This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Cisco Systems Inc. (CSCO) on August 7, 2007.
Management:
Chairman and CEO: John Chambers
CFO: Dennis Powell
CEO, Scientific-Atlanta: Jim McDonald
SVP of Worldwide Operations and Business Development: Rick Justice
Senior Vice President of Corporate Development: Ned Hooper
Senior Vice President of Customer Solutions Finance: Frank Calderoni
Chief Development Officer: Charlie Giancarlo
VP of Corporate Communications: Blair Christie
Key Investors Issues
- Earnings per share were 31 cents, up 24% from the prior year.
- Revenue increased 18% from a year ago to $9.4 billion.
- Net income was up 25% to $1.9 billion.
- Cash generated from operations was $2.7 billion.
- Share repurchased totaled $7.8 billion of common stock or 1.5 million shares, with a remaining approved amount of $8.8 billion.
Fourth Quarter Highlights
Total revenue was $9.4 billion up 18% from June 2006 following strong results from Scientific-Atlanta, with $791 million as well as WebEx and IronPort, with $76 million.
– Routing revenue grew 14% from 2006 to $1.9 billion, due to a 30% growth in orders for high-end routers particularly the CRS, the 7600 and GSR.
- Switching revenue was $3.3 billion, up 18% from the prior year, due to strength across the fixed and modular switching portfolio.
Growth and balance across customer segments in the U.S. has remained strong.
- Advanced technology revenues at $2.2 billion increased 24%, improving total contribution to top line as market transitions started yielding results.
- Services revenue represents 16% of total revenue, growing by 19% from a year ago.
- Other product revenue totaled $503 million, an increase of 8% from 2006 and total service revenue was $1.5 billion, up 19%.
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Gross margin improved to 65.2% as a result of higher shipment volume, a more favorable mix, and cost savings, partially offset by modest price reductions.
- Service margins rose to 65.1% despite volatility based on revenue levels and mix between technical support and advanced services.
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Net income was $1.9 billion compared to $1.54 billion in 2006, representing a 25% growth from a year ago.
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Earnings per share were 31 cents, up 24% from 25 cents in 2006.
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Inventory turns were 10.1 times, up from 8.6 times in 2006 following the successful completion of lean implementation.
Headcount increased to 61,535 as a result of acquisitions and hires in sales, engineering and services.
- Dennis Powell will step down as CFO and will be replaced by Frank Calderon, currently Senior Vice President of Customer Solutions Finance.
Fiscal Year 2007 Highlights
- Revenue increased 23% from the prior year to $34.9 billion.
- Net income rose from $5.6 billion in 2006 to $7.3 billion.
- Earnings per share amounted to $1.17, up 32% from 89 cents in 2006.
- Year end product backlog stood at $3.9 billion compared to $3 billion in 2006, a 29% or $900 million increase.
- Share repurchased totaled $7.8 billion of common stock or 297 million shares at an average price of $26.12.
The management reiterated its commitment to create the next generation of products or advanced technologies including security, wireless, storage, networked home and unified communications.
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- Implementation of Unified Communications, TelePresence and other video applications across the entire company is expected to grow network load by up to 300% over the next several years.
Customer Segments
- The U.S. service provider market, excluding Scientific-Atlanta, had strong order growth rate of 30% and high 20s for full year distributed evenly across all four categories i.e. incumbent wireline, wireline emerging and cable operations.
The outlook for the Enterprise business is relatively flat given the volatility of order growth rates on a quarterly basis.
