate the deployment of private and hybrid cloud infrastructure worldwide.
• Cisco released an Internet of Everything (IoE) Value Index study predicting that the IoE-the networked connection of people, process, data and things-is expected to enable global private-sector businesses to generate at least $613 billion in global profits in 2013.

Cisco Innovation

• Cisco introduced the Carrier Routing System-X (CRS-X), its newest addition to the industry-leading CRS family. The CRS-X is designed to provide unmatched economical scale and lasting investment protection to more than 750 customers worldwide, including global telecommunications service providers and organizations.
• Cisco announced that it has opened an innovation center in Israel in collaboration with Pelephone Communications Ltd., an Israeli telecom service provider, to develop and deploy a radio network topology for handling the surge in demand for mobile Internet services.
• Cisco announced the evolution of its network services strategy for virtual and cloud networks by integrating the market-leading Citrix® NetScaler® application delivery controller (ADC) technology into the Cisco Unified Fabric Cloud Network Services portfolio.
• At Cisco Live! in Orlando, Cisco unveiled a new data center networking architecture designed to usher in the era of Application-Centric Infrastructure by transforming data centers to better address the demands of new and current applications in the cloud era.
• Cisco took another significant step in the evolution of its networking portfolio, introducing new and updated Cisco Catalyst® switching and Integrated Services Router products that provide high-performing, fully programmable enterprise networking solutions.

Select Customer Announcements

• Cisco announced that it was selected by Vodafone Hutchison Australia (VHA) to accelerate deployment of VHA’s 4G long-term evolution (LTE) network with the Cisco® ASR 5500 as the mobile multimedia core platform.
• Cisco announced that Manchester City will be the first Premier League team to offer Cisco Connected Stadium Wi-Fi and StadiumVision™ Mobile solutions.
• Cisco announced that Czech telecommunications operator T-Mobile has chosen the Cisco ASR 5000 Series to manage its mobile data traffic from the new LTE network, together with existing 2G and 3G networks.
• The Universidad San Sebastián in Chile has updated its voice, data and wireless connectivity using Cisco technology to serve more than 26,000 students and 2,500 teachers.
• Cisco announced that TIM Brazil, one of Brazil’s leading service providers, has selected Cisco Videoscape™ Distribution Suite Transparent Caching (VDS-TC) to enable the delivery of video content across multiple screens, protocols, applications and networks.
• Cisco announced that Polymetal, a leading precious metals company in Russia and Kazakhstan, has deployed a distributed telephone network based on Cisco Unified Communications.
• The University of Virginia Center for Telehealth was selected as the first member of the Cisco Healthcare Center of Excellence program.
• The Stock Exchange of Thailand has implemented Cisco’s Data Center architecture to increase operational flexibility and streamline its online trading platform.
• By using the Cisco service provider Wi-Fi solution, Hong Kong telecommunications service provider PCCW-HKT became the first service provider in the Greater China region to deploy the next-generation 802.11ac Wi-Fi network.
• Cisco announced that Vodafone India, one of India’s leading telecommunications service providers, will be deploying Cisco’s end-to-end networking solutions to evolve to a complete IP-based architecture in India.

Editor’s Note:

• The Q4 and fiscal year 2013 conference call to discuss Cisco’s results along with its business outlook will be held on Wednesday, August 14, 2013 at 1:30 p.m. Pacific Time. Conference call number is1-888-848-6507 (United States) or 1-212-519-0847 (international).
• Conference call replay will be available from 4:00 p.m. Pacific Time, August 14, 2013 to 4:00 p.m. Pacific Time, August 21, 2013 at 1-866-507-3618 (United States) or 1-203-369-1892 (international). The replay will also be available via webcast from August 14, 2013 through October 21, 2013 on the Cisco Investor Relations website at http://investor.cisco.com.
• Additional information regarding Cisco’s financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, August 14, 2013. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with GAAP reconciliation information, will be available on the Cisco Investor Relations website athttp://investor.cisco.com.

About Cisco
Cisco (NASDAQ: CSCO) is the worldwide leader in IT that helps companies seize the opportunities of tomorrow by proving that amazing things can happen when you connect the previously unconnected. For ongoing news, please go to http://thenetwork.cisco.com.

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This release includes non-GAAP net income, non-GAAP effective tax rates, non-GAAP net income per share data and non-GAAP inventory turns.

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco’s results of operations in conjunction with the corresponding GAAP measures.

Cisco believes that the presentation of non-GAAP net income, non-GAAP effective tax rates, and non-GAAP net income per share data, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations. In addition, Cisco believes that the presentation of non-GAAP inventory turns provides useful information to investors and management regarding financial and business trends relating to inventory management based on the operating activities of the period presented.

For its internal budgeting process, Cisco’s management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, impact to cost of sales from purchase accounting adjustments to inventory, other acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation settlements (such as the patent litigation settlement with TiVo in the fourth quarter of fiscal 2013), the income tax effects of the foregoing, and significant tax matters. Cisco’s management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future there may be other items, such as significant gains or losses from contingencies that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results.

For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

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