SAN JOSE, CA–(Feb 12, 2014) – Cisco (NASDAQ: CSCO)

• Q2 Revenue: $11.2 billion (decrease of 8% year over year)
• Q2 Earnings per Share: $0.27 GAAP; $0.47 non-GAAP

Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its second quarter results for the period ended January 25, 2014. Cisco reported second quarter revenue of $11.2 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.4 billion or $0.27 per share, and non-GAAP net income of $2.5 billion or $0.47 per share.

“We delivered the results we expected this quarter. I’m pleased with the progress we’ve made managing through the technology transitions of cloud, mobile, security and video,” stated chairman and CEO John Chambers. “Our financials are strong and our strategy is solid. The major market transitions are networking centric and as the Internet of Everything becomes more important to business, cities and countries, Cisco is uniquely positioned to help our customers solve their biggest business problems.”

GAAP net income for the second quarter of fiscal 2014 included a pre-tax charge of $655 million related to the expected cost of remediation of issues with memory components in certain products sold in prior fiscal years. This charge was excluded from non-GAAP net income and earnings per share. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table below.

For the second quarter of fiscal 2013, GAAP net income and GAAP earnings per share include total tax benefits of $926 million or $0.17 per share, respectively, related to a tax settlement with the Internal Revenue Service (IRS) and the reinstatement of the U.S. federal research and development (R&D) tax credit on January 2, 2013.

Revenue for the first six months of fiscal 2014 was $23.2 billion, compared with $24.0 billion for the first six months of fiscal 2013. Net income for the first six months of fiscal 2014, on a GAAP basis, was $3.4 billion or $0.64 per share, compared with $5.2 billion or $0.98 per share for the first six months of fiscal 2013. Non-GAAP net income for the first six months of fiscal 2014 was $5.4 billion or $1.00 per share, compared with $5.3 billion or $0.99 per share for the first six months of fiscal 2013.

Cisco will discuss second quarter 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/.

Cisco Increases Quarterly Cash Dividend

Cisco is also announcing that earlier today its Board of Directors declared a quarterly dividend of $0.19 per common share, a two-cent increase over the previous quarter’s dividend, to be paid on April 23, 2014 to all shareholders of record as of the close of business on April 3, 2014. Future dividends will be subject to Board approval.

“We had a record quarter of returning $4.9 billion to our shareholders through our quarterly dividend of approximately $900 million and share repurchases of $4.0 billion,” stated Frank Calderoni, executive vice president and chief financial officer. “Our financial strength gives us the confidence to provide a meaningful return to our shareholders, and I’m pleased we are increasing our quarterly dividend by 12 percent to $0.19 per share.”

Other Financial Highlights

• Cash flows from operations were $2.9 billion for the second quarter of fiscal 2014, compared with $2.6 billion for the first quarter of fiscal 2014, and compared with $3.3 billion for the second quarter of fiscal 2013.
• Cash and cash equivalents and investments were $47.1 billion at the end of the second quarter of fiscal 2014, compared with $48.2 billion at the end of the first quarter of fiscal 2014, and compared with $50.6 billion at the end of the fourth quarter of fiscal 2013.
• Cisco repurchased approximately 185 million shares of common stock under the stock repurchase program at an average price of $21.73 per share for an aggregate purchase price of $4.0 billion during the second quarter of fiscal 2014. As of January 25, 2014, Cisco had repurchased and retired 4.1 billion shares of Cisco common stock at an average price of $20.53 per share for an aggregate purchase price of approximately $84.9 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases as of January 25, 2014 was approximately $12.1 billion with no termination date.
• During the second quarter of fiscal 2014, Cisco paid a cash dividend of $0.17 per common share, or $896 million.

Internet of Everything

• Cisco announced a blueprint for creating a sustainable smart and connected city to help fulfill Dubai’s Smart City ambitions.
• Cisco released a study which estimates that The Internet of Everything (IoE) could generate $4.6 trillion in value for public sector organizations over the next decade.
• Cisco announced that it has allocated $100 million to invest in early stage companies in order to drive the evolution of the IoE.

