SOURCE: Cisco

August 05, 2008 16:05 ET

Cisco Reports Fourth Quarter and Fiscal Year 2008 Earnings

SAN JOSE, CA--(Marketwire - August 5, 2008) - Cisco (NASDAQ: CSCO)

--  Q4 Net Sales: $10.4 billion (increase of 10% year over year)
    
--  Q4 Net Income: $2.0 billion GAAP; $2.4 billion non-GAAP
    
--  Q4 Earnings per Share: $0.33 GAAP (increase of 6% year over year);
    $0.40 non-GAAP (increase of 11% year over year)
    
--  FY 2008 Net Sales: $39.5 billion (increase of 13% year over year)
    
--  FY 2008 Net Income: $8.1 billion GAAP; $9.6 billion non-GAAP
    
--  FY 2008 Earnings per Share: $1.31 GAAP (increase of 12% year over
    year); $1.56 non-GAAP (increase of 16% year over year)
    

Cisco (NASDAQ: CSCO), the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its fourth quarter and fiscal year results for the period ended July 26, 2008. Cisco reported fourth quarter net sales of $10.4 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.0 billion or $0.33 per share, and non-GAAP net income of $2.4 billion or $0.40 per share.

"Cisco delivered solid quarterly and annual results as network-enabled business process changes and productivity increases gain traction on a global basis," said John Chambers, chairman and CEO, Cisco. "Today's strong results demonstrate the company's ability to execute. The market is clearly in transition, and we will use this time as an opportunity to expand our share of customer spend and to aggressively move into market adjacencies."

Chambers continued, "Our focus is on our portfolio approach to technology innovation, a broad global footprint, and management dedicated to sustainable differentiation and execution. We believe we are entering the next phase of the Internet as growth and productivity will center on collaboration enabled by networked Web 2.0 technologies."

                              Q4 GAAP Results

                                  Q4 2008        Q4 2007      Vs. Q4 2007
                               -------------- -------------- -------------
Net Sales                      $ 10.4 billion $  9.4 billion         + 9.9%
Net Income                     $  2.0 billion $  1.9 billion         + 4.4%
Earnings per Share             $         0.33 $         0.31         + 6.5%



                           Q4 Non-GAAP Results

                                  Q4 2008        Q4 2007      Vs. Q4 2007
                               -------------- -------------- -------------
Net Income                     $  2.4 billion $  2.3 billion         + 5.6%
Earnings per Share             $         0.40 $         0.36         +11.1%



                           Fiscal Year GAAP Results

                                  FY 2008        FY 2007      Vs. FY 2007
                               -------------- -------------- -------------
Net Sales                      $ 39.5 billion $ 34.9 billion         +13.2%
Net Income                     $  8.1 billion $  7.3 billion         + 9.8%
Earnings per Share             $         1.31 $         1.17         +12.0%


                         Fiscal Year Non-GAAP Results

                                  FY 2008        FY 2007      Vs. FY 2007
                               -------------- -------------- -------------
Net Income                     $  9.6 billion $  8.4 billion         +14.5%
Earnings per Share             $         1.56 $         1.34         +16.4%

A reconciliation between GAAP net income and non-GAAP net income is provided in the table on page 7.

Cisco will discuss fourth quarter and fiscal year 2008 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.


Other Financial Highlights

--  Cash flows from operations were $3.5 billion for the fourth quarter of
    fiscal 2008, compared with $2.7 billion for the fourth quarter of fiscal
    2007, and compared with $3.0 billion for the third quarter of fiscal 2008.
    Cash flows from operations were $12.1 billion for fiscal 2008, compared
    with $10.1 billion for fiscal 2007.
    
--  Cash and cash equivalents and investments were $26.2 billion at the
    end of fiscal 2008, compared with $22.3 billion at the end of fiscal 2007,
    and compared with $24.4 billion at the end of the third quarter of fiscal
    2008.
    
