Annual Report 2004


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Building Tomorrow's Networks

Cisco is proud to feature its employees in this year's annual report:

(left to right): Jeff Bray, Senior Technical Writer; Iris Chao, I.T. Project Manager; Venkatesh Iyer, Software Engineer; Lyn Gardiner, Sr. Manager, WW Sales Productivity; Carey Wan, Software Engineer; Marie King, Corporate Operations Specialist


This Annual Report contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "may," variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses or key markets, including growth in the service provider market, and future growth and revenues from Advanced Technologies, improvements in the capital spending environment, benefits of taking business risks, future financial conditions, increases in productivity and standard of living, and other characterizations of future events or circumstances, are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions, are subject to risks, uncertainties, and assumptions that are difficult to predict, and may differ materially and adversely from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry and in various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth 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; the timing of orders and manufacturing 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; the ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; increased competition in the networking industry; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters; the ability to recruit and retain key personnel; our ability to manage financial risk; currency fluctuations and other international factors; potential volatility in operating results and other factors listed in our most recent reports on Form 10-K, 10-Q and 8-K. The financial information contained in this Annual Report should be read in conjunction with the consolidated financial statements and notes thereto that are included in this report. Our results of operations for the year ended July 31, 2004 are not necessarily indicative of our operating results for any future periods. We undertake no obligation to revise or update any forward-looking statements for any reason.

For fiscal 2004, pro forma net income excluded the following items: in-process research and development of $3 million, payroll tax on stock option exercises of $16 million, amortization of deferred stock-based compensation of $244 million, amortization of purchased intangible assets of $242 million, gains on publicly traded equity securities of ($85) million, income tax effect of ($51) million and cumulative effect of accounting change, net of tax, of $567 million.