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Tag: Cisco

  • 500 Chrome Extensions Caught Uploading Private Data

    500 Chrome Extensions Caught Uploading Private Data

    Independent research Jamila Kaya, in cooperation with Cisco-owned Duo Security, helped uncover approximately 500 Chrome extensions that were uploading private data from millions of users.

    Kaya used Duo Security’s CRXcavator—an automated tool designed specifically to help assess Chrome extensions— to “uncover a large scale campaign of copycat Chrome extensions that infected users and exfiltrated data through malvertising while attempting to evade fraud detection on the Google Chrome Web Store.” Initially, Kaya discovered 70 malicious extensions being used by 1.7 million users. Kaya and Duo Security notified Google, who went on to find an additional 430 similar extensions.

    “In the case reported here, the Chrome extension creators had specifically made extensions that obfuscated the underlying advertising functionality from users,” wrote Kaya and Duo Security’s Jacob Rickerd. “This was done in order to connect the browser clients to a command and control architecture, exfiltrate private browsing data without the users knowledge, expose the user to risk of exploit through advertising streams, and attempt to evade the Chrome Web Store’s fraud detection mechanisms.”

    Google quickly removed all 500 extensions, and implemented new policies to make it harder for these type of extensions to reappear. As Duo Security recommends, individuals should periodically review the extensions they’re using and delete any they don’t recognize or no longer use.

  • Cisco: How To Be An Engineer Of The Future

    Cisco: How To Be An Engineer Of The Future

    “We’re seeing an increased interest in how people take teams, work with their engineers, build towards these automation and software skill sets, and create the engineer of the future,” says Mandy Whaley, Sr. Director, DevNet & Certifications at Cisco. “What we see at Cisco is that the most successful teams and the most successful companies are building teams with this combined skill set of infrastructure skills and software and automation skills.”

    “I lead our DevNet and technical community and certifications team for Cisco,” says Whaley. “This includes everything about helping developers use our APIs. We do a lot of work on the paths that you can take to build the skills to learn about Cisco technology, to learn about software skills, to learn about automation, and then prove and test those skills by earning some certifications.”

    Mandy Whaley, Sr. Director, DevNet & Certifications at Cisco, says that the engineer of the future combines infrastructure, software, and automation skills:

    How To Be An Engineer Of The Future

    I come from a software development background. I’m working with a lot of DevOps, network engineering teams, infrastructure engineering teams, and we’re really looking at how all these skill sets have been evolving over time. What we see at Cisco is that the most successful teams and the most successful companies are building teams with this combined skill set of infrastructure skills and software and automation skills. Whether those skill sets are combined in one person or combined within a team of engineers who have specialties, that’s what it really takes to succeed with the scale, the speed, the agility, and the distributed nature of applications that we’re seeing today.

    We’ve really seen this come into effect with COVID and the way that companies have had to respond really quickly. Automation came to the forefront as being very important. Companies that had at least a start on those skill sets have been able to respond more quickly. Now we’re seeing an increased interest in how people take teams, work with their engineers, build towards these automation and software skill sets, and create the engineer of the future.

    New Job Roles Are Emerging

    Part of that has a lot to do with new job roles that are coming out of that. These business drivers of speed and agility and scale are driving things like the need for CI/CD pipeline for more than just your software, even for your networks, for your infrastructure. Out of that are these new job roles emerging, things like a Network Automation Engineer or DevSecOps Engineer, bringing security strongly into your DevOps flow.

    That’s part of what we’re learning from the DevNet community and what we’re working with the DevNet community on is how people are building the skills to go after those new job roles. There are a lot of opportunities and a lot of fun stuff to learn.

    Cisco’s Mandy Whaley Explains How To Be An Engineer Of The Future
  • Microsoft Expected To Make Major Cloud Gains At The Expense Of—Everyone

    Microsoft Expected To Make Major Cloud Gains At The Expense Of—Everyone

    On the heals of a survey showing Microsoft making significant inroads in the cloud industry, Morgan Stanley has even worse news for the company’s competitors, according to Business Insider.

    In the previous survey by Goldman Sachs—despite AWS taking in the lion’s share of cloud revenue—97% of companies said they currently use Azure, compared with 58% for AWS and 25% for Google Cloud. Even more concerning, the survey showed that far more companies were planning to use Microsoft’s platform within the next three years compared to its competitors.

    Morgan Stanley’s research provides more validation for Microsoft’s current strategy, predicting the company will “gain the largest percentage of IT budgets over the next three years, while VMware, Cisco, Hewlett Packard Enterprise, Oracle, and Dell stand to lose the most.”

    Further complicating things is an expected slowdown in IT budgets in 2020. The slowdown will negatively impact the above companies as more and more businesses move to the cloud. This move signals more good news for Microsoft, however, as it is expected to see gains “driven by an increasing proportion of customers citing Microsoft as their preferred hybrid cloud vendor,” according to the survey.

    After years of telling customers onsite hardware was antiquated and unnecessary, even Amazon recently joined the hybrid market. As Business Insider points out, with Microsoft’s lead in this particular segment, Amazon may regret ignoring the hybrid cloud market for so long.

  • Cisco CEO Says 5G Networks Could Be Active In 2 to 3 Years

    Cisco CEO Says 5G Networks Could Be Active In 2 to 3 Years

    “The carriers today are building the consumer 5G networks, and they don’t require a massive backbone upgrade when you just increase bandwidth to lots of mobile phones.”

    Cisco CEO Chuck Robbins stopped by Fox Business’ Mornings with Maria to discuss 5G, intellectual property and reports of China bullying companies.

    “When they begin to build out enterprise 5G services, then that will require them to build a dedicated, next generation, high-performance backbone because of all the traffic that will be generated and…that will be over the next two to three years. So right now, they are focused on the radios needed for the consumer side.

    “If you think about the speeds that are going to be supported at the edge, and the number of those connections, it’s only logical that you’re going to have to update…your infrastructure to accommodate all the bandwidth that’s going to be…given out around the world. So we would expect to ultimately be a beneficiary of that when it happens.”

    Mr. Robbins goes on to discuss the challenges the world is facing economically, emphasizing his belief that the economic slowdown is a global one, not isolated to the U.S.

    While highlighting that intellectual property theft is by no means unique to the Chinese market, Mr. Robbins was adamant that respect for intellectual property needs to be a fundamental aspect of doing business.

    “The lack of theft should be a core principle in every country around the world….I think that’s a broad issue that should just be a basic premise of doing business around the world, is that your intellectual property should be respected.”

    He also discussed recent reports of companies being bullied by the Chinese government. While he said Cisco has never been able to reach the level of business they would like to within the country, they had never felt bullied by China.

    https://video.foxbusiness.com/v/6094650754001/

  • 5G Reality is Going to Match the Hype, Says Cisco CEO

    5G Reality is Going to Match the Hype, Says Cisco CEO

    “We have done a study and we believe that by 2022 there will be over 400 million 5G connections,” says Cisco CEO Chuck Robbins. “This is one of those great examples where the reality is going to match the hype building up to this.” Robbins adds: “If you think about what this is going to create, we believe in 2022 the amount of new traffic created in that year will actually exceed all of the traffic that has been created since the inception of the internet.”

    Chuck Robbins, CEO of Cisco, discusses how technology is now defining enterprise strategy and how 5G is going to impact connectivity in an interview on Fox Business:

    Technology is at the Heart of the Strategy

    This technology is at the heart of the strategy of our customers. It is no longer enabling their strategy. They’re taking the technology and then they are defining their strategy based on what it makes possible. A lot of the focus over the last decade has been around consumer tech. If it’s on your phone you know what it does. If you use a social media app then you know what it does. What we do isn’t that clear to the everyday investor.

    The technology that we are building are really enabling our enterprise customers and public sector customers to digitize and really take advantage of new methods of revenue stream. In the case of the public sector, new ways of delivering citizen services. Putting video connectivity out into rural areas and delivering citizen services virtually. There are all these things that are happening that are leading to continued demand.

    5G Reality is Going to Match the Hype

    We’ve been talking about 5G for many years. The trials are beginning this year. This is one of those great examples where the reality is going to match the hype building up to this. The fundamental difference that this technology is going to bring is (massive). In 2022 you’re going to see speeds that average 4-5 times more than we get today. If you think about what it enables, not only higher speeds and lower latency for mobile devices, but we are going to get connectivity into rural areas that we haven’t been able to because the cost of digging trenches and laying fiber has just been prohibitive. Now we can do this with 5G.

    We are going to be able to connect people who have not been connected before. We have done a study and we believe that by 2022 there will be over 400 million 5G connections. What happens is when you get to a place where you have all of this high bandwidth capacity out at the edge of the network then the core infrastructure has to be updated to actually accommodate that. That’s one of the big roles that we are going to play is delivering innovation that actually allows our customers to deal with all this traffic.

    5G is going to provide everything from the ability to connect IoT devices to things in your home and vehicles, all the way to connecting enterprise branch locations. The whole notion of lower latency is really what’s required to do real-time video applications. If you think about what this is going to create, we believe in 2022 the amount of new traffic created in that year will actually exceed all of the traffic that has been created since the inception of the internet.


  • Cisco CEO: Last Year We Blocked 7 Trillion Cybersecurity Threats

    Cisco CEO: Last Year We Blocked 7 Trillion Cybersecurity Threats

    The CEO of Cisco says that last year they blocked seven trillion cybersecurity threats or about 20 billion per day. He says that by and large cybersecurity organizations inside of their customers are very good. But they only have to be right once, so it’s a constant ongoing battle.

    Chuck Robbins, Cisco CEO, discusses cybersecurity, technology, and trade issues with China on Bloomberg:

    Last Year We Blocked 7 Trillion Cybersecurity Threats

    Last year we blocked seven trillion threats on behalf of our customers. That’s 20 billion a day. The problem is the adversary only has to be right once. We have to be right all the time. It’s the only part of our business where we have to think about an active adversary. That’s not how we think about other parts of our business.

    By and large, when you look at the cybersecurity organizations inside of our customers they’re very good. But again, they only have to be right once, so it’s just a constant ongoing battle.

    Solving Security Issues Deep Within Network Infrastructure

    Our growth is primarily driven by organic growth. We are in a unique position as a company that’s been around for 34 years. Our core franchises are actually growth engines for the company. Whereas a lot of companies of our age they would be looking at their core franchises as the profit pools that you would invest in other businesses.

    We have done some of that but we are seeing strong growth in the core franchises that we build. This is because in order to solve the security issues you have to do it deep within the network infrastructure. We are rebuilding and rearchitecting networks for customers all around the world in order to do this.

    Technology is at the Heart of What Every Entity is Doing

    The things that we do are the digital nervous system for the economy. Companies today realize that technology is actually defining their future strategies. Technology is not an optional cost center anymore. It really is at the heart of what every entity is doing around the world.

    Technology is at a different place today relative to the strategic value to our customers. It’s been strategic, but it literally is at the heart of everything they are trying to drive now.

