Analyst Conference Summary

conference date: May 12, 2010 @ 1:30 PM Pacific Time
for quarter ending: May 1, 2010 (3rd quarter fiscal 2010)

Forward-looking statements

Overview: Nice recovery from year-earlier slump.

Basic data (GAAP) :

Revenues were $10.37 billion, up 6% sequentially from $9.81 billion and up 27% from $8.16 billion in the year-earlier quarter.

Net income was $2.19 billion, up 18% sequentially from $1.85 billion and up 62% from $1.35 billion.

EPS (earnings per share) were $0.37, up 16% sequentially from $0.32 and up 61% from $0.23 year-earlier.

Guidance:

Q4 is shorter by 1 week that Q3. Tandberg will contribute 2% to sequential growth or about $200 million in revenue in Q4. Non-GAAP fiscal Q4 based total revenue up 25 to 28% y/y. Typical Q3 to Q4 growth has been 5 to 6% without the extra week.

Conference Highlights:

Revenue growth was strong and balanced "across geographies, products and customer segments," having gained market share during the recesion. Cisco now has "next-generation products in almost every product category." The quarter exceeded company expectation.

Note that the quarter reported on had 14 weeks in it, one more week than in the year-earlier quarter. Also the GAAP numbers (but not non-GAAP) include a tax benefit of $158 million or $0.03/share.

Non-GAAP numbers: net income $2.48 billion, EPS $0.42.

Cash flow from operations was $3.0 billion. Cash and equivalents balance ended at $39.1 billion. $2.25 billion of stock was repurchased in the quarter. Long term debt was $12.1 billion.

The Tandberg acquisition was completed in the quarter.

Product introductions in the quater included the CRS-3 Carrier Routing System, WebEx applications for smartphones, the second generatin Cisco Unified Computing System, CleanAir wireless technology, and Catalyst 3560/3750-X/2960-S series switches.

New product order growth was extremely strong, perhaps the best in Cisco's history overall. Believes Cisco is "expanding its leadership in the marketplace while at the same time moving effectively into 30+ market adjacencies."

$8.44 billion of revenue was from product sales, $1.93 billion was from services.

Revenue by segment: routers $1.7 billion, up 23% y/y; switches $3.7 billion, up 40% y/y; advanced technologies $2.4 billion, up 18% y/y; other (including Flip video) $0.6 billion, up 71% y/y.

Cost of sales was $3.74 billion, leaving gross profit of $6.63 billion. Operating expenses were $4.29 billion, leaving operating income of $2.35 billion. Other income was $58 million. Income tax provision was $211 million.

64.2% non-GAAP gross margin, up 0.1% y/y.

Product orders were up 33% from year-earlier. Services up 30%.

Orders by geography: U.S. orders grew 34% y/y, Europe 33% y/y, Emerging Markets in the high forties, Asia about 34%. Japan was weak, up only 2% y/y. In the U.S. Enterprise orders were up 27% y/y.

Lead times improved in the quarter, but were not yet in the desired range.

Q&A:

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