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Cisco Reports Second Quarter Earnings

SAN JOSE, CA -- (Marketwire) -- 02/13/13 -- Cisco (NASDAQ: CSCO)

  • Q2 Net Sales: $12.1 billion (increase of 5% year over year)
  • Q2 Earnings per Share: $0.59 GAAP (includes tax benefits of $0.17); $0.51 non-GAAP (includes a tax benefit of $0.01)

Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its second quarter results for the period ended January 26, 2013. Cisco reported second quarter net sales of $12.1 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.1 billion or $0.59 per share, and non-GAAP net income of $2.7 billion or $0.51 per share.

GAAP net income and GAAP earnings per share for the second quarter of fiscal 2013 included total tax benefits of approximately $926 million or $0.17 per share, related to a tax settlement with the Internal Revenue Service and related to the reinstatement of the U.S. federal research and development (R&D) tax credit on January 2, 2013. Non-GAAP net income and non-GAAP earnings per share for the second quarter of fiscal 2013 included a tax benefit of approximately $60 million or $0.01 per share as a result of the reinstatement of the U.S. federal R&D tax credit on January 2, 2013.

"Cisco delivered record earnings per share this quarter and record revenue for the 8th quarter in a row in a challenging economic environment. We continue to drive the innovation, quality and leadership our customers expect, and we remain focused on consistent returns to our shareholders," said John Chambers, Cisco chairman and chief executive officer.

"In terms of the future, we are making solid progress towards our goal of becoming the #1 IT company in the world. As new markets grow and are created, such as the Internet of Everything, it's very easy to see how the intelligent network is at the center of that future. Our customers already understand that Cisco has the architectures, solutions and services to best help them deliver the business results they need and we are honored to work with them and serve them each and every day."


                                GAAP Results

                                     Q2 2013        Q2 2012     Vs. Q2 2012
                                 -------------- -------------- ------------
Net Sales                        $ 12.1 billion $ 11.5 billion          5.0%
Net Income                       $  3.1 billion $  2.2 billion         44.0%
Earnings per Share               $         0.59 $         0.40         47.5%


                              Non-GAAP Results

                                     Q2 2013        Q2 2012     Vs. Q2 2012
                                 -------------- -------------- ------------
Net Income                       $  2.7 billion $  2.6 billion          6.2%
Earnings per Share               $         0.51 $         0.47          8.5%

Net sales for the first six months of fiscal 2013 were $24.0 billion, compared with $22.8 billion for the first six months of fiscal 2012. Net income for the first six months of fiscal 2013, on a GAAP basis, was $5.2 billion or $0.98 per share, compared with $4.0 billion or $0.73 per share for the first six months of fiscal 2012. Non-GAAP net income for the first six months of fiscal 2013 was $5.3 billion or $0.99 per share, compared with $4.9 billion or $0.90 per share for the first six months of fiscal 2012.

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

Cisco will discuss second quarter results and business outlook on a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.

Cash and Cash Equivalents and Investments

  • Cash flows from operations were $3.3 billion for the second quarter of fiscal 2013, compared with $2.5 billion for the first quarter of fiscal 2013, and compared with $3.1 billion for the second quarter of fiscal 2012.
  • Cash and cash equivalents and investments were $46.4 billion at the end of the second quarter of fiscal 2013, compared with $45.0 billion at the end of the first quarter of fiscal 2013, and compared with $48.7 billion at the end of fiscal 2012.

Dividends and Stock Repurchase Program

During the second quarter of fiscal 2013:

  • The combination of cash used for dividends and common stock repurchases under the stock repurchase program totaled approximately $1.2 billion.
  • Cisco paid a cash dividend of $0.14 per common share, or $743 million.
  • Cisco repurchased approximately 25 million shares of common stock under the stock repurchase program at an average price of $20.15 per share for an aggregate purchase price of $500 million. As of January 26, 2013, Cisco had repurchased and retired 3.8 billion shares of Cisco common stock at an average price of $20.34 per share for an aggregate purchase price of approximately $76.9 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $5.1 billion with no termination date.

