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• Q2 Net Sales: $9.8 billion (increase of 8% year over year)
• Q2 Net Income: $1.9 billion GAAP; $2.3 billion non-GAAP
• Q2 Earnings per Share: $0.32 GAAP (increase of 23% year over year); $0.40 non-GAAP (increase of 25% year over year)

SAN JOSE, Calif. – February 3, 2010 – 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 23, 2010. Cisco reported second quarter net sales of $9.8 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.9 billion or $0.32 per share, and non-GAAP net income of $2.3 billion or $0.40 per share.

"Our outstanding Q2 results exceeded our expectations and we believe they provide a clear indication that we are entering the second phase of the economic recovery. During the quarter we saw dramatic across the board acceleration and sequential improvement in our business in almost all areas," said John Chambers, chairman and chief executive officer, Cisco.

"We are confident that our aggressive strategy of investing in the business during the downturn and our focus on innovation, operational excellence, and productivity are driving our momentum and growth in the market. We believe that we are extremely well-positioned—by geography, in our customer segments, and in our key product categories—as economies around the world continue to improve and our customers increase their technology investments."

Net sales for the first six months of fiscal 2010 were $18.8 billion, compared with $19.4 billion for the first six months of fiscal 2009. Net income for the first six months of fiscal 2010, on a GAAP basis, was $3.6 billion or $0.62 per share, compared with $3.7 billion or $0.63 per share for the first six months of fiscal 2009. Non-GAAP net income for the first six months of fiscal 2010 was $4.5 billion or $0.76 per share, compared with $4.4 billion or $0.74 per share for the first six months of fiscal 2009.

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. A Q&A with Cisco's Chairman and CEO John Chambers and CFO Frank Calderoni will also be available at http://newsroom.cisco.com. To view a video of Cisco's CFO discussing second quarter results, visit http://blogs.cisco.com.

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Cisco EVP/CFO Frank Calderoni - Q2FY10 Earnings

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Chairman and CEO John Chambers and CFO Frank Calderoni Discuss Cisco Second Quarter Fiscal Year 2010 Performance

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Cisco's Q2 FY'10 Performance

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Q2 FY'10 Financial Results Conference Call

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Q2 FY'10 Financial Results

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Q2 FY'10 Technology & Customer Highlights

Other Financial Highlights

• Cash flows from operations were $2.5 billion for the second quarter of fiscal 2010, compared with $1.5 billion for the first quarter of fiscal 2010, and compared with $3.2 billion for the second quarter of fiscal 2009.
• Cash and cash equivalents and investments were $39.6 billion at the end of the second quarter of fiscal 2010, compared with $35.0 billion at the end of fiscal 2009, and compared with $35.4 billion at the end of the first quarter of fiscal 2010.
• During the second quarter of fiscal 2010, Cisco repurchased 63 million shares of common stock at an average price of $23.96 per share for an aggregate purchase price of $1.5 billion. As of January 23, 2010, Cisco had repurchased and retired 2.9 billion shares of Cisco common stock at an average price of $20.55 per share for an aggregate purchase price of approximately $60.4 billion since the inception of the stock repurchase program. The remaining authorized repurchase amount as of January 23, 2010 was $11.6 billion with no termination date.
• Days sales outstanding in accounts receivable (DSO) at the end of the second quarter of fiscal 2010 were 39 days, compared with 32 days at the end of the first quarter of fiscal 2010, and compared with 29 days at the end of the second quarter of fiscal 2009.
• Inventory turns on a GAAP basis were 12.1 in the second quarter of fiscal 2010, compared with 11.6 in both the first quarter of fiscal 2010 and the second quarter of fiscal 2009. Non-GAAP inventory turns were 11.7 in the second quarter of fiscal 2010, compared with 11.3 in both the first quarter of fiscal 2010 and the second quarter of fiscal 2009.

"From a financial standpoint, Q2 was an outstanding quarter. Our performance with an eight percent year-over-year increase in Q2 revenue represents our third sequential quarter of positive growth and was well above the strong guidance we outlined during our first quarter conference call," said Frank Calderoni, chief financial officer, Cisco. "We delivered strong gross margins and added $2.5 billion in cash from operations during our second quarter, bringing our total of cash and investments to $39.6 billion. We believe that these results demonstrate the strong foundation from which we can continue to focus on growing and capturing market transitions in our industry."

Select Global Business Highlights

• Cisco, EMC Corp., and VMware, Inc., announced the formation of a Virtual Computing Environment coalition designed to accelerate pervasive data center virtualization and private cloud infrastructure development.
• Cisco marked its 25th anniversary with a challenge to every Cisco employee to volunteer four hours of service in his or her local community.

Acquisitions and Investments

• Cisco completed its purchase of ScanSafe, Inc., a market leader of software-as-a-service (SaaS) web security solutions for organizations ranging from global enterprises to small businesses.
• Cisco completed the acquisition of Starent Networks, Corp., a leading supplier of IP-based mobile infrastructure solutions targeting mobile and converged carriers.