    Technology That We’ve Build Has Created a Flat World

    What we do is create this flat world that we live in. Fundamentally the technology that we’ve built over the last 30 years has created a flat world. Now we find ourselves with lots of conflicts around the world. The geopolitical dynamics are clearly complicated for all of us. Countries are just trying to find out how to deal with this technology change that is occurring so rapidly.

    Frankly, it’s very difficult because governments around the world don’t have the expertise necessarily inside the government to even be able to regulate or determine what they should do. What that leads us to are very binary decisions. It’s difficult to understand how to do it surgically so I have to do it with brute force.

    5G Buildout is Critical to Every Countries Future

    Regarding the China trade issue, there are aspects of intellectual property. There are aspects of trade deficits. There are aspects of the view that this 5G buildout is critical to every countries future and there is this competitive race going on around the world. I this it is a bit of all of that.

    My hope is we can get to a place where we can all move forward in a way that lifts the global economy again and actually allows us to begin to take advantage of some of the technology. What it can do, not only for business but candidly we are at a point in time where technology can help solve some of the biggest problems in the world. That’s what we need to be focused on.  

    Educating Governments on How to Regulate Technology

    Our business in China is a relatively small percentage of our business still. The impact (from tariffs) has been quite minimal. What we do is just be a part of the discussion. We try to bring some logic as to what needs to be done.

    We are trying to help educate governments around the world as to how should they think about regulating this technology. How should they think about data privacy? What can we do to help alleviate some of the concerns and help them achieve what they are trying to achieve while not destroying the global benefit of connectivity?

    https://youtu.be/n-jE6kA7aqM


  • Cisco: Financial Institutions Struggle With Pace of Technological Change

    Cisco: Financial Institutions Struggle With Pace of Technological Change

    The pace of technological change is possibly the biggest challenge that financial institutions are facing says Cisco FinTech Lead Al Slamecka. He says that the large financial organizations are zeroing in on automating the network management functions and the operations side of their businesses, which they call Intent-Based Networking.

    Al Slamecka, Financial Services Industry Lead at Cisco, discussed the challenges institutions are facing because of all that is currently going on in the FinTech space with Investor’s Business Daily:

    Financial Institutions Struggle With Pace of Technological Change

    The pace of change is probably the biggest thing large financial institutions struggle with. They continually face the pressures of seeing a lot of what’s going on from the FinTech space. As large organizations, they are continuing to try to evolve the way that they as a provider of a significant number of services can accelerate their innovation and accelerate their transformation. In that regard, from our perspective, there’s a lot that is dependent on their ability to provide greater automation and orchestration of the underlying infrastructure.

    Organizations Focusing on Intent-Based Networking

    We’re starting to see a lot more organizations look at the capabilities of automating the network management function and the operations side of the business, something that is typically called Intent-Based Networking. Essentially this accelerates their ability to allow the organization to be more agile from an application development perspective and from a partnership perspective with FinTech firms. There’s good momentum in that space currently. It’s an interesting time for them but we think that those organizations that are taking that fundamental view at their infrastructure are well on their way.

    Software Defined Networking is the Preferred Approach

    These are large institutions and so over the years, they’ve developed large complex networks to service their business. The challenge is one in which they need to get out of the business of doing what they used to do. Things like command line execution of management functions have been a real time-staking task, so to deploy automation they need more intelligence out of the solutions they deploy. Software Defined Networking is generally the approach that they’re taking both from the data center side, software-defined data center, as well software-defined campus and WAN.

    There’s a transition in the products that support that and they need to essentially upgrade their infrastructure with products that have the intelligence to provide the kind of visibility and manageability that they need. Then they also need to look at their own capabilities inside, the talent inside the IT organizations needs transformation as well. So there’s an upgrade both on the operational side as well as on the infrastructure and technology side.

  • RingCentral CEO: All of the Legacy Providers Are in Secular Decline

    RingCentral CEO: All of the Legacy Providers Are in Secular Decline

    RingCentral founder and CEO Vlad Shmunis spoke with Jim Cramer on CNBC about how they are competing and leading in cloud communications, winning business from huge legacy companies such as Cisco and Avaya:

    What RingCentral does is we change ways in which companies communicate, communicate internally with their employees as well as their customers. We have the Tampa Bay Buccaneers and two other NFL teams as customers which we can’t announce yet. They’re franchises and they are also companies. They have employees, they have customers who want to reach out to them and communicate with them. What we do at RingCentral is we make all of that very easy and very modern.

    What do we do that is different? We enable companies and people to communicate the way that they want to. What does this mean? They can communicate via any mode, any device, whether it be voice, video, texting, or messaging. We have an open platform which means that people can enable our communications within their workflows. None of this was ever available before the cloud came in and we happened to be leading in the cloud.

    We’re winning business from Cisco all the time. The number one provider or company that we replace happens to be Cisco followed by Avaya. These would be the two, what we call, legacy ventures. It is a huge field, it’s a hundred-billion-dollar market and we are in the lead. All of the legacy providers are in secular decline.

  • Apple & Cisco Team Up to Offer Cybersecurity Insurance

    Apple & Cisco Team Up to Offer Cybersecurity Insurance

    Apple and Cisco are forging a new path in their partnership. The two companies announced on Monday that they are working with insurance company Allianz and Aon, a premier risk evaluator, to assist their customers in having the best cyber protection around.

    The goal of this new endeavor is to provide businesses a practical way to deal with cybersecurity risks caused by malware and ransomware. And what better way to do this than by integrating the best in cyber insurance and security technology, the most secure devices, and the premier experts in cybersecurity domain.

    It should be emphasized that Apple and Cisco are not directly selling insurance, but their deal with Allianz and Aon will ensure that businesses can avail of improved conditions in their cyber insurance coverage. This could mean lower, or even zero, deductibles. But for a business to avail of such a package, it has to be using specific Apple hardware and Cisco’s Ransomware Defense platform.

    Allianz reportedly found that that the two companies’ products can provide businesses with a “superior level of security.” Apple has confidently pointed out that the amalgamation of its software, services, and hardware in its iOS devices ensure that it has some of the most secure products on the market. Meanwhile, Cisco boasts of a platform that can block malicious internet websites. It also has email security and endpoint protection.

    On Aon’s part, its cybersecurity experts will assess the current security environment of its prospective clients and make recommendations on how to shore up their cyber defenses. And in case businesses who participate in this deal are attacked by malware, they will have access to Aon and Cisco’s Incident Response teams.

    This is not the first time that Apple and Cisco partnered up. The two companies worked together in 2015 when Cisco enhanced its software and networking gear for iOS devices and apps. This led to a number of optimizations for iOS 10 that gave iPad and iPhone users a smoother time on Cisco apps.

  • Cisco Ventures Into the Cloud, Acquires Broadsoft for $1.9 Billion

    Cisco Ventures Into the Cloud, Acquires Broadsoft for $1.9 Billion

    Cisco has just signed a check worth $1.9 billion for Broadsoft, a clear sign that the company is set on moving away from switches and routers and expanding its product portfolio.

    Cisco, the world’s biggest producer of networking gear, announced on Monday that it offered Broadsoft $55 per share, a 28% premium over its closing price on Aug. 29. The market day ended with the two companies enjoying a rise in their shares, with Broadsoft enjoying a 1.5% boost before the bell.

    News that Cisco was planning on acquiring the American telecom software company surfaced on Sunday, with the deal estimated to be valued at $1.71 billion based on its outstanding 31 million shares.

    The arrangement between the two companies would also give Cisco a firmer stronghold in selling consolidated communications software to major telecommunication companies. It also heralds the company’s move from being a purely networking company to one that focuses on software and services delivered via the cloud.

    The deal is expected to be wrapped up by the first quarter to 2018, after which Broadsoft employees will be joining Cisco’s communications technology division.

    Broadsoft is known for supplying software and services that allow fixed-line, cable and mobile service providers to offer integrated communications over their IP networks. It has historically been offering its products to big telecom companies like AT&T and Verizon, which then resells the software to their clients. Meanwhile, Cisco has been placing all its attention on high-growth sectors like cloud computing, the Internet of Things and security.

    While the move might have been surprising for some, Cisco’s management strongly believes the two companies complement each other. CEO Chuck Robbins said that the deal with Broadsoft will give their clients a way to better connect with their customers. According to Robbins, businesses have to think about how they interact with their customers when dealing with digital strategies. He also added that the “acquisition of Broadsoft actually gives us the most comprehensive set of collaboration solutions for our customers.”

    Cisco’s Broadsoft acquisition is the company’s second large-scale purchase this year after scooping up AppDynamics for $3.7 billion in March. The company is also gearing up to acquire more companies. In May, Cisco agreed to purchase Viptela Inc., a software-based networking start-up, for $610 million. It also has plans to acquire Perspica, an analytics company focused on machine learning-driven operations. Cisco reportedly has plans to integrate Perspica’s engineering team with the AppDynamics group.

    [Featured image via Cisco]

  • Government Can Speed Up Implementation of IoT Technology

    Government Can Speed Up Implementation of IoT Technology

    Government around the world play a key role in whether IoT becomes a mainstream technology sooner rather than later according to Cisco IoT expert Maciej Kranz. Kranz recently posted an excerpt of his book Building the Internet of Things on the Cisco Innovation blog.

    IoT Adoption is Key to Regional Competitiveness

    “Governments around the world are beginning to realize that IoT adoption will be one of the key factors defining the competitiveness of their cities, provinces, countries, or regions and that IoT can help solve many of the chronic problems plaguing their economies and their environments,” says Kranz. “Thus, governments at various levels have a number of key roles to play.”

    “There will be competition for bandwidth and other resources; there will be ideas that may conflict with public policy; and there will be IoT-based ideas that need to be regulated to ensure public safety and privacy,” noted Kranz. “Think drones. In these and other ways, government regulations can help direct and align the industry.”

    Kranz offered a few examples of U.S. legislations and related impact:

    • The Energy Act drove the need for energy monitoring, including smart meters.
    • The Rail Safety Improvement Act specified the requirements and the deadline (since extended) for adoption of Positive Train Control on main U.S. railways.
    • The Food Safety Modernization Act drove the requirements for IoT-based systems, including quality control and source tracking, across the food supply chain to prevent food safety issues.
    • Most recently, the Drug Quality and Security Act requires the adoption of a system to identify and trace prescription drugs.

    Kranz believes that government funding priorities may drive the future of IoT. “Through their spending power, governments can drive the focus and accelerate the adoption of IoT technologies and solutions. In aggregate, governments represent a huge global market. Their priorities, what they choose to buy, and what problems they choose to address can drive the roadmaps of IoT technology and solution providers.”

    He lists these additional government roles:

    • Supporting training and education
    • Supporting development of startup ecosystems
    • Supporting standards efforts
    • Supporting basic research and development
    • Enabling competitiveness and openness of the country’s markets
    • Promoting best practices and modern business models
    Why the IoT is Important to Our Future

    Kranz’ promo video for his book says this about the amazing future predicted for IoT technology, impacting not just consumers but manufacturers and really… everybody.

    “The wheel, printing press, the airplane. It’s impossible to imagine life without them and soon it will be just as impossible to imagine life before the Internet of Things! IoT is already happening and the growth and opportunity it provides isn’t just big, it’s huge. Wheel, printing press and airplane huge. Billions of connected devices, trillions in revenue.”