"We delivered another solid quarter achieving profitable growth which contributes to increasing shareholder value over the long term," stated Frank Calderoni, Cisco executive vice president and chief financial officer. "We are executing consistently, and we remain confident with our financial strategy while capitalizing on strategic investment opportunities to help drive our continued leadership in the industry."

Select Global Business Highlights

  • Cisco announced and completed the acquisition of privately held Cloupia, Inc., a software company that automates converged data center infrastructure, allowing enterprises and service providers to simplify the deployment and configuration of physical and virtual resources from a single management console.
  • Cisco announced and completed the acquisition of privately held Meraki, Inc., a leader in cloud networking offering midmarket customers easy-to-deploy, on-premise networking solutions that can be centrally managed from the cloud.
  • Cisco announced and completed the acquisition of privately held Cariden Technologies, Inc., a supplier of network planning, design and traffic management solutions for telecommunications service providers.
  • Cisco announced and completed the acquisition of BroadHop, Inc., a provider of next-generation policy control and service management technology for carrier networks worldwide.
  • Cisco announced the investment of $6 million in the venture capital fund Monashees Capital, a leading Brazilian VC focused on Internet companies and online education.
  • Belkin announced its intent to acquire Cisco's Linksys product line.
  • Cisco unveiled its new "Internet of Everything" global integrated marketing campaign, with a message that connecting people, process, data and things will make the network more valuable than ever.

Cisco Innovation

  • Cisco unveiled Videoscape Unity™, its new and expanded Videoscape™ video services delivery platform, empowering service providers and media companies to deliver new intuitive and synchronized multiscreen video experiences.
  • Cisco announced new solutions under the Cisco Unified Access™ umbrella that simplify network design by converging wired and wireless networks.
  • Cisco introduced Cisco StadiumVision® Mobile, a solution that delivers live video to mobile devices to create an entirely new fan experience in sports and entertainment venues.
  • Cisco introduced its advanced Wi-Fi location data analytics platform to help businesses enhance customer experiences and create new monetization opportunities to meet the needs of the growing number of connected consumers.
  • Cisco announced two new connected health offerings, Connected Health solutions and HealthPresence® 2.5, designed to meet the increasing need in healthcare for software and services that help enable efficient, convenient, high-quality patient care, and more collaboration across the healthcare continuum.

Select Customer Announcements

  • Cisco announced that Turkiye Is Bankasi (Isbank), the largest bank of Turkey, deployed a Cisco® Borderless Networks and Collaboration infrastructure to enhance business agility, speed product and service development, and better serve its customers.
  • ME Bank in Australia selected a Cisco and NetApp FlexPod® for VMware solution to help transform its information technology and operational excellence functions and to accelerate the speed with which it can introduce new business applications and services to customers.
  • SingTel announced that it is the first service provider in the Asia-Pacific region to globally deploy Multiprotocol Label Switching-Transport Profile (MPLS-TP) technology for its ConnectPlus E-Line service, providing its multinational corporation customers with scalable high-speed connections worldwide.
  • Xerox selected Cisco Unified Computing System™ to deliver its cloud-based global managed print services.
  • Cisco announced that Eastlink, a leading telecommunications service provider in Canada, is using Cisco Videoscape™ to power its new mobile video platform, Eastlink To Go, designed to deliver new consumer experiences anytime, anywhere.
  • Cisco announced that Telefonica Global Solutions, part of the Telefonica Group, a leading global provider of telecommunication services for fixed and mobile carriers, ISPs and content providers, selected Cisco for its enhanced Internet Protocol Next-Generation Network.

Editor's Note:

  • Q2 FY2013 conference call to discuss Cisco's results along with its business outlook will be held on Wednesday, February 13, 2013 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 4:30 p.m. Pacific Time, February 13, 2013 to 4:30 p.m. Pacific Time, February 20, 2013 at 1-866-484-6427 (United States) or 1-203-369-1601 (international). The replay also will be available via webcast from February 13, 2013 through April 19, 2013 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, February 13, 2013. 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 networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com.

