Analyst Conference Summary

conference date: November 7, 2007 @ 1:30 PM Pacific Time
for quarter ending: October 27, 2007 (1st quarter fiscal 2008)

Forward-looking statements

Overview: Another solid quarter. Phenomenal year-over-year earnings growth for a company of its size.

Basic data:

Revenues were $9.6 billion, up 2% sequentially from $9.4 billion, and up 16.7% from $8.2 billion year-earlier.

Net income was $2.2 billion, up 15.8% sequentially from $1.9 billion, and up 37.1% from $1.6 billion year-earlier.

EPS (earnings per share) were $0.35, up 13% sequentially from $0.31, and up34.6% from $0.26 year-earlier.

Guidance:

Fiscal year 2008 guidance is for growth rate near middle of 12% to 17% long term growth rate.

For Q2 fiscal 2008, revenue growth of 16% y/y. Non-Gaap gross margin 65.5%, operating expense 36% of revenue, interest and other income near $225 million, tax rate 24%, share count flat to up 50 million shares sequentially. Cash flow from operations in the $700 to $900 million per month range.

Conference Highlights:

Non-GAAP net income was given as $2.5 billion, or $0.40 per share, up 29% y/y.

Cash flow from operations was $3.1 billion. Cash and equivalents ended at $24.7 billion, up sequentially from $22.3 billion. 96 million shares of stock were repurchased for $3.0 billion, or an average of $31.28 per share.

Agreed to purchase Navini Networks. Closed acquisitions of Cognio and Latigent in quarter.

Reiterated new product and major customer announcements from quarter.

Product sales were $8.01 billion.

Services revenues were $1.54 billion.

Cost of sales was $3.38 billion. Gross margin was $6.17 billion. R&D expense was $1.19 billion, Sales and marketing $2.00 billion, General and Administrative $0.49 billion, amortization $117 million, for total operating expense of $3.8 billion. Operating income was $2.37 billion. Interest income $223 million, other income 31 million. Income tax provision was $417 million.

Non-GAAP gross margin was 65.6%. Both GAAP and non-GAAP eps include a tax benefit.

Inventory ended at $1.3 billion, about flat sequentially.

Book to bill ratio was approximately 1. Product orders grew 16%. Deferred revenue was $7.1 billion.

Phase 2 of Internet will continue to drive Cisco's revenues. Gained market share against almost all competitors in almost all product lines.

Routing revenue grew 18% y/y to $1.9 billion. High end router orders grew in mid-30s% y/y.

Switching revenue grew 8% y/y to $3.3 billion.

Advanced technologies revenue grew 27% y/y to $2.4 billion. Unified Communications including WebEx had over 70% growth. Storage over 20%. Wireless and home networking were flat. Security was in mid-teens. Video and application networking mid-30s y/y.

Service revenue grew 24% y/y to $1.5 billion. Other revenue was $0.5 billion, up 8% y/y.

Geographic, orders: Europe grew 20% y/y with Germany particularly strong. Emerging markets grew about 35% y/y, Asia Pacific in high teens y/y with India growing about 50% y/y, U.S. orders grew 13%.

Commercial segment orders grew 25% y/y. Service Provider segment grew in high teens y/y. Global enterprise orders grew in low double digits y/y.

Believes long term guidance should be in 12 to 17% annual growth rate, but there will be times when we are over or under this spectrum.

Q&A:

Lumpiness in enterprise verticals? On global basis enterprise was very solid. Financial services category did see y/y decrease in orders. Automotive was down, retail was mixed.

Is it harder to grow quickly at your size? There are some very real advantages to size. Routing and switching have grown quicker than most people expected. We believe network loads are growing 200% or more a year.

Is U.S. enterprise slowdown a leading or lagging indicator for the U.S.? Global economy is not that dependent on U.S. any more. Internal consumption has increased dramatically in China and India. We believe Europe is heading upward. Global momentum feels good. Believes enterprise markets have been delaying orders and will have to start back up.

Is Q2 guidance including US enterprise down? Our overall number, we are good at estimating that, usually. We have been conserverative about U.S. sales. Enterprise is now only 41% of U.S. sales now. Financial sector is 8% of the 41%.

Switching sales slowing? Switching is tied to U.S. enterprise sales; will have ups and downs. Routing ties more closely to service provider side of business. Modular switching was flat, fixed switching was in high teens. Major upgrades to lines announced yesterday; some customers wait for new products.

China? In India was decided 5 years ago to invest there. Then globabization center; good results today. China is similar; we invested there in 1994-95. China is building out away from coast, has emerging software industry that is going global. CEO's in China are aggressive and want a technology advantage.

Our issue is not of growth, but of what market adjacencies we go into and when.

Optimistic as we are we did delay some hires because of uncertainty; enterprise CEO's think the same way. Most think the Fed has done a good job and expect a soft landing, but are being conservative. In quarter, just in U.S., August was as expected, September was soft, but then October was solid.

Wireless flat, used to be a growth center? A lot of wireless does go into enterprise customers. Wireless is always lumpy because it is a channel business, so would not read too much into it. Moving to unified architecture for wireless/wireline.

For enterprise in U.S, top 25 customers were hardest hit, and 8 of those are financial.

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