    At its core, Kranz said on his website, “it’s about business outcomes and people; it is about new ways of doing business, talent and change management; it is about migration to open technologies and open business structures based on co-development and ecosystems of partnerships; it is a multi-year, multi-phase journey.”

    Here’s a recent interview that Maciej Kranz gave explaining IoT to investors:

  • Cisco: It’s Increasingly Easy to Imagine a Time When Every Device is Connected to the Internet of Things

    Cisco: It’s Increasingly Easy to Imagine a Time When Every Device is Connected to the Internet of Things

    Yves Padrines, Paris based VP, Global Service Provider EMEAR at Cisco, says that all devices will soon be connected to the internet of things (IoT).

    From the Cisco SP360: Service Provider blog:

    It’s increasingly easy to imagine a time when every device – from the street lamps on your road to the fridge in your kitchen – is connected to the internet of things. So it’s probable people will use IoT in ways we haven’t even begun to imagine.

    The automotive industry is one area where IoT is already becoming a reality. Recent research by technology consultants Chetan Sharma found that in the first quarter of 2016, there were more cars added to networks than phones (32%, compared to 31%).

    The owner of a connected car might want to subscribe to a connected vehicle care service, including options like virtual in-car assistance, sensor-based maintenance alerts, and on-board scheduling of appointments. They might also want to assess their driving safety, limit the speed a teenage driver can reach, or even monitor the health of an older family member at the wheel. And lots of organisations would be interested in the data provided by connected cars – insurance companies, emergency services, and parking providers, to name just a few.

    In the US, AT&T already has over 8 million cars on its network. AT&T used Cisco’s virtualisation technology to create a network specifically for connecting cars. They required a fundamentally new mobile architecture that would enable machine-to-machine connections. Using Cisco technology, they were able to create a network that combined virtual and physical resources.

    Of course, it isn’t just cars that can benefit from being connected. Philips has announced it sees itself as “the lighting company for the Internet of Things”, and has begun partnerships with Cisco and Vodafone. And in a further indication of IoT’s huge potential, service providers like Orange France – who last year created a low power network for machine-to-machine applications – are investing in the technology.

    Read the rest on SP360: Service Provider.

    Below is a related interview with Guillaume Gottardi, a Consulting System Engineer at Cisco Systems based in Paris, France.

    Also worth watching is Cisco’s video on their IoT advancements with General Motors cars:

  • How Companies Can Solve the China Puzzle

    How Companies Can Solve the China Puzzle

    Amy Karam, author of the book, The China Factor:Strategies to Compete, Grow and Win in the New Global Economy, recently was interviewed at Google’s Mountain View campus, providing insight for companies to better compete.

    “The main intention of “The China Factor” is to equip western-based companies with strategies and tactics and knowledge to better compete with emerging entrants like those from China,” says Karam. “China has risen, they’re doing a great job, there a strong force in our economy and they do business differently. The premises is that we as western-based companies need to change our game. We need to know that emerging competitors have different approaches and we need to be more creative about that.”

    “The other element is the innovation advantage and how do we protect or maintain and evolve our innovation advantage?” she asks. “How did China become so strong? What are the strengths and weaknesses of each side, the West and the East?”

    Working for Cisco in China Was Eye Opening

    Karam’s time at Cisco where she was involved in the Cisco sales strategy shaped her opinions of how Western companies can better compete. “The results were eye opening,” she said. “Wow, this isn’t business as usual. It’s not like our domestic competitors. It’s not a product superiority play anymore, where it’s like my box is better than your box so I’ll win the business. That’s not what was happening in emerging markets and especially with some emerging competitors.”

    “That was the catalyst for me to say, wow, this is not a trend, this is not a blip, this is here to stay.” She noted some big competitive differences with Chinese companies. “First is the severe price discounting and that’s no shocker right? Most of us know that that’s generally a pretty consistent market penetration strategy, but there was really no bottom to it. I encountered a lot of escalations where they say, hey my competitors just discounted me by another 25% and I need approval for another discount. We realized that wasn’t going to be a successful strategy for either competitor and even for the customer, it wasn’t a winning game.”

    “Another big thread was financing, which we didn’t really get into very much as a Western based company but that’s a a real helpful tool for emerging customers. This competitor would help them with financing and to an extreme degree. Sometimes they would help finance over a very long
    period of time and that was a real great value to these emerging markets customers.”

    “Another huge trend that came up was the use of politics to influence business decisions,” Karam said. “We’re like whoa, where did that come from what do we do about that? I would get escalated complaints from emerging markets that we’ve been working this deal for two years, we had in the bag and in the eleventh hour they would just say it was a an influence from above and we have no idea where it came from. It was government-to-government influencing for business decisions at a more granular level.”

    What Can Western companies Do at the Practical Level?

    “For those who are business geeks, you know there are the 4 P’s of marketing… product, price, place, promotion, so I created the 5th “P” which is politics,” said Karam. “I created the 5 P’s of Global Marketing framework. Because this has become such a a big world but it’s small at the same time, we need market access, we want to play and other peoples sandboxes, but there are certain rules and there are certain limitations that we need to encounter. When Google pulled out of China in 2010 for censorship reasons that was a big decision and the implications were huge. You could have affected 1.5 billion people in terms of access to knowledge, but there were really good reasons and those were the the boundaries within which a Western based company decided that they did not want to operate.”

    “Recent headlines say that Google is going back in,” says Karam. “So market access is really important and reach is really important, so the political element is knowing that co-oppetition is is the new element. It’s an integral part of a strategy going forward, it’s not us versus them. It’s how do we all play together within our own boundaries and desirables to get ultimately the success that we need. That’s it at a high level.”

    “Then how do we at the working level deal with politics?” she asks. “Politics even happens at the organizational level and generally there’s a pretty negative connotation to politics, but it’s really important, we can’t ignore it anymore, we we need to embrace it and apply it.

    “So how do we apply it from a sales perspective is to educate the sales teams on some of the tools available from the US government and the local governments in the different countries,” asks Karam. “How can they engage with their own government to help influence their own sales locally? Reaching out to the consulates, how do you get them involved, how do you know that some of these deal opportunities are happening early on in the game? There may be unfair trade issues that you’re experiencing so that maybe some intervention sooner rather than later so it’s not at the eleventh hour when we oftentimes hear about it.”

    “We’re also organizationally changed and we’re able to convince the senior vice president of government affairs to shift the focus from just a policy perspective to helping with sales objectives,” she says. “Using the influence that they have in the government affairs group for more of the end result in terms of numbers and not just policy has been very effective.”

    How Should Western Companies Evolve and Change?

    “Very simply, go global,” says Karam. “A lot of times Western based companies have been hesitant to go global. The second part is let’s move out of emerging markets being a novelty. I think a lot of Western based companies dabble in emerging markets thinking it’s really cool, it’s let’s try it out let’s throw a few people and in there and see how it works out, and then… oh no, not making the ROI that we need so we need to pull out. It needs to be a longer-term investment, it needs to be a commitment and you need to know that it’s it’s not just a temporary thing.”

    “Make sure that your product development is catering or customizing to local customer needs,” she says. “We can’t just recycle, saying this is a mature product in this market and let’s just throw it over the fence and see if they’re going to like our old product.

    How Can Western Companies Maintain Their Innovation Advantage?

    “Every company, East to West, really wants to be innovative because that’s where the next phase of growth comes from,” says Karam. “We see contingents of emerging folks coming to Silicon Valley wanting to learn the secret of how is Silicon Valley innovative, how do you do it how do you become creative? But the idea is that we have to also be creative – we have to be innovative at being innovative, so you can’t just the rest on your laurels. This whole concept of innovation is evolving and as more players from different backgrounds are becoming innovative they’re bringing different business models.”

    “Some business model innovations are coming from the East,” she says. “They’re really good and commercializing things and we’re really good at making things, really cool things, but they’re really good at making money yet from really cool things or even making money from ok cool things.”

    “We also talked about supply chain or process innovation,” said Karam. “There’s the reputation of manufacturing, they’ve got it down. One venture capitalist who I interviewed for the book says, you know all this business about bringing manufacturing back to America, we don’t have the efficiencies, we don’t have the ecosystems yet to do that, and some of the Eastern countries do. We need to either establish that ecosystem or just understand that there’s there’s a different source of innovation happening out there.”

    “What I’m saying s let’s get more creative, let’s figure out what’s our what’s our innovation 2.0,” she says. “How are we going to step up our game and learn from others as well?”

  • Are You Ready for the New Mobile Gold Rush?

    Are You Ready for the New Mobile Gold Rush?

    “Are you ready for the new mobile gold rush? Of course you’re not,” said Jim O’Leary, Sr. Manager Mobile Solutions Marketing at Cisco. “Though truth be told, the pending growth in mobile video may be more like a video tornado and only a handful of mobile operators are prepared.”

    What Jim O’Leary is talking about is the rapidly changing landscape of content viewing. Multi-device viewing is now the norm and the dumping of the old cable content bundle is well under way. Over-The-Top content (OTT), where content is consumed without going through the traditional gatekeepers such as the cable or satellite provider, is bringing complete and utter disruption to the cable and broadcast companies.

    (Related: How Google Measures Cross-Device Ad Conversions)

    However, with disruption comes opportunity.

    Video now accounts for the majority of global mobile data traffic and is forecast to be the key driver of data traffic growth globally. To date, mobile video (and the ability to monetize the content) has been dominated by Internet players, such as YouTube, Netflix, with the operator role simply one of connectivity provider.

    However, a number of operators are developing their own content delivery platforms. Singtel, Verizon and PCCW are three prominent examples of this trend, with their HOOQ, Go90 and Viu video platforms respectively. While HooQ and Viu are variants of the subscription-based model, Go90 more closely resembles the Internet business model, with a reliance on advertising for revenues and a focus on millennials. – Jim O’Leary, Cisco

    “Mobile operators across the world face the same twin challenges of slowing growth and ongoing disruption of core services by new Internet & OTT players, even as the broader mobile ecosystem continues to see significant revenue growth,” O’Leary posted. “So if you are tired of being just an operator that carries mobile video and prefer to be able to monetize it, read on.”

    Mobile Video Watching is Booming!

    O’Leary sees a significant monetization opportunity for mobile operators with video for a very good reason, the exploding growth in using mobile devices to watch videos. An On Device Research study commissioned by the IAB in 2015 (Download PDF) confirmed the changing landscape for mobile globally, with 35% watching more video on their smartphone versus last year.

    In February 2016 Cisco released a study predicting that by 2020 there will be 5.5 billion global mobile users which is up from the 4.8 billion currently, and those millions of new mobile users will be watching video too!

    More astonishing, the study says that by 2020 there will be 11.6 mobile-connected devices! This is indicative of another emerging trend, connecting ALL devices to the internet via mobile operators where internet content and data can be consumed and sometimes produced on and by these devices.

    Gartner estimates that the Internet of Things (IoT) is currently connected to 6.4 billion devices and will connect to 20.8 billion “things” by 2020. Some of these “things” will be video enabled devices as well. For instance, watching a video of how to make vegan scrambled eggs on your refrigerator door!