--  During the fourth quarter of fiscal 2008, Cisco repurchased 54 million
    shares of common stock at an average price of $25.11 per share for an
    aggregate purchase price of $1.35 billion.  During fiscal 2008, Cisco
    repurchased 372 million shares of common stock at an average price of
    $27.80 per share for an aggregate purchase price of $10.4 billion.  As of
    July 26, 2008, Cisco had repurchased and retired 2.6 billion shares of
    Cisco common stock at an average price of $20.60 per share for an aggregate
    purchase price of approximately $53.6 billion since the inception of the
    stock repurchase program.  The remaining authorized repurchase amount as of
    July 26, 2008 was $8.4 billion with no termination date.
    
--  Days sales outstanding in accounts receivable (DSO) at the end of the
    fourth quarter of fiscal 2008 were 34 days, compared with 38 days at the
    end of the fourth quarter of fiscal 2007, and compared with 39 days at the
    end of the third quarter of fiscal 2008.
    
--  Inventory turns on a GAAP basis were 11.8 in the fourth quarter of
    fiscal 2008, compared with 10.3 in the fourth quarter of fiscal 2007, and
    compared with 11.0 in the third quarter of fiscal 2008.  Non-GAAP inventory
    turns were 11.5 in the fourth quarter of fiscal 2008, compared with 10.1 in
    the fourth quarter of fiscal 2007, and compared with 10.7 in the third
    quarter of fiscal 2008.
    

"We are very pleased to deliver the first $10 billion quarter in the company's history," said Frank Calderoni, chief financial officer, Cisco. "Cisco's ability to deliver solid financial results, with excellent cash flow and a strong book to bill during a quarter of somewhat uncertain macro-economic conditions in our largest geographies illustrates the power of our business model. We believe this will enable us to take advantage of market transitions and drive toward our long-term growth objectives."

Select FY'08 Business Highlights

--  Cisco unveiled its state-of-the-art Globalisation Centre East campus
    in Bangalore at an opening ceremony presided over by former Indian
    President Dr. A. P. J. Abdul Kalam and Chambers.
    
--  Cisco announced the next phase of its corporate strategy for China,
    marked by new public-private collaborative programs within the country that
    deliver upon Cisco's $16 billion multiyear innovation and sustainability
    initiative.
    
--  Marking the next evolution of its network-enabled Data Center 3.0
    vision to transform the data center into a virtualized environment
    providing anytime, anywhere access to content on any device, Cisco
    announced the Cisco Nexus™ 7000 and 5000 Series of data center-class
    switches, introduced industry-leading interoperability through an ecosystem
    of application and systems partners, and accelerated adoption with a data
    center channel partner enablement strategy.
    
--  Cisco introduced the Cisco® ASR 1000 Series Aggregation Services
    Routers, designed to help service provider and enterprise edge networks
    simultaneously host an ever-increasing array of resource-intensive
    integrated data, voice and video business and consumer services.
    

Q4 Business Highlights

Acquisitions and Investments

--  Cisco completed the acquisitions of Denmark-based DiviTech A/S, a
    leader in the digital-service management (DSM) market, and Nuova Systems,
    Inc., a startup focused on the development of next-generation products for
    the data center market.
    
--  Cisco announced its intent to purchase Pure Networks, Inc., a
    privately-held, Seattle-based leader in home networking management software
    and tools.
    
--  Cisco announced an investment in the Almaz Capital / Cisco Fund I, a
    venture capital fund targeting investments in technology-sector and
    communications-sector startups in Russia and the Commonwealth of
    Independent States (CIS), initially closing the fund at $60 million.
    

New Products

--  Cisco introduced a personal Cisco TelePresence™ system for use in
    individual offices and a large Cisco TelePresence room designed for large-
    attendee group training and cross-geography team meetings.
    
--  Cisco introduced Cisco Motion, a new business mobility architecture
    that integrates mobile devices, applications, security and disparate
    networks into a unified platform.
    
--  Cisco announced a video surveillance solution enabled on the Cisco
    Integrated Services Router platform that incorporates video surveillance
    network modules into the router, thereby converging physical security over
    an IP network.
    