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 statements regarding innovation, value to shareholders, the goal of becoming the #1 IT company, the future of the intelligent network, Cisco's ability to help customers deliver business results, strategic investment opportunities and industry leadership) 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 November 20, 2012 and September 12, 2012, 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 and six months ended January 26, 2013 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 and non-GAAP inventory turns.

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 period presented.

For its internal budgeting process, Cisco's management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, impact to cost of sales from purchase accounting adjustments to inventory, other acquisition-related/divestiture costs, significant asset impairments and restructurings, 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, such as significant gains or losses from contingencies 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 © 2013 Cisco and/or its affiliates. All rights reserved. Cisco, the Cisco logo, Cisco Unified Access, Cisco Unified Computing System, Cisco StadiumVison, Cisco Videoscape, Cisco Videoscape Unity, HealthPresence, 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         Six Months Ended
                         ------------------------  ------------------------
                         January 26,  January 28,  January 26,  January 28,
                             2013         2012         2013         2012
                         -----------  -----------  -----------  -----------
NET SALES:
    Product              $     9,437  $     9,118  $    18,734  $    18,070
    Service                    2,661        2,409        5,240        4,713
                         -----------  -----------  -----------  -----------
      Total net sales         12,098       11,527       23,974       22,783
                         -----------  -----------  -----------  -----------
COST OF SALES:
    Product                    3,857        3,650        7,605        7,213
    Service                      898          812        1,787        1,615
                         -----------  -----------  -----------  -----------
      Total cost of
       sales                   4,755        4,462        9,392        8,828
                         -----------  -----------  -----------  -----------
GROSS MARGIN                   7,343        7,065       14,582       13,955
OPERATING EXPENSES:
    Research and
     development               1,452        1,339        2,883        2,714
    Sales and marketing        2,387        2,395        4,803        4,847
    General and
     administrative              584          497        1,144        1,049
    Amortization of
     purchased
     intangible assets           118           97          240          196
    Restructuring and
     other charges                13            3           72          205
                         -----------  -----------  -----------  -----------
      Total operating
       expenses                4,554        4,331        9,142        9,011
                         -----------  -----------  -----------  -----------
OPERATING INCOME               2,789        2,734        5,440        4,944
    Interest income              160          158          321          322
    Interest expense            (147)        (150)        (295)        (298)
    Other income (loss),
     net                         (22)           7          (55)          26
                         -----------  -----------  -----------  -----------
      Interest and other
       income (loss),
       net                        (9)          15          (29)          50
                         -----------  -----------  -----------  -----------
INCOME BEFORE PROVISION
 FOR (BENEFIT FROM)
 INCOME TAXES                  2,780        2,749        5,411        4,994
Provision for (benefit
 from) income taxes             (363)         567          176        1,035
                         -----------  -----------  -----------  -----------
    NET INCOME           $     3,143  $     2,182  $     5,235  $     3,959
                         ===========  ===========  ===========  ===========

Net income per share:
  Basic                  $      0.59  $      0.41  $      0.99  $      0.74
                         ===========  ===========  ===========  ===========
  Diluted                $      0.59  $      0.40  $      0.98  $      0.73
                         ===========  ===========  ===========  ===========
Shares used in per-share
 calculation:
  Basic                        5,318        5,368        5,310        5,381
                         ===========  ===========  ===========  ===========
  Diluted                      5,357        5,401        5,344        5,404
                         ===========  ===========  ===========  ===========

Cash dividends declared
 per common share        $      0.14  $      0.06  $      0.28  $      0.12
                         ===========  ===========  ===========  ===========


               RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
                  (In millions, except per-share amounts)