    Mobile Operators Can Play “Central Role” in Content

    So mobile operators have massive connectivity with virtually everyone 12 years old and up having a smart phone and if they can play a central role in providing content they can benefit from the “emerging online video value chain.” It’s about using great content to boost usage of their mobile broadband service. O’Leary believes that Verizon, Sprint, AT&T and others should take advantage of this “content opportunity” in order to cash in and drive business growth.

    The biggest impediment for mobile phone companies entering the video content space is their tendency to charge high rates for large bandwidth consumption. Mobile broadband carriers should eventually come to the realization that their businesses are tied to consumers needing them and it is in their interest to provide inexpensive ways to consume high bandwidth mobile content or they will by bypassed by new mobile broadband competitors that get it.

    Mobile is the New Video Distribution Platform

    O’Leary predicts that OTT, where the internet is used to bypass traditional content middlemen like cable, is the driving motivation that should entice broadband providers to enter the content space more aggressively over the next few years. He advocates mobile operators creating a “cloud based platform” and then partnering with content producers in order to “scale their video infrastructure efforts and deliver high-quality, live video and on-demand content to consumers on any device — be it their smartphone, tablet or connected television.”

    Content producers will likely consist of a wide variety of players from traditional sources like ESPN and Disney to well funded content upstarts such as such as Amazon, Apple, YouTube and Netflix. Content alliances between mobile operators may also include more direct deals with talent such as successful independent internet based content stars on YouTube, Vine and even Snapchat. Mobile is already the primary platform used to consume video content so the next step is to cut out the middleman and partner directly with popular content providers.

    “In growing numbers, consumers are replacing their traditional cable and satellite TV packages with smaller, more customized, and often less expensive mixes of programming, cobbled together from an array of online and on-demand services,” said O’Leary. “As more consumers replace their big-bundle TV packages with à la carte online offerings, an opportunity is emerging for mobile operators and other service providers to combine mobile broadband (MBB) packages with compelling “over the top” content.”

    Mobile operators should realize that they are the distribution platform for millennials, they are the network and they are the new cable and satellite companies. With that in mind, they don’t need the networks or cable to drive viewership and usage of their platform, they simply need great content however they can get it, even if it means becoming content creators themselves.

  • Net Neutrality Upheld: No Blocking, Throttling or Fast Lanes, Cisco Slams

    Net Neutrality Upheld: No Blocking, Throttling or Fast Lanes, Cisco Slams

    The US Court of Appeals for the District of Columbia Circuit released their ruling today upholding the FCC’s current Net Neutrality rules.

    The ruling stated:

    But nothing about affording indiscriminate access to internet content suggests that the broadband provider agrees with the content an end user happens to access. Because a broadband provider does not—and is not understood by users to—“speak” when providing neutral access to internet content as common carriage, the First Amendment poses no bar to the open internet rules.

    FCC Chairman Tom Wheeler and the FCC praised the ruling:

    Cisco Slams Ruling:

    “Cisco is disappointed in the DC Circuit’s decision to uphold the FCC’s open Internet rules.

    We believe in an open Internet and that balanced rules to protect consumers and prevent anti-competitive behavior are necessary and appropriate. But uncertain regulation under Title II, as provided for by the FCC and upheld by this court, diminishes the enthusiasm for new investments in broadband networks and limits new innovation and business models.

    This is particularly true at a time when the Internet continues to evolve and innovative new services are coming to market every day, including Internet of Things technologies, telemedicine, distance learning, emergency services, and mobile 5G.

    One bright spot. The FCC rules do recognize that the open internet rules are not appropriate for enterprise networks and specialized services. This will enable new services to obtain the quality of service needed to foster innovation in these areas, and we anticipate that entrepreneurs will explore both of these options going forward.

    The discussion over these issues is not going away because the Internet ecosystem continues to evolve at an unprecedented pace. Policymakers need to remain focused on ensuring that these rules support the development of new technologies and business models.”

    Part of a dissent published in the ruling concluded:

    The ultimate irony of the Commission’s unreasoned patchwork is that, refusing to inquire into competitive conditions, it shunts broadband service onto the legal track suited to natural monopolies. Because that track provides little economic space for new firms seeking market entry or relatively small firms seeking expansion through innovations in business models or in technology, the Commission’s decision has a decent chance of bringing about the conditions under which some (but by no means all) of its actions could be grounded—the prevalence of incurable monopoly.

    I would vacate the Order.

  • Microsoft And Others Work on IoT Standards For Companies And Developers

    Microsoft And Others Work on IoT Standards For Companies And Developers

    Tech heavyweights including Microsoft, Samsung, Intel, Qualcomm, Cisco, ARRIS, Electrolux, CableLabs, and GE Digital announced the formation of the Open Connectivity Foundation (OCF) aimed at helping to unify Internet of Things (IoT) standards so businesses and developers can create IoT solutions and devices that cooperate with one another.

    According to the announcement, the OCF, which unifies the former Open Interconnect Consortium (OIC) with various companies, will work to accelerate industry innovation and collaborate on specifications, protocols, and open source projects so that a wide range of consumer, enterprise, and embedded devices and sensors from a variety of makers can seamlessly (and securely) work together.

    The goal is to make it so that billions of connected devices, appliances, phones, computers, and industrial machines can communicate with one another regardless of manufacturer, operating system, chipset, or transport.

    Terry Myerson, EVP, Windows and Devices Group at Microsoft said, “The OCF will help consolidate industry attention and create opportunity, via an agreed upon set of protocols that move the world forward. We are designing Windows 10 to be the ideal operating system and Azure to be the best cloud companion for Things, and for both of them to interoperate with all Things. Windows 10 devices will natively support the new OCF standard, making it easy for Windows to discover, communicate, and orchestrate multiple IoT devices in the home, in business, and beyond. We look forward to seeing the innovation this new standard will enable for all customers and the endless opportunities it will create for developers.”

    “OIC has been working to develop a standard specification for IoT devices, and at the same time developing IoTivity as an open source reference implementation,” said SeungHwan Cho, Executive Vice President and Deputy Head of Software R&D Center at Samsung. “We welcome these leaders in their fields to OCF, which we believe will become the most diverse global organization developing IoT standards and code.”

    You can learn more about the Foundation and peruse various resources here.

    Image via OCF (Twitter)

  • Cisco To Acquire Security Company Neohapsis

    Cisco To Acquire Security Company Neohapsis

    Cisco announced that it intends to acquire Neohapsis, a company which offers network, cloud, and app security, as well as IT risk and compliance services.

    Cisco says it will use the acquisition to help customers build security capabilities and overcome operational and technical vulnerabilities, as well as “achieve a comprehensive view of their risks, take advantage of new business models, and define structured approaches for better protection.”

    Neohapsis President and CEO James Mobley had this to say:

    As our clients and friends in the industry know, Neohapsis has been a key player in the security, risk and compliance market. Today, we are excited to announce plans to join Cisco, who we believe will be the perfect strategic match for us, given our services and research mission.

    We share with Cisco a global enterprise customer base, and a commitment to help our customers address their most challenging threats, especially in the rapidly evolving mobile and cloud arenas. Because of Neohapsis’ and Cisco’s shared focus on the Internet of Everything, the opportunity to do groundbreaking work together is enormous. Together, what we bring to enterprise customers, IoT device manufacturers, and associated service providers will be unique in the market.

    “Today, businesses are looking at security in a strategic, comprehensive way to protect mission critical processes and assets,” said Hilton Romanski, who leads corporate development at Cisco. “There has never been a greater need to understand the impact that security threats can have on a company’s bottom line. For these reasons, experienced security advice is now among the table stakes required to assess and address the threat landscape that faces enterprises today. The skills and capabilities companies need to maintain a strong security posture, keep pace with rapidly evolving threats and take full advantage of new technologies that can protect their businesses are rare and difficult to retain. The right advisory service can change all of that.”

    The Chicago-based Neohapsis team will join Cisco’s Security Services organization led by SVP and GM Bryan Palma. Cisco expects the deal to close in the second quarter of fiscal year 2015. Terms weren’t disclosed.

    Image via Neohapsis

  • Cisco Earnings Released, CFO Out

    Cisco Earnings Released, CFO Out

    Cisco just reported its Q1 earnings for the quarter ended October 25. In a return to growth, the company reported its strongest Q1 revenue ever at $12.2 billion, which is up 1% year-over-year. Earnings per share were $0.35 GAAP and $0.54 non-GAAP.

    Cisco also announced that executive vice president and CFO Frank Calderoni is stepping down at the beginning of the new year, and that it will appoint senior vice president, Business Technology and Operations Finance Kelly A. Kramer to succeed him.

    “We are pleased with our results and are very comfortable in our strategy to deliver innovative solutions which enable the next generation of IT and the Internet of Everything. This was our strongest Q1 ever in terms of revenue, non-GAAP operating income, and non-GAAP EPS,” said Cisco chairman and CEO John Chambers. “We continue to make progress towards becoming the #1 IT company in the world. We are still in a tough environment, but seeing encouraging trends as cities, businesses, governments and schools are becoming more digitized. Our solutions continue to drive positive outcomes and enable productivity through the combination of collaboration, mobility, security and efficiency across our customers’ businesses.”

    Here’s the release in its entirety:

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

    • Q1 Revenue: $12.2 billion (increase of 1% year over year)
    • Q1 Earnings per Share: $0.35 GAAP; $0.54 non-GAAP

    Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its first quarter results for the period ended October 25, 2014. Cisco reported first quarter revenue of $12.2 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.8 billion or $0.35 per share, and non-GAAP net income of $2.8 billion or $0.54 per share.

    “We are pleased with our results and are very comfortable in our strategy to deliver innovative solutions which enable the next generation of IT and the Internet of Everything. This was our strongest Q1 ever in terms of revenue, non-GAAP operating income, and non-GAAP EPS,” stated Cisco chairman and CEO John Chambers. “We continue to make progress towards becoming the #1 IT company in the world. We are still in a tough environment, but seeing encouraging trends as cities, businesses, governments and schools are becoming more digitized. Our solutions continue to drive positive outcomes and enable productivity through the combination of collaboration, mobility, security and efficiency across our customers’ businesses.”

    GAAP Results
    Q1 2015 Q1 2014 Vs. Q1 2014
    Revenue $ 12.2 billion $ 12.1 billion 1.3 %
    Net Income $ 1.8 billion $ 2.0 billion (8.4 )%
    Earnings per Share $ 0.35 $ 0.37 (5.4 )%
    Non-GAAP Results
    Q1 2015 Q1 2014 Vs. Q1 2014
    Net Income $ 2.8 billion $ 2.9 billion (2.3 )%
    Earnings per Share $ 0.54 $ 0.53 1.9 %

    A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table following the Consolidated Statements of Operations.

    Cisco will discuss first 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.

    CFO Transition
    Frank Calderoni recently notified Cisco of his decision to step down as executive vice president and chief financial officer of Cisco, effective January 1, 2015. Cisco plans to appoint Kelly A. Kramer to succeed Mr. Calderoni. She is currently senior vice president, Business Technology and Operations Finance of Cisco.