--  Cisco introduced advancements for the Cisco Digital Media System that
    will help organizations enhance their customers' experiences, facilitate
    learning and improve employee productivity.
    
--  Cisco announced the expansion of virtualization capabilities across
    its data center portfolio to help customers realize more operationally
    efficient and energy-conserving IT operations.
    
--  Cisco, together with Sprint and Ciena, announced the implementation of
    40 Gbps circuits on the Global Sprint Tier 1 IP Network, to support the
    needs of Sprint customers who are looking to adopt next-generation
    services, grow their businesses and enable their employees to conduct day-
    to-day tasks simply and immediately.
    
--  Cisco announced enhancements to its Internet Protocol over dense
    wavelength-division multiplexing technology, designed to help service
    providers deliver a wide array of services to businesses and consumers and
    push service provider networks into the "zettabyte era."
    
--  Linksys by Cisco announced router setup support for Mac OS X.
    
--  Linksys by Cisco announced the Simultaneous Dual-N Band Wireless
    Router (WRT610N), designed to enhance the entertainment experience for
    consumers who wish to take advantage of the ever-increasing availability of
    digital media content, including high-definition video.
    

Select Customer Announcements

--  Cisco and Harrah's Operating Company announced a broad-based, 10-year
    global strategic agreement under which Harrah's plans to deliver compelling
    next-generation guest experiences through the use of Cisco products,
    thereby helping Harrah's effort to remain at the forefront of innovation in
    the casino entertainment industry.
    
--  Cisco announced that Kent School District in the state of Washington,
    the Brevard School District in Florida and School District No. 23 in
    Kelowna, B.C. have each deployed Cisco switching and wireless technologies
    to enhance student performance, improve safety and reduce operating
    expenses.
    
--  Tata Communications announced the launch of its Telepresence services,
    the first-ever offering to deliver both private and public Cisco
    TelePresence rooms to businesses across the world.
    
--  Cisco announced that Russia's largest commercial bank, Sberbank,
    deployed the 17 millionth Cisco Unified IP device sold worldwide, as part
    of a solution to help introduce new customer services.
    
--  Cisco announced that BT Global Services intends to deploy the new
    Cisco ASR 1000 Series Aggregation Services Routers.
    
--  Japan's Jupiter Telecommunications Co. Ltd. (J: COM) selected Cisco®
    DPC3000 DOCSIS cable modems to enable delivery of ultra-high-speed
    broadband with speeds up to 160 Mbps.
    

Milestones

--  Cisco announced a three-year, $45 million (RMB 300 million) commitment
    to support reconstruction efforts in China's earthquake-devastated Sichuan
    Province.
    
--  The prime minister of Portugal signed an agreement with Cisco to help
    bridge the anticipated information and communications technology skills gap
    through the expansion of the Cisco Networking Academy® from 100 to 350
    academies across Portugal.
    

Editor's Note:

--  Q4 and FY 2008 conference call to discuss Cisco's results along with
    its business outlook will be held at 1:30 p.m. Pacific Time, Tuesday,
    August 5, 2008.  Conference call number is 888-848-6507 (United States) or
    212-519-0847 (international).
    
--  Conference call replay will be available from 4:30 p.m. Pacific Time,
    August 5, 2008 to 4:30 p.m. Pacific Time, August 12, 2008 at 866-357-4205
    (United States) or 203-369-0122 (international).  The replay also will be
    available via webcast from August 5, 2008 through October 17, 2008 on the
    Cisco Investor Relations website at http://www.cisco.com/go/investors.
    
--  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 5,
    2008.  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 at
    http://www.cisco.com/go/investors.
    
--  A Q&A with Cisco's Chairman and CEO John Chambers and CFO Frank
    Calderoni about Q4 and FY 2008 results will be available at
    http://newsroom.cisco.com.
    
--  To view a video of Cisco's CFO discussing the quarter and year-end
    results, visit Cisco's blog site, The Platform, at http://blogs.cisco.com.
    

About Cisco

Cisco (NASDAQ: CSCO) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, visit http://newsroom.cisco.com.