                            Three Months Ended         Six Months Ended
                         ------------------------  ------------------------
                         January 26,  January 28,  January 26,  January 28,
                             2013         2012         2013         2012
                         -----------  -----------  -----------  -----------
GAAP net income          $     3,143  $     2,182  $     5,235  $     3,959
  Adjustments to cost of
   sales:
    Share-based
     compensation
     expense                      47           54           92          104
    Amortization of
     acquisition-related
     intangible assets           136           90          270          177
    Impact to cost of
     sales from purchase
     accounting
     adjustments to
     inventory                    16           --           40           --
    Significant asset
     impairments and
     restructurings               --          (16)          --          (21)
                         -----------  -----------  -----------  -----------
  Total adjustments to
   GAAP cost of sales            199          128          402          260
                         -----------  -----------  -----------  -----------
  Adjustments to
   operating expenses:
    Share-based
     compensation
     expense                     255          302          519          593
    Amortization of
     acquisition-related
     intangible assets           118           97          240          196
    Other acquisition-
     related/divestiture
     costs                        39            7           54           15
    Significant asset
     impairments and
     restructurings               13            3           72          205
                         -----------  -----------  -----------  -----------
  Total adjustments to
   GAAP operating
   expenses                      425          409          885        1,009
                         -----------  -----------  -----------  -----------
  Total adjustments to
   GAAP income before
   provision for income
   taxes                         624          537        1,287        1,269
                         -----------  -----------  -----------  -----------
  Income tax effect of
   non-GAAP adjustments         (179)        (156)        (365)        (343)
  Significant tax
   matters (1) (2)              (866)          --         (866)          --
                         -----------  -----------  -----------  -----------
  Total adjustments to
   GAAP provision for
   income taxes               (1,045)        (156)      (1,231)        (343)
                         -----------  -----------  -----------  -----------
Non-GAAP net income      $     2,722  $     2,563  $     5,291  $     4,885
                         -----------  -----------  -----------  -----------
Diluted net income per
 share:
GAAP                     $      0.59  $      0.40  $      0.98  $      0.73
                         -----------  -----------  -----------  -----------
Non-GAAP                 $      0.51  $      0.47  $      0.99  $      0.90
                         -----------  -----------  -----------  -----------

(1) In the second quarter of fiscal 2013, the American Taxpayer Relief Act
    of 2012 reinstated the U.S. federal R&D tax credit, retroactive to
    January 1, 2012. GAAP net income for the second quarter and first six
    months of fiscal 2013 included a $132 million tax benefit as a result.
    Non-GAAP net income for the second quarter and first six months of
    fiscal 2013 excluded the $72 million tax benefit related to fiscal 2012
    R&D expenses.
(2) In the second quarter of fiscal 2013, the Internal Revenue Service and
    Cisco settled all outstanding items related to Cisco's federal income
    tax returns for the fiscal years ended July 27, 2002 through July 28,
    2007. As a result of the settlement, Cisco recorded a net tax benefit of
    $794 million, which included related interest.


           RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE TAX RATE

                            Three Months Ended         Six Months Ended
                        -------------------------  ------------------------
                        January 26,   January 28,  January 26,  January 28,
                            2013          2012         2013         2012
                        -----------   -----------  -----------  -----------
GAAP effective tax rate       (13.1)%        20.6%         3.3%        20.7%
Tax effect of non-GAAP
 adjustments to net
 income                        33.1%          1.4%        17.7%         1.3%
                        -----------   -----------  -----------  -----------
Non-GAAP effective tax
 rate                          20.0%         22.0%        21.0%        22.0%
                        -----------   -----------  -----------  -----------


                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (In millions)
                                 (Unaudited)