    Cash and Cash Equivalents and Investments

    • Cash flows from operations were $2.5 billion for the first quarter of fiscal 2015, compared with $3.6 billion for the fourth quarter of fiscal 2014, and compared with $2.6 billion for the first quarter of fiscal 2014.
    • Cash and cash equivalents and investments were $52.1 billion at the end of the first quarter of fiscal 2015, compared with $52.1 billion at the end of the fourth quarter of fiscal 2014, and compared with $48.2 billion at the end of the first quarter of fiscal 2014.

    Dividends and Stock Repurchase Program

    • During the first quarter of fiscal 2015, Cisco paid a cash dividend of $0.19 per common share, or $973 million.
    • Cisco repurchased approximately 41 million shares of common stock under the stock repurchase program at an average price of $24.58 per share for an aggregate purchase price of $1.0 billion during the first quarter of fiscal 2015. As of October 25, 2014, Cisco had repurchased and retired 4.3 billion shares of Cisco common stock at an average price of $20.66 per share for an aggregate purchase price of approximately $89.5 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $7.5 billion with no termination date.

    “We had a solid quarter delivering results for Q1 consistent with our expectations,” stated Frank Calderoni, Cisco executive vice president and chief financial officer. “Our strong cash flow, balance sheet, and ongoing commitment to return capital to shareholders demonstrates the strength of our financial strategy.”

    Internet of Everything

    • Cisco unveiled new Cisco® Connected Transportation Solutions designed to offer a safer and more productive commuter experience via the Internet of Everything (IoE).
    • Cisco and the City of Berlin announced an IoE Innovation Center, to be located in Berlin, which will focus on manufacturing, transport and logistics.
    • Marking the next phase of its expansion in India, Cisco unveiled the “Cisco Smart City” as a blueprint for the future of smart and connected communities in India.
    • Cisco announced new Connected Safety and Security solutions that add intelligence and analytics from the core to the edge to help protect cities and businesses.
    • Cisco outlined an expansion of its fog computing strategy with the second phase of its IOx platform for industrial scale Internet of Things (IoT) deployments.
    • Addressing the growing demand for IoE skills, the Cisco Networking Academy announced the first global IoE curriculum.

    Fast IT

    • Cisco broadened its storage networking portfolio to address the massive data growth across small-to cloud-scale storage networks.
    • Cisco introduced innovations to its Unified Computing System™ business, delivering a broader and more powerful portfolio of technologies to help customers capitalize on rapidly changing landscapes in business and IT.
    • Cisco introduced ASA with FirePOWER — the industry’s first threat-focused next-generation firewall.
    • Cisco announced that it has added the support of more than 30 additional companies to its Intercloud ecosystem, expanding the reach of the global Intercloud by 250 additional data centers in 50 countries.
    • Cisco announced that Shell has deployed the Cisco Secure Ops Solution to increase security maturity level by improving its cyber security and risk management while lowering costs of delivery and operations.
    • Cisco expanded its Videoscape™ Virtualized Video Processing solution, the industry’s first fully orchestrated and virtualized solution, to enable faster, cost-effective scaling for multi-screen video workers.

    Innovation

    • Cisco and Red Hat announced a new integrated infrastructure solution for OpenStack-based cloud deployments.
    • Cisco completed the acquisition of Metacloud, Inc. Metacloud’s OpenStack-based cloud platform is expected to help accelerate Cisco’s strategy to build the world’s largest global Intercloud.
    • Cisco completed the acquisition of Memoir Systems enabling the proliferation of affordable, fast memory for existing Cisco switch ASICs and helping advance Cisco’s ASIC innovations necessary to meet next-generation IT requirements.

    Editor’s Notes:

    • Q1 fiscal year 2015 conference call to discuss Cisco’s results along with its business outlook will be held on Wednesday, November 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, November 12, 2014 to 11:59 p.m. Pacific Time, on November 19, 2014 at 1-800-835-3804 (United States) or 1-402-280-1654 (international). The replay will also be available via webcast from November 12, 2014 through January 16, 2015 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, November 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 at http://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.

    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 our strategy, our goal to become the #1 IT company, return of capital to shareholders and the ability of our solutions to drive positive outcomes and enable productivity in our customers’ businesses) 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 priorities, including our foundational priorities, and in certain 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; our ability to achieve expected benefits of our partnerships; 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, engineering, service, marketing and manufacturing 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; 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 report on Form 10-K filed on September 9, 2014. 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 report on Form 10-K as it may be amended from time to time. Cisco’s results of operations for the three months ended October 25, 2014 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 effective tax rates, non-GAAP net income per share data, non-GAAP inventory turns and free cash flow.

    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 effective tax rates, and non-GAAP net income per share data, 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 periods presented. Cisco believes that the presentation of free cash flow, which it defines as the net cash provided by operating activities less cash used to acquire property and equipment, to be a liquidity measure that provides useful information to management and investors because of its intent to return a stated percentage of free cash flow to shareholders in the form of dividends and stock repurchases. Cisco further regards free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in its business, make strategic acquisitions, repurchase common stock, and pay dividends on its common stock, after deducting capital investments.

    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, impact to cost of sales from purchase accounting adjustments to inventory, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation and other contingencies, the income tax effects of the foregoing, and significant tax matters. 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. 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 © 2014 Cisco and/or its affiliates. All rights reserved. Cisco, the Cisco logo, Unified Computing System, and Videoscape are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. To view a list of Cisco trademarks, go to: www.cisco.com/go/trademarks. Third-party 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.

    CONSOLIDATED STATEMENTS OF OPERATIONS
    (In millions, except per-share amounts)
    (Unaudited)
    Three Months Ended
    October 25,
    2014    		 October 26,
    2013
    REVENUE:
    Product $ 9,435 $ 9,397
    Service 2,810 2,688
    Total revenue 12,245 12,085
    COST OF SALES:
    Product 3,919 3,747
    Service 993 931
    Total cost of sales 4,912 4,678
    GROSS MARGIN 7,333 7,407
    OPERATING EXPENSES:
    Research and development 1,583 1,724
    Sales and marketing 2,515 2,411
    General and administrative 504 515
    Amortization of purchased intangible assets 71 65
    Restructuring and other charges 318 237
    Total operating expenses 4,991 4,952
    OPERATING INCOME 2,342 2,455
    Interest income 179 169
    Interest expense (139 ) (140 )
    Other income (loss), net (22 ) 56
    Interest and other income (loss), net 18 85
    INCOME BEFORE PROVISION FOR INCOME TAXES 2,360 2,540
    Provision for income taxes 532 544
    NET INCOME $ 1,828 $ 1,996
    Net income per share:
    Basic $ 0.36 $ 0.37
    Diluted $ 0.35 $ 0.37
    Shares used in per-share calculation:
    Basic 5,112 5,378
    Diluted 5,156 5,430
    Cash dividends declared per common share $ 0.19 $ 0.17
    RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
    (In millions, except per-share amounts)
    Three Months Ended
    October 25,
    2014    		 October 26,
    2013
    GAAP net income $ 1,828 $ 1,996
    Adjustments to cost of sales:
    Share-based compensation expense 48 43
    Amortization of acquisition-related intangible assets 181 167
    Patent portfolio charge 188 —
    Total adjustments to GAAP cost of sales 417 210
    Adjustments to operating expenses:
    Share-based compensation expense 325 269
    Amortization of acquisition-related intangible assets 71 65
    Acquisition-related/divestiture costs 101 308
    Significant asset impairments and restructurings 318 237
    Total adjustments to GAAP operating expenses 815 879
    Total adjustments to GAAP income before provision for income taxes 1,232 1,089
    Income tax effect of non-GAAP adjustments (258 ) (218 )
    Non-GAAP net income $ 2,802 $ 2,867
    Diluted net income per share:
    GAAP $ 0.35 $ 0.37
    Non-GAAP $ 0.54 $ 0.53
    RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE TAX RATE
    Three Months Ended
    October 25,
    2014    		 October 26,
    2013
    GAAP effective tax rate 22.5 % 21.4 %
    Tax effect of non-GAAP adjustments to net income (0.5 )% (0.4 )%
    Non-GAAP effective tax rate 22.0 % 21.0 %
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In millions)
    (Unaudited)
    October 25,
    2014    		 July 26,
    2014
    ASSETS
    Current assets:
    Cash and cash equivalents $ 4,387 $ 6,726
    Investments 47,720 45,348
    Accounts receivable, net of allowance for doubtful accounts of $276 at October 25, 2014 and $265 at July 26, 2014 4,375 5,157
    Inventories 1,676 1,591
    Financing receivables, net 4,265 4,153
    Deferred tax assets 2,689 2,808
    Other current assets 1,284 1,331
    Total current assets 66,396 67,114
    Property and equipment, net 3,233 3,252
    Financing receivables, net 3,691 3,918
    Goodwill 24,364 24,239
    Purchased intangible assets, net 3,066 3,280
    Other assets 3,228 3,331
    TOTAL ASSETS $ 103,978 $ 105,134
    LIABILITIES AND EQUITY
    Current liabilities:
    Short-term debt $ 1,357 $ 508
    Accounts payable 1,022 1,032
    Income taxes payable 94 159
    Accrued compensation 2,638 3,181
    Deferred revenue 9,449 9,478
    Other current liabilities 5,496 5,451
    Total current liabilities 20,056 19,809
    Long-term debt 19,615 20,401
    Income taxes payable 1,504 1,851
    Deferred revenue 4,295 4,664
    Other long-term liabilities 1,793 1,748
    Total liabilities 47,263 48,473
    Total equity 56,715 56,661
    TOTAL LIABILITIES AND EQUITY $ 103,978 $ 105,134
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In millions)
    (Unaudited)
    Three Months Ended
    October 25,
    2014    		 October 26,
    2013
    Cash flows from operating activities:
    Net income $ 1,828 $ 1,996
    Adjustments to reconcile net income to net cash provided by operating activities:
    Depreciation, amortization, and other 596 591
    Share-based compensation expense 369 309
    Provision for receivables 43 23
    Deferred income taxes 236 130
    Excess tax benefits from share-based compensation (71 ) (55 )
    (Gains) losses on investments and other, net 29 (108 )
    Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
    Accounts receivable 723 361
    Inventories (107 ) 22
    Financing receivables (2 ) (37 )
    Other assets 5 28
    Accounts payable (5 ) (29 )
    Income taxes, net (398 ) (389 )
    Accrued compensation (495 ) (460 )
    Deferred revenue (328 ) (307 )
    Other liabilities 68 574
    Net cash provided by operating activities 2,491 2,649
    Cash flows from investing activities:
    Purchases of investments (9,761 ) (8,835 )
    Proceeds from sales of investments 3,450 4,733
    Proceeds from maturities of investments 3,906 4,058
    Acquisition of businesses, net of cash and cash equivalents acquired (184 ) (2,447 )
    Purchases of investments in privately held companies (50 ) (134 )
    Return of investments in privately held companies 42 33
    Acquisition of property and equipment (285 ) (315 )
    Proceeds from sales of property and equipment 3 156
    Other 2 (4 )
    Net cash used in investing activities (2,877 ) (2,755 )
    Cash flows from financing activities:
    Issuances of common stock 353 444
    Repurchases of common stock – repurchase program (1,088 ) (1,898 )
    Shares repurchased for tax withholdings on vesting of restricted stock units (342 ) (286 )
    Short-term borrowings, original maturities less than 90 days, net (4 ) (2 )
    Issuances of debt — 4
    Repayments of debt (3 ) —
    Excess tax benefits from share-based compensation 71 55
    Dividends paid (973 ) (914 )
    Other 33 32
    Net cash used in financing activities (1,953 ) (2,565 )
    Net decrease in cash and cash equivalents (2,339 ) (2,671 )
    Cash and cash equivalents, beginning of period 6,726 7,925
    Cash and cash equivalents, end of period $ 4,387 $ 5,254
    Supplemental cash flow information:
    Cash paid for interest $ 263 $ 221
    Cash paid for income taxes, net $ 694 $ 803
    CASH AND CASH EQUIVALENTS AND INVESTMENTS
    (In millions)
    October 25,
    2014    		 July 26,
    2014
    Cash and cash equivalents and investments:
    Cash and cash equivalents $ 4,387 $ 6,726
    Fixed income securities 45,923 43,396
    Publicly traded equity securities 1,797 1,952
    Total $ 52,107 $ 52,074
    RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
    TO FREE CASH FLOW (NON-GAAP)
    (In millions)
    Three Months Ended
    October 25,
    2014    		 July 26,
    2014    		 October 26,
    2013
    Net cash provided by operating activities $ 2,491 $ 3,612 $ 2,649
    Acquisition of property and equipment (285 ) (325 ) (315 )
    Free cash flow $ 2,206 $ 3,287 $ 2,334
    DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK
    (In millions, except per-share amounts)
    DIVIDENDS STOCK REPURCHASE PROGRAM TOTAL
    Quarter Ended Per Share Amount Shares Weighted-Average Price per Share Amount Amount
    Fiscal 2015
    October 25, 2014 $ 0.19 $ 973 41 $ 24.58 $ 1,013 $ 1,986
    Fiscal 2014
    July 26, 2014 $ 0.19 $ 974 61 $ 25.11 $ 1,514 $ 2,488
    April 26, 2014 0.19 974 90 $ 22.24 2,005 2,979
    January 25, 2014 0.17 896 185 $ 21.73 4,020 4,916
    October 26, 2013 0.17 914 84 $ 23.65 2,000 2,914
    Total $ 0.72 $ 3,758 420 $ 22.71 $ 9,539 $ 13,297
    ACCOUNTS RECEIVABLE AND DSO
    (In millions, except DSO)
    October 25,
    2014    		 July 26,
    2014    		 October 26,
    2013
    Accounts receivable, net $ 4,375 $ 5,157 $ 5,188
    Days sales outstanding in accounts receivable (DSO) 33 38 39
    INVENTORIES
    (In millions)
    October 25,
    2014    		 July 26,
    2014    		 October 26,
    2013
    Inventories:
    Raw materials $ 173 $ 77 $ 80
    Work in process 3 5 7
    Finished goods:
    Distributor inventory and deferred cost of sales 654 595 619
    Manufactured finished goods 535 606 464
    Total finished goods 1,189 1,201 1,083
    Service-related spares 275 273 257
    Demonstration systems 36 35 39
    Total $ 1,676 $ 1,591 $ 1,466
    INVENTORY TURNS AND RECONCILIATION OF GAAP TO NON-GAAP
    COST OF SALES USED IN INVENTORY TURNS
    (In millions, except annualized inventory turns)
    Three Months Ended
    October 25,
    2014    		 July 26,
    2014    		 October 26,
    2013
    Annualized inventory turns – GAAP 12.0 12.7 12.7
    Cost of sales adjustments (1.0 ) (0.6 ) (0.6 )
    Annualized inventory turns – non-GAAP 11.0 12.1 12.1
    GAAP cost of sales $ 4,912 $ 4,952 $ 4,678
    Cost of sales adjustments:
    Share-based compensation expense (48 ) (49 ) (43 )
    Amortization of acquisition-related intangible assets (181 ) (180 ) (167 )
    Acquisition-related/divestiture costs — (1 ) —
    Patent portfolio charge (188 ) — —
    Non-GAAP cost of sales $ 4,495 $ 4,722 $ 4,468
    DEFERRED REVENUE
    (In millions)
    October 25,
    2014    		 July 26,
    2014    		 October 26,
    2013
    Deferred revenue:
    Service $ 9,029 $ 9,640 $ 8,896
    Product:
    Unrecognized revenue on product shipments and other deferred revenue 4,056 3,924 3,628
    Cash receipts related to unrecognized revenue from two-tier distributors 659 578 683
    Total product deferred revenue 4,715 4,502 4,311
    Total $ 13,744 $ 14,142 $ 13,207
    Reported as:
    Current $ 9,449 $ 9,478 $ 9,212
    Noncurrent 4,295 4,664 3,995
    Total $ 13,744 $ 14,142 $ 13,207
    SUMMARY OF SHARE-BASED COMPENSATION EXPENSE
    (In millions)
    Three Months Ended
    October 25,
    2014    		 October 26,
    2013
    Cost of sales – product $ 11 $ 10
    Cost of sales – service 37 33
    Share-based compensation expense in cost of sales 48 43
    Research and development 119 92
    Sales and marketing 147 123
    General and administrative 59 54
    Restructuring and other charges (4 ) (3 )
    Share-based compensation expense in operating expenses 321 266
    Total share-based compensation expense $ 369 $ 309
    Income tax benefit for share-based compensation $ 94 $ 78