Cisco Innovation

• At its Collaboration Summit, Cisco introduced new products in Cisco TelePresence^TM, unified communications, enterprise social software, and hosted email technologies to facilitate fundamental changes to how organizations communicate and collaborate.
• At the 2010 International Consumer Electronics Show, Cisco showcased its vision to enable consumers to live a connected life through its momentum in home networking and consumer video products, new partnerships with media and entertainment companies, and plans to drive a new class of consumer video communication experiences.

Select Customer Announcements

• Cisco and Molina Healthcare, Inc. announced a telemedicine initiative designed to deliver better care to underserved and underinsured communities throughout the state of California with immersive doctor-patient interactions.
• TASER International, Inc. enhanced its evidence capabilities for law enforcement agencies with an innovative, cloud-based service built on the Cisco Unified Computing System^TM.
• The Mandarin Oriental hotel in Kuala Lumpur, Malaysia announced it will provide highly secure high-speed wireless Internet access throughout its premises through an upgrade of its network infrastructure with Cisco's next-generation 802.11n, or Wireless-N, technology.
• The Melbourne Airport modernized and digitized its International Terminal 2 operations with the deployment of Cisco business video and mobility technologies.
• BT and Cisco launched a hosted IP telephony service representing the world's first global offering based on Cisco cloud-based unified communications as the platform for collaborative voice communications.
• Onet.pl Group in Poland chose the Cisco Nexus® data center platform for its new data centre in Krakow to serve the fast-growing number of customers who would like to make use of the portal's innovative video-based services.

Editor's Note:

• Q2 FY10 conference call to discuss Cisco's results along with its business outlook will be held at 1:30 p.m. Pacific Time, Wednesday, February 3, 2010. Conference call number is 888-848-6507 (United States) or 212-519-0847 (international).
• Conference call replay will be available from 4:30 p.m. Pacific Time, February 3, 2010 to 4:30 p.m. Pacific Time, February 10, 2010 at 866-357-4205 (United States) or 203-369-0122 (international). The replay also will be available via webcast from February 3, 2010 through April 23, 2010 on the Cisco Investor Relations website at http://www.cisco.com/go/investors.
• 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 3, 2010. 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 at http://www.cisco.com/go/investors.
• A Q&A with Cisco's Chairman and CEO John Chambers and CFO Frank Calderoni about Q2 FY10 results will be available at approximately 2:15 pm PT at http://newsroom.cisco.com.
• To view a video of Cisco's CFO discussing Q2 FY10 results, visit Cisco's blog site, The Platform, at http://blogs.cisco.com.

About Cisco

Cisco, (NASDAQ: CSCO), the worldwide leader in networking that transforms how people connect, communicate and collaborate, this year celebrates 25 years of technology innovation, operational excellence and corporate social responsibility. 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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This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as the entry into the second phase of the economic recovery, our momentum and growth in the market, that we are extremely well-positioned, and our ability to continue to focus on growing and capturing market transitions in our industry) and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution 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 and other customer markets; the return on our investments in certain market adjacencies and geographical locations; the timing of orders and manufacturing and customer 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; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; increased competition in our product and service markets, including the data center; 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, and governmental investigations; natural catastrophic events; a pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales and engineering activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors, including relating to transactions to hedge foreign currency consideration for acquisitions; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco's most recent reports on Form 10-K and Form 10-Q. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent reports on Form 10-K and Form 10-Q, as each may be amended from time to time. Cisco's results of operations for the three and six months ended January 23, 2010 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

This release includes non-GAAP net income, non-GAAP net income per share data, non-GAAP shares used in net income per share calculation, and non-GAAP inventory turns. Effective for the second quarter and first six months of fiscal 2010, Cisco no longer uses non-GAAP shares in the calculation of non-GAAP net income per share.

These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco's results of operations in conjunction with the corresponding GAAP measures.

Cisco believes that the presentation of non-GAAP net income, non-GAAP net income per share data and non-GAAP shares used in net income per share calculation for the periods in which such measures are presented, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations. In addition, Cisco believes that the presentation of non-GAAP inventory turns provides useful information to investors and management regarding financial and business trends relating to inventory management based on the operating activities of the period presented.

For its internal budgeting process, Cisco's management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, other acquisition-related costs, enhanced early retirement benefits, the income tax effects of the foregoing, significant effects of retroactive tax legislation, and significant transfer pricing adjustments related to share-based compensation. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures; for example, effective in the third quarter of fiscal 2009, Cisco no longer excludes payroll tax on stock option exercises, and effective in fiscal 2010, Cisco no longer excludes in-process research and development upon acquisition as it is no longer expensed as a result of new accounting guidance. From time to time in the future, there may be other items that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results.

For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

Copyright © 2010 Cisco Systems, Inc. All rights reserved. Cisco, the Cisco logo, Cisco Systems, Cisco Nexus, Cisco TelePresence, and Cisco Unified Computing System are registered trademarks or trademarks of Cisco Systems, Inc. and/or its affiliates in the United States and certain other countries. All other trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.