                                                     January 26,   July 28,
                                                         2013        2012
                                                     ----------- -----------
ASSETS
Current assets:
  Cash and cash equivalents                          $     6,847 $     9,799
  Investments                                             39,529      38,917
  Accounts receivable, net of allowance for doubtful
   accounts of $218 at January 26, 2013 and $207 at
   July 28, 2012                                           4,462       4,369
  Inventories                                              1,574       1,663
  Financing receivables, net                               3,894       3,661
  Deferred tax assets                                      2,297       2,294
  Other current assets                                     2,122       1,230
                                                     ----------- -----------
    Total current assets                                  60,725      61,933
Property and equipment, net                                3,403       3,402
Financing receivables, net                                 3,837       3,585
Goodwill                                                  21,361      16,998
Purchased intangible assets, net                           3,542       1,959
Other assets                                               3,510       3,882
                                                     ----------- -----------
TOTAL ASSETS                                         $    96,378 $    91,759
                                                     =========== ===========
LIABILITIES AND EQUITY
Current liabilities:
  Short-term debt                                    $        37 $        31
  Accounts payable                                           890         859
  Income taxes payable                                        87         276
  Accrued compensation                                     2,921       2,928
  Deferred revenue                                         9,108       8,852
  Other current liabilities                                4,907       4,785
                                                     ----------- -----------
    Total current liabilities                             17,950      17,731
Long-term debt                                            16,254      16,297
Income taxes payable                                       1,340       1,844
Deferred revenue                                           4,213       4,028
Other long-term liabilities                                1,096         558
                                                     ----------- -----------
Total liabilities                                         40,853      40,458
Total equity                                              55,525      51,301
                                                     ----------- -----------
TOTAL LIABILITIES AND EQUITY                         $    96,378 $    91,759
                                                     =========== ===========


                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In millions)
                                (Unaudited)

                                                       Six Months Ended
                                                   ------------------------
                                                   January 26,  January 28,
                                                       2013         2012
                                                   -----------  -----------
Cash flows from operating activities:
  Net income                                       $     5,235  $     3,959
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation, amortization, and other                1,223        1,185
    Share-based compensation expense                       608          695
    Provision for receivables                               12           43
    Deferred income taxes                                  148           29
    Excess tax benefits from share-based
     compensation                                          (32)         (32)
    Net losses (gains) on investments                       14          (11)
    Change in operating assets and liabilities,
     net of effects of acquisitions and
     divestitures:
      Accounts receivable                                  100          761
      Inventories                                          194         (194)
      Financing receivables                               (403)        (551)
      Other assets                                         (63)        (505)
      Accounts payable                                     (17)         (78)
      Income taxes, net                                 (1,444)         146
      Accrued compensation                                (161)        (508)
      Deferred revenue                                     407          304
      Other liabilities                                     (7)         191
                                                   -----------  -----------
        Net cash provided by operating activities        5,814        5,434
                                                   -----------  -----------

Cash flows from investing activities:
  Purchases of investments                             (14,234)     (17,810)
  Proceeds from sales of investments                     4,991       12,291
  Proceeds from maturities of investments                8,652        4,039
  Acquisition of property and equipment                   (552)        (549)
  Acquisition of businesses, net of cash and cash
   equivalents acquired                                 (6,035)        (109)
  Purchases of investments in privately held
   companies                                              (116)        (231)
  Return of investments in privately held
   companies                                                68          124
  Other                                                     30          160
                                                   -----------  -----------
        Net cash used in investing activities           (7,196)      (2,085)
                                                   -----------  -----------

Cash flows from financing activities:
  Issuances of common stock                                652          653
  Repurchases of common stock - repurchase program        (645)      (2,210)
  Shares repurchased for tax withholdings on
   vesting of restricted stock units                      (212)        (145)
  Short-term borrowings, maturities less than 90
   days, net                                                 4           17
  Excess tax benefits from share-based
   compensation                                             32           32
  Dividends paid                                        (1,487)        (644)
  Other                                                     86         (153)
                                                   -----------  -----------
        Net cash used in financing activities           (1,570)      (2,450)
                                                   -----------  -----------
Net (decrease) increase in cash and cash
 equivalents                                            (2,952)         899
Cash and cash equivalents, beginning of period           9,799        7,662
                                                   -----------  -----------
Cash and cash equivalents, end of period           $     6,847  $     8,561
                                                   ===========  ===========
Cash paid for:
Interest                                           $       341  $       340
Income taxes                                       $     1,472  $       860


                      ADDITIONAL FINANCIAL INFORMATION
                               (In millions)
                                (Unaudited)