This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our vision of the Internet, our entry into new and adjacent markets, our expansion plans, the power of our business model, and our ability to take advantage of market transitions and drive toward our long-term growth objectives) and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; increased competition in our product and service markets; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks, including risks related to our lean manufacturing model; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters, and governmental investigations; natural catastrophic events; a pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales and engineering activities; our ability to recruit and retain key personnel; our ability to manage financial risk; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; potential volatility in operating results; and other factors listed in Cisco's most recent reports on Form 10-K and Form 10-Q. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent reports on Form 10-K and Form 10-Q, as each may be amended from time to time. Cisco's results of operations for the three and twelve months ended July 26, 2008 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

This release includes non-GAAP net income, non-GAAP net income per share data, shares used in non-GAAP net income per share calculation 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 net income per share data and shares used in non-GAAP net income per share calculation, 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 employee share-based compensation expense, impact to cost of sales from purchase accounting adjustments to inventory, payroll tax on stock option exercises, compensation expense related to acquisitions and investments, in-process research and development, amortization of acquisition-related intangible assets, significant gains and losses on publicly traded equity securities, the income tax effects of the foregoing, tax effects of post-acquisition integration of intangible assets from significant acquisitions, and significant effects of retroactive tax legislation. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco.

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.

Copyright ©2008 Cisco Systems, Inc. All rights reserved. Cisco, the Cisco logo, Cisco Nexus, Cisco TelePresence, Cisco Systems, Linksys, Networking Academy and WebEx are registered trademarks or trademarks of Cisco Systems, Inc. and/or its affiliates in the United States and certain other countries. DOCSIS is a registered trademark of Cable Television Laboratories, Inc. All other trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.

                   CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In millions, except per-share amounts)
                                (Unaudited)


                                    Three Months Ended  Twelve Months Ended
                                    ------------------  -------------------
                                    July 26,  July 28,  July 26,  July 28,
                                      2008      2007      2008      2007
                                    --------  --------- --------  ---------

NET SALES:
Product                             $  8,640  $   7,942 $ 33,099  $  29,462
Service                                1,724      1,491    6,441      5,460
                                    --------  --------- --------  ---------

Total net sales                       10,364      9,433   39,540     34,922
                                    --------  --------- --------  ---------

COST OF SALES:
Product                                3,061      2,820   11,631     10,548
Service                                  637        545    2,425      2,038
                                    --------  --------- --------  ---------

Total cost of sales                    3,698      3,365   14,056     12,586
                                    --------  --------- --------  ---------

GROSS MARGIN                           6,666      6,068   25,484     22,336

OPERATING EXPENSES:
Research and development               1,306      1,178    5,153      4,499
Sales and marketing                    2,164      1,973    8,380      7,215
General and administrative               518        431    2,007      1,513
Amortization of purchased intangible
 assets                                  149        109      499        407
In-process research and development       --         74        3         81
                                    --------  --------- --------  ---------

Total operating expenses               4,137      3,765   16,042     13,715
                                    --------  --------- --------  ---------

OPERATING INCOME                       2,529      2,303    9,442      8,621

Interest income, net                     188        197      824        715
Other income (loss), net                 (31)        31      (11)       125
                                    --------  --------- --------  ---------

Interest and other income (loss), net    157        228      813        840
                                    --------  --------- --------  ---------

INCOME BEFORE PROVISION FOR INCOME
 TAXES                                 2,686      2,531   10,255      9,461
Provision for income taxes               672        601    2,203      2,128
                                    --------  --------- --------  ---------

NET INCOME                          $  2,014  $   1,930 $  8,052  $   7,333
                                    --------  --------- --------  ---------

Net income per share:
Basic                               $   0.34  $    0.32 $   1.35  $    1.21
                                    --------  --------- --------  ---------

Diluted                             $   0.33  $    0.31 $   1.31  $    1.17
                                    --------  --------- --------  ---------

Shares used in per-share calculation:
Basic                                  5,898      6,062    5,986      6,055
                                    --------  --------- --------  ---------