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  • Cisco Announces Plans To Acquire Memoir Systems

    Cisco Announces Plans To Acquire Memoir Systems

    Cisco announced its intent to acquire privately held Memoir Systems, which develops semiconductor memory intellectual property and tools for ASIC vendors to build programmable network switches.

    This is the second acquisition announcement from Cisco in as many days. On Wednesday, the company announced its intent to buy Metacloud.

    “This acquisition will enable the proliferation of affordable, fast memory for existing Cisco switch ASICs and will help advance Cisco’s ASIC innovations necessary to meet next-generation IT requirements,” Cisco’s Hilton Romanski said of the Memoir Systems deal. “Currently in the data center switching market, denser infrastructure and data-intensive workloads are driving demand for higher port density (feeds) and greater bitrates (speeds). At the same time, the accelerating growth of scale-out (non-virtualized) Big Data applications like Hadoop are driving increasing East-West data traffic – furthering the need for greater data center network density. Unfortunately, the physical memory in typical ASIC switch chips cannot cope with the design requirements for these more intense needs and as a result, can become the bottleneck that limits the density and performance of future data center switches.”

    “To help solve the ASIC memory issue, Memoir currently licenses soft-logic IP, which speeds up memory access by up to 10 times,” he added. “It also reduces the overall footprint this memory takes up in typical switch ASICs. As a result, this technology allows the development of switch and router ASICs with speeds, feeds, and costs typically not possible with traditional physical memory design techniques. This differentiation is critically important as port densities and port speeds move from 10G to 40/100G.”

    The company expects the dal to close in the first quarter of its fiscal year 2015. The Memoir Systems team will report to Cisco’s Insieme Business Unit.

    Terms of the deal were not disclosed.

    Image via Memoir Systems

  • Cisco Announces Metacloud Acquisition Plans

    Cisco Announces Metacloud Acquisition Plans

    Cisco just announced that it intends to acquire private cloud company Metacloud to accelerate its own “intercloud” strategy.

    Metacloud says the deal will not affect users’ environments, and that it already has account reps reaching out to customers to answer questions. It counts Tableau, Ooyala, SK Planet, and Tapjoy among its customers.

    “Metacloud’s OpenStack-based cloud platform will accelerate Cisco’s strategy to build the world’s largest global Intercloud, a network of clouds, together with key partners to address customer requirements for a globally distributed, highly secure cloud platform capable of meeting the robust demands of the Internet of Everything,” Cisco said in its announcement. “Since announcing its Intercloud strategy in March, Cisco has made rapid progress, enlisting key technology partners, service and cloud providers, all of whom are standardizing upon the Cisco Cloud Services architecture, which is based on OpenStack open source software for building private and public clouds.”

    “Cloud computing has dramatically changed the IT landscape. To enable greater business agility and lower costs, organizations are shifting from an on-premise IT structure to hybrid IT – a mix of private cloud, public cloud, and on-premise applications,” said Hilton Romanski, senior vice president, Cisco Corporate Development. “The resulting silos present a challenge to IT administrators, as choice, visibility, data sovereignty and protection in this world of many clouds requires an open platform. We believe Metacloud’s technology will play a critical role in enabling our customers to experience a seamless journey to a new world of many clouds, providing choice, flexibility, and data governance.”

    The company didn’t disclose how much it’s paying for Metacloud, but says it expcts the deal to close in the first quarter of fiscal year 2015.

    Metacloud employees will join Cisco’s Cloud Infrastructure and Managed Services organization after the deal is completed.

    Image via Metacloud

  • Cisco Cuts 6,000 Jobs As It Reports Better Than Expected Earnings

    Cisco Cuts 6,000 Jobs As It Reports Better Than Expected Earnings

    Cisco announced on Wednesday that it will cut about 6,000 jobs or 8% of its total workforce.

    The news came as the company reported its earnings for its fourth quarter and fiscal year 2014, beating Wall Street estimates.

    Chairman and CEO John Chambers said in a statement, “We are executing well in a tough environment and delivered our best non-GAAP earnings per share quarter in our history. I’m pleased with how we are transforming our company over the past several years and that journey continues. We are focused on growth, innovation and talent, especially in the areas of security, data center, software, cloud and internet of everything. Our strategy is sound, our financials are strong, and our market leadership is secure. We have the team in place to deliver and are uniquely positioned to help our customers solve their biggest business problems.”

    Revenue for the quarter was flat year-over-year at $12.4 billion, and down 3% for the year at $47.1 billion. Q4 earnings per share were $0.43 GAAP.

    Here’s the release in its entirety:

     

    SAN JOSE, CA — Aug 13, 2014 — Cisco (NASDAQ: CSCO)

    • Q4 Revenue: $12.4 billion (flat year over year)
    • Q4 Earnings per Share: $0.43 GAAP; $0.55 non-GAAP
    • FY 2014 Revenue: $47.1 billion (decrease of 3% year over year)
    • FY 2014 Earnings per Share: $1.49 GAAP; $2.06 non-GAAP

    Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its fourth quarter and fiscal year results for the period ended July 26, 2014. Cisco reported fourth quarter revenue of $12.4 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion or $0.43 per share, and non-GAAP net income of $2.8 billion or $0.55 per share.

    “We are executing well in a tough environment and delivered our best non-GAAP earnings per share quarter in our history. I’m pleased with how we are transforming our company over the past several years and that journey continues,” stated John Chambers, Cisco chairman and chief executive officer. “We are focused on growth, innovation and talent, especially in the areas of security, data center, software, cloud and internet of everything. Our strategy is sound, our financials are strong, and our market leadership is secure. We have the team in place to deliver and are uniquely positioned to help our customers solve their biggest business problems.”