Next Generation of IT

• Cisco completed its acquisition of WhipTail Technologies, Inc. to strengthen the Cisco Unified Computing System™ (UCS) strategy and enhance application performance by integrating scalable solid state memory into the Cisco UCS® fabric computing architecture.
• Cisco acquired Collaborate.com to provide a comprehensive solution that enables the mobile workforce to work smarter and more efficiently from virtually anywhere and help accelerate innovation in collaboration.
• Cisco completed its acquisition of Insieme Networks, Inc., furthering its ability to deliver to customers the first data center and cloud solution that offers full visibility and integrated management of physical and virtual networked IT resources, all built around meeting the needs of applications.
• Cisco was awarded the “Ten-Year Recognition Award for Outstanding Contribution in Corporate Social Responsibility” at a ceremony jointly hosted by 21st Century Business Review, 21st Century Business Herald and the 21st Century Corporate Citizenship Research Center in Beijing.
• Cisco expanded its manufacturing in Brazil with the production of advanced enterprise Wi-Fi access points.
• Cisco was selected to provide video hardware and cloud software components from its Videoscape™ TV services delivery platform to support transcoding and content management during NBC’s production of the 2014 Olympic Winter Games in Sochi, Russia.
• Cisco released its 2014 Annual Security Report, which offers a vivid picture of rapidly evolving security challenges facing businesses, IT departments and individuals.
• At the 2014 World Economic Forum Annual Meeting in Davos, Cisco announced that it plans to invest up to $1.35 billion in Mexico to expand its presence in the region during 2014 via the Cisco Support Center, the expansion of the manufacturing of advanced technology products and the expansion of the Cisco Networking Academy™ program.

Innovation

• Cisco announced the delivery of Application Centric Infrastructure (ACI), new professional services, and an open ecosystem of partners to help customers unleash their applications and enable greater business agility.
• Tata Sky deployed Cisco Videoscape™ Video Everywhere solution, a thin-client user interface application designed to enable new multiscreen experiences beyond the set-top box. Tata Sky is the first platform in Asia to deploy this solution.
• Using the Cisco Remote Expert Solution, UK-based Nationwide Building Society announced plans to introduce a new remote mortgage service from more than 60 branches throughout the UK by the end of spring 2014.
• The Government of Canarias in Spain commissioned an innovative telepresence service, based on Cisco TelePresence®, to enable representatives of the public administration of Canarias to hold virtual “face-to-face” meetings without traveling between islands — thereby saving travel costs and speeding decision-making.
• Cisco announced new solutions and services in the Cisco EnergyWise™ suite that help enterprises become more energy efficient and reduce carbon emissions. The expanded portfolio is based on the integration of software acquired through Cisco’s acquisition of JouleX with Cisco’s existing services offerings and EnergyWise technology.
• Cisco expanded its Videoscape TV services delivery platform to include a host of new cloud video capabilities, including an industry-first Videoscape “as-a-service” offering and open cloud software technologies based on OpenStack, designed to help service providers and media companies enhance agility, increase revenue and reduce operating expenses.

Editor’s Notes:

• Q2 fiscal year 2014 conference call to discuss Cisco’s results along with its business outlook will be held on Wednesday, February 12, 2014 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).
• Conference call replay will be available from 4:00 p.m. Pacific Time, February 12, 2014 to 4:00 p.m. Pacific Time, February 19, 2014 at 1-866-513-1228 (United States) or 1-203-369-1971 (international). The replay will also be available via webcast from February 12, 2014 through April 19, 2014 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, February 12, 2014. 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/.

(1) GAAP net income for the second quarter of fiscal 2014 included a pre-tax charge of $655 million related to the expected cost of remediation of issues with memory components in certain products sold in prior fiscal years.

The charge is related to the expected remediation cost for certain products containing memory components manufactured by a single supplier between 2005 and 2010. These components are widely used across the industry and are included in a number of Cisco products. They are known to slowly degrade over time, and in some cases, have caused products to fail after a power cycle event. Failure rates due to this issue have been and are expected to be low. However, recently Cisco has seen a handful of its customers experience a growing number of failures in their networks as a result of this component problem. Accordingly, although the majority of these products are beyond Cisco’s warranty terms, Cisco is proactively working with customers on mitigation, resulting in a charge to product cost of sales during the second quarter of fiscal 2014.

Cisco believes its approach to this industry-wide issue is the best course of action for its customers and, despite the cost, demonstrates that customer satisfaction is a top priority. Customers can learn more about this issue and potential mitigation steps at www.cisco.com/go/memory.

(2) For the three months and six months ended January 25, 2014, Cisco recorded a net tax benefit of $69 million related to prior fiscal years. Non-GAAP net income excluded this net tax benefit of $69 million.

(3) For the three months and six months ended January 26, 2013, Cisco recorded a net tax benefit of $866 million. This net tax benefit is comprised of an Internal Revenue Service settlement of $794 million and the retroactive reinstatement of the U.S. federal R&D tax credit of $72 million. Non-GAAP net income excluded this net tax benefit of $866 million.

Certain reclassifications have been made to prior period amounts to conform to the current period’s presentation.