Diluted                                6,034      6,275    6,163      6,265
                                    --------  --------- --------  ---------


               RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
                  (In millions, except per-share amounts)


                                 Three Months Ended   Twelve Months Ended
                                --------------------  --------------------
                                July 26,   July 28,   July  26,  July 28,
                                  2008       2007       2008       2007
                                ---------  ---------  ---------  ---------
GAAP net income                 $   2,014  $   1,930  $   8,052  $   7,333


  Employee share-based
   compensation expense               258        222      1,025        931
  Payroll tax on stock option
   exercises                            3         10         23         36
  Compensation expense related to
   acquisitions and investments        68         29        427         93
  In-process research and
   development                         --         74          3         81
  Amortization of
   acquisition-related intangible
   assets                             203        157        732        563
                                ---------  ---------  ---------  ---------
  Total adjustments to GAAP
   income before provision for
   income taxes                       532        492      2,210      1,704
                                ---------  ---------  ---------  ---------

  Income tax effect                  (151)      (154)      (677)      (603)
  Effect of retroactive tax
   legislation                         --         --         --        (60)
                                ---------  ---------  ---------  ---------
  Total adjustments to GAAP
   provision for income taxes        (151)      (154)      (677)      (663)
                                ---------  ---------  ---------  ---------

Non-GAAP net income             $   2,395  $   2,268  $   9,585  $   8,374
                                ---------  ---------  ---------  ---------
Diluted net income per share:
GAAP                            $    0.33  $    0.31  $    1.31  $    1.17
                                ---------  ---------  ---------  ---------
Non-GAAP                        $    0.40  $    0.36  $    1.56  $    1.34
                                ---------  ---------  ---------  ---------
Shares used in diluted net
 income per share calculation:
GAAP                                6,034      6,275      6,163      6,265
                                ---------  ---------  ---------  ---------
Non-GAAP                            6,018      6,263      6,153      6,249
                                ---------  ---------  ---------  ---------

Additional reconciliations between GAAP and non-GAAP financial measures are
provided in the tables that follow on page 11.



                     CONSOLIDATED BALANCE SHEETS
                            (In millions)
                             (Unaudited)
                                                    July 26,     July 28,
                                                      2008         2007
                                                  ------------ ------------
ASSETS
Current assets:
   Cash and cash equivalents                      $      5,191 $      3,728
   Investments                                          21,044       18,538
   Accounts receivable, net of allowance for
    doubtful accounts of $177 at July 26, 2008
    and $166 at July 28, 2007                            3,821        3,989
   Inventories                                           1,235        1,322
   Deferred tax assets                                   2,075        1,953
   Prepaid expenses and other current assets             2,333        2,044
                                                  ------------ ------------

   Total current assets                                 35,699       31,574

Property and equipment, net                              4,151        3,893
Goodwill                                                12,392       12,121
Purchased intangible assets, net                         2,089        2,540
Other assets                                             4,403        3,212
                                                  ------------ ------------

TOTAL ASSETS                                      $     58,734 $     53,340
                                                  ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Current portion of long-term debt              $        500 $         --
   Accounts payable                                        869          786
   Income taxes payable                                    107        1,740
   Accrued compensation                                  2,428        2,019
   Deferred revenue                                      6,197        5,391
   Other current liabilities                             3,757        3,422
                                                  ------------ ------------

   Total current liabilities                            13,858       13,358

Long-term debt                                           6,393        6,408
Income taxes payable                                       749           --
Deferred revenue                                         2,663        1,646
Other long-term liabilities                                669          438
                                                  ------------ ------------

Total liabilities                                       24,332       21,850
                                                  ------------ ------------

Minority interest                                           49           10

Shareholders' equity                                    34,353       31,480
                                                  ------------ ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $     58,734 $     53,340
                                                  ------------ ------------





                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In millions)
                               (Unaudited)