    Q4 GAAP Results
    Q4 2014 Q4 2013 Vs. Q4 2013
    Revenue $12.4 billion $12.4 billion (0.5 )%
    Net Income $2.2 billion $2.3 billion (1.0 )%
    Earnings per Share $ 0.43 $ 0.42 2.4 %
    Q4 Non-GAAP Results
    Q4 2014 Q4 2013 Vs. Q4 2013
    Net Income $2.8 billion $2.8 billion (0.4 )%
    Earnings per Share $ 0.55 $ 0.52 5.8 %
    Fiscal Year GAAP Results
    FY 2014 FY 2013 Vs. FY 2013
    Revenue $47.1 billion $48.6 billion (3.0 )%
    Net Income $7.9 billion $10.0 billion (21.3 )%
    Earnings per Share $ 1.49 $ 1.86 (19.9 )%
    Fiscal Year Non-GAAP Results
    FY 2014 FY 2013 Vs. FY 2013
    Net Income $10.9 billion $10.9 billion — %
    Earnings per Share $ 2.06 $ 2.02 2.0 %

    A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table following the Consolidated Statements of Operations.

    Cisco will discuss fourth quarter and fiscal year 2014 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 athttp://investor.cisco.com.

    Cash and Cash Equivalents and Investments

    • Cash flows from operations were $3.6 billion for the fourth quarter of fiscal 2014, compared with $3.2 billion for the third quarter of fiscal 2014, and compared with $4.0 billion for the fourth quarter of fiscal 2013. Cash flows from operations were $12.3 billion for fiscal 2014, compared with $12.9 billion for fiscal 2013.
    • Cash and cash equivalents and investments were $52.1 billion at the end of the fourth quarter of fiscal 2014, compared with $50.5 billion at the end of the third quarter of fiscal 2014, and compared with $50.6 billion at the end of the fourth quarter of fiscal 2013.

    Dividends and Stock Repurchase Program

    • During the fourth quarter of fiscal 2014:
      • Cisco paid a cash dividend of $0.19 per common share, or $974 million.
      • Cisco repurchased approximately 61 million shares of common stock under the stock repurchase program at an average price of $25.11 per share for an aggregate purchase price of $1.5 billion.
    • During fiscal year 2014:
      • Cisco paid cash dividends of $0.72 per common share, or $3.8 billion.
      • Cisco repurchased approximately 420 million shares of common stock under the stock repurchase program at an average price of $22.71 per share for an aggregate purchase price of $9.5 billion. As of July 26, 2014, Cisco had repurchased and retired 4.3 billion shares of Cisco common stock at an average price of $20.63 per share for an aggregate purchase price of approximately $88.4 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $8.6 billion with no termination date.

    “We returned a record $13.3 billion to shareholders this fiscal year through share buybacks and dividends,” stated Frank Calderoni, Cisco executive vice president and chief financial officer. “We remain committed to delivering value to our shareholders through our capital allocation strategy and continued investment in our long-term growth opportunities.”

    Internet of Everything

    • Cisco and leaders of the city of Hamburg signed a Memorandum of Understanding to create specific pilot projects around smart traffic, smart street lighting, infrastructure sensing and remote citizen services.
    • Cisco and leaders of the city of Kansas City, Missouri signed a letter of intent to launch a plan to enhance connectivity and innovation through the Smart+Connected Communities™ framework.
    • Cisco collaborated with the municipalities of Copenhagen, Albertslund and Frederikssund in Denmark, to research and develop tomorrow’s digital infrastructure, the Internet of Everything (IoE), with the goal of strengthening services for citizens while supporting Copenhagen’s climate targets.
    • Cisco and the Barcelona City Council announced plans to open a Cisco Global IoE Innovation Center in Barcelona to provide a platform for research, technological development and new market opportunities related to the IoE for smart cities.

    Fast IT

    • Cisco continued to implement its vision for Application Centric Infrastructure (ACI) with plans to release the Application Policy Infrastructure Controller (APIC), ACI fabric mode for Cisco Nexus® 9000 Series switches, UCS Director support for ACI, industry-leading hardware and software innovations across its portfolio, and a market strategy that includes a robust ecosystem, Cisco validated designs, and new Cisco Services for ACI.
    • Cisco added the Cisco WAN Automation Engine (WAE) to its Evolved Services Platform (ESP), marking another key milestone in Cisco’s network function virtualization (NFV) and software-defined networking (SDN) strategy.
    • Cisco unveiled three new personal collaboration tools, the DX70, DX80 and Cisco Collaboration Meeting Rooms, designed to help customers quickly and simply connect people, conversations and data.
    • Cisco launched Cisco Small Cell Enterprise Select, a program designed to enable mobile network operators to effectively scale small cell deployments for enterprises that need cost-effective mobility solutions. The program provides a mutually beneficial model for partners, mobile operators and enterprises to enable a seamless, scalable and intelligent solution.
    • Cisco estimates that global Internet Protocol (IP) traffic will increase nearly three-fold over the next five years due to more Internet users and devices, faster broadband speeds and more video viewing, according to a report entitled “Cisco Visual Networking Index: Forecast and Methodology, 2013 to 2018.”
    • IDC ranked Cisco the number one provider of x86 blade servers in the Americas, measured by revenue market share, according to the IDC Worldwide Quarterly Server Tracker, 2014 Q1, May 2014.

    Innovation

    • Cisco acquired ThreatGRID, a provider of dynamic malware analysis and threat intelligence technology, both on-premise and in the cloud, designed to help organizations and security teams defend proactively against and quickly respond to advanced cyber-attacks and malware outbreaks.
    • Cisco acquired Assemblage, a company that provides tools and infrastructure designed to enable simple, one-click browser-to-browser collaboration without the need for downloads, plugins or installations.
    • Cisco acquired Tail-f Systems, a leader in multivendor network service orchestration solutions for traditional and virtualized networks, to accelerate Cisco’s cloud virtualization strategy of delivering software that increases value of customer applications and services.
    • Cisco Investments, the corporate venture capital arm of Cisco, announced it is allocating an additional $150 million to fund early-stage companies focused on next horizon “themes” to accelerate the development of disruptive technology markets, including big data and analytics, the Internet of Things, connected mobility, storage, silicon, the content technology ecosystem and India innovation.
    • Cisco Investments announced the Cisco Canada Innovation Program, a strategy to invest CAD $150 million to support and accelerate innovation in Canada.
    • Cisco Investments announced an additional allocation of $40 million to fund early-stage firms in India focused on products and technologies that are unique and relevant to India and other emerging markets.

    Editor’s Notes:

    • The Q4 and fiscal year 2014 conference call to discuss Cisco’s results along with its business outlook will be held on Wednesday, August 13, 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, August 13, 2014 to 11:59 p.m. Pacific Time, on September 1, 2014 at 1-888-403-4665 (United States) or 1-203-369-3148 (international). The replay will also be available via webcast from August 13, 2014 through October 17, 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, August 13, 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 at http://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.

    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 our focus on growth, innovation and talent, especially in the areas of security, data center, software, cloud and IoE; our strategy and market leadership; our ability to help customers solve their biggest business problems; and our ability to deliver value to shareholders through our capital allocation strategy and our continued investment in long-term growth opportunities) 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 priorities, including our foundational priorities, and in certain 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; our ability to achieve expected benefits of our partnerships; 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, engineering, service, marketing and manufacturing 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; 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 Forms 10-Q and 10-K filed on May 22, 2014 and September 10, 2013, respectively. 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 Forms 10-Q and 10-K as each may be amended from time to time. Cisco’s results of operations for the three months and the year ended July 26, 2014 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 effective tax rates, non-GAAP net income per share data, non-GAAP inventory turns and free cash flow.

    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 effective tax rates, and non-GAAP net income per share data, 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 periods presented. Cisco believes that the presentation of free cash flow, which it defines as the net cash provided by operating activities less cash used to acquire property and equipment, to be a liquidity measure that provides useful information to management and investors because of its intent to return a stated percentage of free cash flow to shareholders in the form of dividends and stock repurchases. Cisco further regards free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in its business, make strategic acquisitions, repurchase common stock, and pay dividends on its common stock, after deducting capital investments.

    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, impact to cost of sales from purchase accounting adjustments to inventory, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation and other contingencies (such as the supplier component remediation charge in the second quarter of fiscal 2014 and the patent litigation settlement with TiVo, Inc. incurred in the fourth quarter of fiscal 2013), the income tax effects of the foregoing, and significant tax matters. 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. 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 © 2014 Cisco and/or its affiliates. All rights reserved. Cisco, the Cisco logo, Cisco Nexus, Cisco Visual Networking Index and Smart+Connected Communities are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. To view a list of Cisco trademarks, go to:www.cisco.com/go/trademarks. Third-party 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.

