Cisco Reports Second Quarter Earnings

• Q2 Net Sales: $9.1 billion (decrease of 7.5% year over year)
• Q2 Net Income: $1.5 billion GAAP; $1.9 billion non-GAAP
• Q2 Earnings per Share: $0.26 GAAP (decrease of 21.2% year over year); $0.32 non-GAAP (decrease of 15.8% year over year)
• Q2 Cash Flows from Operations: $3.2 billion
• Total Cash, Cash Equivalents and Investments: $29.5 billion

SAN JOSE, Calif. – February 4, 2009 – 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 24, 2009. Cisco reported second quarter net sales of $9.1 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.5 billion or $0.26 per share, and non-GAAP net income of $1.9 billion or $0.32 per share.

"Cisco showcased solid financial strength during a period of significant economic challenge," said John Chambers, chairman and chief executive officer, Cisco. "We remain comfortable with our long-term vision and strategy as we move into new market adjacencies and prioritize our existing opportunities. We intend to accelerate the alignment of our resources to prioritize future growth opportunities, gradually decrease our operating expenses, while building even stronger customer relationships to position Cisco for ongoing, long-term market leadership."

Net sales for both the first six months of fiscal 2009 and fiscal 2008 were $19.4 billion. Net income for the first six months of fiscal 2009, on a GAAP basis, was $3.7 billion or $0.63 per share, compared with $4.3 billion or $0.68 per share for the first six months of fiscal 2008. Non-GAAP net income for the first six months of fiscal 2009 was $4.4 billion or $0.74 per share, compared with $4.9 billion or $0.78 per share for the first six months of fiscal 2008.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 6.

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://www.cisco.com/go/investors.

Other Financial Highlights

• Cash flows from operations were $3.2 billion for the second quarter of fiscal 2009, compared with $2.4 billion for the second quarter of fiscal 2008, and compared with $2.7 billion for the first quarter of fiscal 2009.
• Cash and cash equivalents and investments were $29.5 billion at the end of the second quarter of fiscal 2009, compared with $26.2 billion at the end of fiscal 2008, and compared with $26.8 billion at the end of the first quarter of fiscal 2009.
• Deferred revenue was $9.3 billion at the end of the second quarter of fiscal 2009, compared with $8.9 billion at the end of fiscal 2008, and compared with $8.8 billion at the end of the first quarter of fiscal 2009.
• During the second quarter of fiscal 2009, Cisco repurchased 37 million shares of common stock at an average price of $16.40 per share for an aggregate purchase price of $600 million. As of January 24, 2009, Cisco had repurchased and retired 2.7 billion shares of Cisco common stock at an average price of $20.57 per share for an aggregate purchase price of approximately $55.2 billion since the inception of the stock repurchase program. The remaining authorized repurchase amount as of January 24, 2009 was $6.8 billion with no termination date.
• Days sales outstanding in accounts receivable (DSO) at the end of the second quarter of fiscal 2009 were 29 days, compared with 34 days at the end of the fourth quarter of fiscal 2008, and compared with 29 days at the end of the first quarter of fiscal 2009.
• Inventory turns on a GAAP basis were 11.6 in the second quarter of fiscal 2009, compared with 11.9 in the fourth quarter of fiscal 2008, and compared with 11.9 in the first quarter of fiscal 2009. Non-GAAP inventory turns were 11.3 in the second quarter of fiscal 2009, compared with 11.6 in the fourth quarter of fiscal 2008, and compared with 11.6 in the first quarter of fiscal 2009.

"Despite a clearly challenging macro-economic environment, Cisco generated $3.2 billion in cash flows from operations in our second quarter, resulting in total cash and investments of $29.5 billion," said Frank Calderoni, chief financial officer, Cisco. "I believe our business model and financial position provide us with two key capabilities: speed and flexibility. We believe we have been able to minimize risk to our business, while still positioning Cisco to take advantage of new opportunities."

About Cisco Systems

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, please go to http://newsroom.cisco.com.

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