                                                    Twelve Months Ended
                                                  ------------------------
                                                    July 26,     July 28,
                                                      2008         2007
                                                  ------------ ------------
Cash flows from operating activities:
   Net income                                     $     8,052  $     7,333
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Depreciation and amortization                        1,744        1,413
   Employee share-based compensation expense            1,025          931
   Share-based compensation expense related to
    acquisitions and investments                           87           34
   Provision for doubtful accounts                         34            6
   Deferred income taxes                                 (772)        (622)
   Excess tax benefits from share-based
    compensation                                         (413)        (918)
   In-process research and development                      3           81
   Net gains and impairment charges on
    investments                                          (103)        (210)
   Change in operating assets and liabilities,
    net of effects of acquisitions:
      Accounts receivable                                 171         (597)
      Inventories                                         104           61
      Lease receivables, net                             (488)        (156)
      Accounts payable                                     62         (107)
      Income taxes payable and receivable                 178        1,104
      Accrued compensation                                351          479
      Deferred revenue                                  1,812        1,293
      Other assets                                       (361)        (452)
      Other liabilities                                   603          431
                                                  -----------  -----------

Net cash provided by operating activities              12,089       10,104
                                                  -----------  -----------

Cash flows from investing activities:
   Purchases of investments                           (22,399)     (20,532)
   Proceeds from sales and maturities of
    investments                                        19,990       17,368
   Acquisition of property and equipment               (1,268)      (1,251)
   Acquisition of businesses, net of cash and
    cash equivalents acquired                            (398)      (3,684)
   Change in investments in privately held
    companies                                            (101)         (92)
   Other                                                  (17)        (151)
                                                  -----------  -----------

Net cash used in investing activities                  (4,193)      (8,342)
                                                  -----------  -----------

Cash flows from financing activities:
   Issuance of common stock                             3,117        5,306
   Repurchase of common stock                         (10,441)      (7,681)
   Proceeds from the termination of interest rate
    swaps                                                 432           --
   Excess tax benefits from share-based
    compensation                                          413          918
   Other                                                   46          126
                                                  -----------  -----------

Net cash used in financing activities                  (6,433)      (1,331)
                                                  -----------  -----------

Net increase in cash and cash equivalents               1,463          431
Cash and cash equivalents, beginning of fiscal
 year                                                   3,728        3,297
                                                  -----------  -----------

Cash and cash equivalents, end of fiscal year     $     5,191  $     3,728
                                                  -----------  -----------

Certain reclassifications have been made to prior year amounts to conform
to the current year's presentation.




                      ADDITIONAL FINANCIAL INFORMATION
                               (In millions)
                                (Unaudited)


                                                    July 26,     July 28,
                                                      2008         2007
                                                  -----------  -----------
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents                         $     5,191  $     3,728
Fixed income securities                                19,869       17,297
Publicly traded equity securities                       1,175        1,241
                                                  -----------  -----------

Total                                             $    26,235  $    22,266
                                                  -----------  -----------

INVENTORIES
Raw materials                                     $       111  $       173
Work in process                                            53           45
Finished goods:
    Distributor inventory and deferred cost of
     sales                                                452          544
    Manufactured finished goods                           381          314
                                                  -----------  -----------

Total finished goods                                      833          858
Service-related spares                                    191          211
Demonstration systems                                      47           35
                                                  -----------  -----------

Total                                             $     1,235  $     1,322
                                                  -----------  -----------

PROPERTY AND EQUIPMENT, NET
Land, buildings, and leasehold improvements       $     4,445  $     4,022
Computer equipment and related software                 1,770        1,605
Production, engineering, and other equipment            4,839        4,264
Operating lease assets                                    209          181
Furniture and fixtures                                    439          394
                                                  -----------  -----------

                                                       11,702       10,466
Less accumulated depreciation and amortization         (7,551)      (6,573)
                                                  -----------  -----------

Total                                             $     4,151  $     3,893
                                                  -----------  -----------

OTHER ASSETS
Deferred tax assets                               $     1,770  $     1,060
Investments in privately held companies                   706          643
Income tax receivable                                      --          277
Lease receivables, net (1)                                862          539
Financed service contracts (2)                            588          377
Other                                                     477          316
                                                  -----------  -----------