    CONSOLIDATED STATEMENTS OF OPERATIONS
    (In millions, except per-share amounts)
    (Unaudited)
    Three Months Ended Fiscal Year Ended
    July 26,
    2014    		 July 27,
    2013    		 July 26,
    2014    		 July 27,
    2013
    REVENUE:
    Product $ 9,532 $ 9,736 $ 36,172 $ 38,029
    Service 2,825 2,681 10,970 10,578
    Total revenue 12,357 12,417 47,142 48,607
    COST OF SALES:
    Product 3,976 4,154 15,641 15,541
    Service 976 916 3,732 3,626
    Total cost of sales 4,952 5,070 19,373 19,167
    GROSS MARGIN 7,405 7,347 27,769 29,440
    OPERATING EXPENSES:
    Research and development 1,593 1,517 6,294 5,942
    Sales and marketing 2,473 2,360 9,503 9,538
    General and administrative 508 590 1,934 2,264
    Amortization of purchased intangible assets 68 66 275 395
    Restructuring and other charges 82 — 418 105
    Total operating expenses 4,724 4,533 18,424 18,244
    OPERATING INCOME 2,681 2,814 9,345 11,196
    Interest income 183 171 691 654
    Interest expense (142 ) (143 ) (564 ) (583 )
    Other income (loss), net 56 29 243 (40 )
    Interest and other income (loss), net 97 57 370 31
    INCOME BEFORE PROVISION FOR INCOME TAXES 2,778 2,871 9,715 11,227
    Provision for income taxes 531 601 1,862 1,244
    NET INCOME $ 2,247 $ 2,270 $ 7,853 $ 9,983
    Net income per share:
    Basic $ 0.44 $ 0.42 $ 1.50 $ 1.87
    Diluted $ 0.43 $ 0.42 $ 1.49 $ 1.86
    Shares used in per-share calculation:
    Basic 5,121 5,367 5,234 5,329
    Diluted 5,172 5,437 5,281 5,380
    Cash dividends declared per common share $ 0.19 $ 0.17 $ 0.72 $ 0.62
    RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
    (In millions, except per-share amounts)
    Three Months Ended Fiscal Year Ended
    July 26,
    2014    		 July 27,
    2013    		 July 26,
    2014    		 July 27,
    2013
    GAAP net income $ 2,247 $ 2,270 $ 7,853 $ 9,983
    Adjustments to cost of sales:
    Share-based compensation expense 49 42 195 178
    Amortization of acquisition-related intangible assets 180 153 710 569
    Supplier component remediation charge — — 655 —
    Impact to cost of sales from purchase accounting adjustments to inventory — — — 40
    TiVo patent litigation settlement — 172 — 172
    Acquisition-related/divestiture costs 1 1 2 1
    Total adjustments to GAAP cost of sales 230 368 1,562 960
    Adjustments to operating expenses:
    Share-based compensation expense 291 198 1,158 947
    Amortization of acquisition-related intangible assets 68 66 275 395
    Acquisition-related/divestiture costs 102 59 585 129
    Significant asset impairments and restructurings 82 — 418 55
    Total adjustments to GAAP operating expenses 543 323 2,436 1,526
    Total adjustments to GAAP income before provision for income taxes 773 691 3,998 2,486
    Income tax effect of non-GAAP adjustments (185 ) (114 ) (834 ) (620 )
    Significant tax matters — — (154 ) (983 )
    Total adjustments to GAAP provision for income taxes (185 ) (114 ) (988 ) (1,603 )
    Non-GAAP net income $ 2,835 $ 2,847 $ 10,863 $ 10,866
    Diluted net income per share:
    GAAP $ 0.43 $ 0.42 $ 1.49 $ 1.86
    Non-GAAP $ 0.55 $ 0.52 $ 2.06 $ 2.02
    RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE TAX RATE
    Three Months Ended Fiscal Year Ended
    July 26,
    2014    		 July 27,
    2013    		 July 26,
    2014    		 July 27,
    2013
    GAAP effective tax rate 19.1% 20.9% 19.2% 11.1%
    Tax effect of non-GAAP adjustments to net income 1.1% (0.8)% 1.6% 9.7%
    Non-GAAP effective tax rate 20.2% 20.1% 20.8% 20.8%
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In millions)
    (Unaudited)
    July 26,
    2014    		 July 27,
    2013
    ASSETS
    Current assets:
    Cash and cash equivalents $ 6,726 $ 7,925
    Investments 45,348 42,685
    Accounts receivable, net of allowance for doubtful accounts of $265 at July 26, 2014 and $228 at July 27, 2013 5,157 5,470
    Inventories 1,591 1,476
    Financing receivables, net 4,153 4,037
    Deferred tax assets 2,808 2,616
    Other current assets 1,331 1,312
    Total current assets 67,114 65,521
    Property and equipment, net 3,252 3,322
    Financing receivables, net 3,918 3,911
    Goodwill 24,239 21,919
    Purchased intangible assets, net 3,280 3,403
    Other assets 3,331 3,115
    TOTAL ASSETS $ 105,134 $ 101,191
    LIABILITIES AND EQUITY
    Current liabilities:
    Short-term debt $ 508 $ 3,283
    Accounts payable 1,032 1,029
    Income taxes payable 159 192
    Accrued compensation 3,181 3,182
    Deferred revenue 9,478 9,262
    Other current liabilities 5,451 5,048
    Total current liabilities 19,809 21,996
    Long-term debt 20,401 12,928
    Income taxes payable 1,851 1,748
    Deferred revenue 4,664 4,161
    Other long-term liabilities 1,748 1,230
    Total liabilities 48,473 42,063
    Total equity 56,661 59,128
    TOTAL LIABILITIES AND EQUITY $ 105,134 $ 101,191
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In millions)
    (Unaudited)
    Fiscal Year Ended
    July 26,
    2014    		 July 27,
    2013
    Cash flows from operating activities:
    Net income $ 7,853 $ 9,983
    Adjustments to reconcile net income to net cash provided by operating activities:
    Depreciation, amortization, and other 2,432 2,451
    Share-based compensation expense 1,348 1,120
    Provision for receivables 79 44
    Deferred income taxes (678 ) (37 )
    Excess tax benefits from share-based compensation (118 ) (92 )
    (Gains) losses on investments and other, net (299 ) (91 )
    Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
    Accounts receivable 340 (1,001 )
    Inventories (109 ) 218
    Financing receivables (119 ) (723 )
    Other assets 33 (27 )
    Accounts payable (23 ) 164
    Income taxes, net 191 (239 )
    Accrued compensation (42 ) 134
    Deferred revenue 659 598
    Other liabilities 785 392
    Net cash provided by operating activities 12,332 12,894
    Cash flows from investing activities:
    Purchases of investments (36,317 ) (36,608 )
    Proceeds from sales of investments 18,193 14,799
    Proceeds from maturities of investments 15,660 17,909
    Acquisition of businesses, net of cash and cash equivalents acquired (2,989 ) (6,766 )
    Purchases of investments in privately held companies (384 ) (225 )
    Return of investments in privately held companies 213 209
    Acquisition of property and equipment (1,275 ) (1,160 )
    Proceeds from sales of property and equipment 232 141
    Other 24 (67 )
    Net cash used in investing activities (6,643 ) (11,768 )
    Cash flows from financing activities:
    Issuances of common stock 1,907 3,338
    Repurchases of common stock – repurchase program (9,413 ) (2,773 )
    Shares repurchased for tax withholdings on vesting of restricted stock units (430 ) (330 )
    Short-term borrowings, original maturities less than 90 days, net (2 ) (20 )
    Issuances of debt 8,001 24
    Repayments of debt (3,276 ) (16 )
    Excess tax benefits from share-based compensation 118 92
    Dividends paid (3,758 ) (3,310 )
    Other (35 ) (5 )
    Net cash used in financing activities (6,888 ) (3,000 )
    Net decrease in cash and cash equivalents (1,199 ) (1,874 )
    Cash and cash equivalents, beginning of fiscal year 7,925 9,799
    Cash and cash equivalents, end of fiscal year $ 6,726 $ 7,925
    Supplemental cash flow information:
    Cash paid for interest $ 682 $ 682
    Cash paid for income taxes, net $ 2,349 $ 1,519

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

    CASH AND CASH EQUIVALENTS AND INVESTMENTS
    (In millions)
    July 26,
    2014    		 July 27,
    2013
    Cash and cash equivalents and investments:
    Cash and cash equivalents $ 6,726 $ 7,925
    Fixed income securities 43,396 39,888
    Publicly traded equity securities 1,952 2,797
    Total $ 52,074 $ 50,610
    RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
    TO FREE CASH FLOW (NON-GAAP)
    (In millions)
    Three Months Ended
    July 26,
    2014    		 April 26,
    2014    		 July 27,
    2013
    Net cash provided by operating activities $ 3,612 $ 3,198 $ 3,986
    Acquisition of property and equipment (325 ) (373 ) (317 )
    Free cash flow $ 3,287 $ 2,825 $ 3,669
    DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK
    (In millions, except per-share amounts)
    DIVIDENDS STOCK REPURCHASE PROGRAM TOTAL
    Quarter Ended Per Share Amount Shares Weighted-Average Price per Share Amount Amount
    Fiscal 2014
    July 26, 2014 $ 0.19 $ 974 61 $ 25.11 $ 1,514 $ 2,488
    April 26, 2014 0.19 974 90 $ 22.24 2,005 2,979
    January 25, 2014 0.17 896 185 $ 21.73 4,020 4,916
    October 26, 2013 0.17 914 84 $ 23.65 2,000 2,914
    Total $ 0.72 $ 3,758 420 $ 22.71 $ 9,539 $ 13,297
    Fiscal 2013
    July 27, 2013 $ 0.17 $ 918 47 $ 24.80 $ 1,160 $ 2,078
    April 27, 2013 0.17 905 41 $ 20.85 860 1,765
    January 26, 2013 0.14 743 25 $ 20.15 500 1,243
    October 27, 2012 0.14 744 15 $ 16.44 253 997
    Total $ 0.62 $ 3,310 128 $ 21.63 $ 2,773 $ 6,083
    ACCOUNTS RECEIVABLE AND DSO
    (In millions, except DSO)
    July 26,
    2014    		 April 26,
    2014    		 July 27,
    2013
    Accounts receivable, net $ 5,157 $ 4,443 $ 5,470
    Days sales outstanding in accounts receivable (DSO) 38 35 40
    INVENTORIES
    (In millions)
    July 26,
    2014    		 April 26,
    2014    		 July 27,
    2013
    Inventories:
    Raw materials $ 77 $ 57 $ 105
    Work in process 5 5 24
    Finished goods:
    Distributor inventory and deferred cost of sales 595 623 572
    Manufactured finished goods 606 550 480
    Total finished goods 1,201 1,173 1,052
    Service-related spares 273 255 256
    Demonstration systems 35 38 39
    Total $ 1,591 $ 1,528 $ 1,476
    INVENTORY TURNS AND RECONCILIATION OF GAAP TO NON-GAAP
    COST OF SALES USED IN INVENTORY TURNS
    (In millions, except annualized inventory turns)
    Three Months Ended
    July 26,
    2014    		 April 26,
    2014    		 July 27,
    2013
    Annualized inventory turns – GAAP 12.7 11.8 13.8
    Cost of sales adjustments (0.6 ) (0.6 ) (1.0 )
    Annualized inventory turns – non-GAAP 12.1 11.2 12.8
    GAAP cost of sales $ 4,952 $ 4,539 $ 5,070
    Cost of sales adjustments:
    Share-based compensation expense (49 ) (51 ) (42 )
    Amortization of acquisition-related intangible assets (180 ) (181 ) (153 )
    TiVo patent litigation settlement — — (172 )
    Acquisition-related/divestiture costs (1 ) (1 ) (1 )
    Non-GAAP cost of sales $ 4,722 $ 4,306 $ 4,702
    DEFERRED REVENUE
    (In millions)
    July 26,
    2014    		 April 26,
    2014    		 July 27,
    2013
    Deferred revenue:
    Service $ 9,640 $ 8,746 $ 9,403
    Product:
    Unrecognized revenue on product shipments and other deferred revenue 3,924 3,669 3,340
    Cash receipts related to unrecognized revenue from two-tier distributors 578 736 680
    Total product deferred revenue 4,502 4,405 4,020
    Total $ 14,142 $ 13,151 $ 13,423
    Reported as:
    Current $ 9,478 $ 9,198 $ 9,262
    Noncurrent 4,664 3,953 4,161
    Total $ 14,142 $ 13,151 $ 13,423
    SUMMARY OF SHARE-BASED COMPENSATION EXPENSE
    (In millions)
    Three Months Ended Fiscal Year Ended
    July 26,
    2014    		 July 27,
    2013    		 July 26,
    2014    		 July 27,
    2013
    Cost of sales – product $ 11 $ 9 $ 45 $ 40
    Cost of sales – service 38 33 150 138
    Share-based compensation expense in cost of sales 49 42 195 178
    Research and development 105 58 411 286
    Sales and marketing 141 101 549 484
    General and administrative 45 39 198 175
    Restructuring and other charges (1 ) — (5 ) (3 )
    Share-based compensation expense in operating expenses 290 198 1,153 942
    Total share-based compensation expense $ 339 $ 240 $ 1,348 $ 1,120
    Income tax benefit for share-based compensation $ 78 $ 53 $ 324 $ 285


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