Total                                             $     4,403  $     3,212
                                                  -----------  -----------

DEFERRED REVENUE
Service                                           $     6,133  $     4,840
Product
    Unrecognized revenue on product shipments and
     other deferred revenue                             2,152        1,769
    Cash receipts related to unrecognized revenue
     from two-tier distributors                           575          428
                                                  -----------  -----------

Total product deferred revenue                          2,727        2,197
                                                  -----------  -----------

Total                                             $     8,860  $     7,037
                                                  -----------  -----------

Reported as:
Current                                           $     6,197  $     5,391
Noncurrent                                              2,663        1,646
                                                  -----------  -----------

Total                                             $     8,860  $     7,037
                                                  -----------  -----------

Note:
(1) The current portion of lease receivables, net, which was $554 million
    and $389 million as of July 26, 2008 and July 28, 2007, respectively,
    is recorded in prepaid expenses and other current assets.
(2) The current portion of financed service contracts, which was $730
    million and $476 million as of July 26, 2008 and July 28, 2007,
    respectively, is recorded in prepaid expenses and other current
    assets. These financed service contracts primarily relate to technical
    support services, and the associated 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.



            SUMMARY OF EMPLOYEE SHARE-BASED COMPENSATION EXPENSE
                                (In millions)

                                 Three Months Ended   Twelve Months Ended
                                --------------------- ---------------------
                                 July 26,   July 28,   July 26,   July 28,
                                   2008       2007       2008       2007
                                ---------- ---------- ---------- ----------
Cost of sales -- product        $       10 $        6 $       40 $       39
Cost of sales -- service                28         25        108        104
                                ---------- ---------- ---------- ----------

Employee share-based
 compensation expense in cost
 of sales                               38         31        148        143
                                ---------- ---------- ---------- ----------

Research and development                71         66        295        289
Sales and marketing                    110         98        434        392
General and administrative              39         27        148        107
                                ---------- ---------- ---------- ----------

Employee share-based
 compensation expense in
 operating expenses                    220        191        877        788
                                ---------- ---------- ---------- ----------

Total employee share-based
 compensation expense           $      258 $      222 $    1,025 $      931
                                ---------- ---------- ---------- ----------

The income tax benefit for employee share-based compensation expense was
$83 million and $330 million for the fourth quarter and for fiscal 2008,
respectively, and $77 million and $342 million for the fourth quarter and
for fiscal 2007, respectively.



             RECONCILIATION OF SHARES USED IN THE GAAP AND NON-GAAP
                  DILUTED NET INCOME PER SHARE CALCULATION
                               (In millions)


                                 Three Months Ended   Twelve Months Ended
                                --------------------  --------------------
                                July 26,   July 28,   July 26,   July 28,
                                  2008       2007       2008       2007
                                ---------  ---------  ---------  ---------
Shares used in diluted net
 income per share
 calculation -- GAAP                6,034      6,275      6,163      6,265
Effect of SFAS 123(R)                 (16)       (12)       (10)       (16)
                                ---------  ---------  ---------  ---------

Shares used in diluted net
 income per share
 calculation -- Non-GAAP            6,018      6,263      6,153      6,249
                                ---------  ---------  ---------  ---------




               RECONCILIATION OF GAAP TO NON-GAAP COST OF SALES
                          USED IN INVENTORY TURNS
                               (In millions)


                                                 Three Months Ended
                                           -------------------------------
                                            July 26,   April 26,  July 28,
                                              2008       2008       2007
                                           ---------  ---------  ---------
GAAP cost of sales                         $   3,698  $   3,486  $   3,365

    Employee share-based compensation
     expense                                     (38)       (37)       (31)

    Amortization of acquisition-related
     intangible assets                           (54)       (57)       (48)

                                           ---------  ---------  ---------

Non-GAAP cost of sales                     $   3,606  $   3,392  $   3,286
                                           ---------  ---------  ---------

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