                                                   January 26,   July 28,
                                                       2013         2012
                                                   -----------  -----------
Cash and Cash Equivalents and Investments:
  Cash and cash equivalents                        $     6,847  $     9,799
  Fixed income securities                               37,421       37,297
  Publicly traded equity securities                      2,108        1,620
                                                   -----------  -----------
      Total                                        $    46,376  $    48,716
                                                   ===========  ===========

Inventories:
  Raw materials                                    $       113  $       127
  Work in process                                           24           35
  Finished goods:
    Distributor inventory and deferred cost of
     sales                                                 648          630
    Manufactured finished goods                            498          597
                                                   -----------  -----------
    Total finished goods                                 1,146        1,227
  Service-related spares                                   248          213
  Demonstration systems                                     43           61
                                                   -----------  -----------
      Total                                        $     1,574  $     1,663
                                                   ===========  ===========

Property and equipment, net:
  Land, buildings, and building and leasehold
   improvements                                    $     4,491  $     4,363
  Computer equipment and related software                1,455        1,469
  Production, engineering, and other equipment           5,642        5,364
  Operating lease assets                                   304          300
  Furniture and fixtures                                   493          487
                                                   -----------  -----------
                                                        12,385       11,983
  Less accumulated depreciation and amortization        (8,982)      (8,581)
                                                   -----------  -----------
      Total                                        $     3,403  $     3,402
                                                   ===========  ===========

Other assets:
  Deferred tax assets                              $     1,807  $     2,270
  Investments in privately held companies                  869          858
  Other                                                    834          754
                                                   -----------  -----------
      Total                                        $     3,510  $     3,882
                                                   ===========  ===========

Deferred revenue:
  Service                                          $     9,055  $     9,173
  Product:
    Unrecognized revenue on product shipments and
     other deferred revenue                              3,309        2,975
    Cash receipts related to unrecognized revenue
     from two-tier distributors                            957          732
                                                   -----------  -----------
    Total product deferred revenue                       4,266        3,707
                                                   -----------  -----------
      Total                                        $    13,321  $    12,880
                                                   ===========  ===========
Reported as:
  Current                                          $     9,108  $     8,852
  Noncurrent                                             4,213        4,028
                                                   -----------  -----------
      Total                                        $    13,321  $    12,880
                                                   ===========  ===========


                SUMMARY OF SHARE-BASED COMPENSATION EXPENSE
                               (In millions)

                            Three Months Ended         Six Months Ended
                         ------------------------  ------------------------
                         January 26,  January 28,  January 26,  January 28,
                             2013         2012         2013         2012
                         -----------  -----------  -----------  -----------
Cost of sales - product  $        11  $        14  $        21  $        27
Cost of sales - service           36           40           71           77
                         -----------  -----------  -----------  -----------
Share-based compensation
 expense in cost of
 sales                            47           54           92          104
                         -----------  -----------  -----------  -----------
Research and development          72           99          156          200
Sales and marketing              135          149          265          291
General and
 administrative                   48           54           98          102
Restructuring and other
 charges                          --           (2)          (3)          (2)
                         -----------  -----------  -----------  -----------
Share-based compensation
 expense in operating
 expenses                        255          300          516          591
                         -----------  -----------  -----------  -----------
Total share-based
 compensation expense    $       302  $       354  $       608  $       695
                         ===========  ===========  ===========  ===========
Income tax benefit for
 share-based
 compensation            $       (80) $       (93) $      (159) $      (183)
                         ===========  ===========  ===========  ===========


                         ACCOUNTS RECEIVABLE AND DSO
                          (In millions, except DSO)

                                         January 26, October 27, January 28,
                                             2013        2012        2012
                                         ----------- ----------- -----------
Accounts receivable, net                 $     4,462 $     3,942 $     3,876
Days sales outstanding in accounts
 receivable (DSO)                                 34          30          31


           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
                                      -------------------------------------
                                      January 26,  October 27,  January 28,
                                          2013         2012         2012
                                      -----------  -----------  -----------
Annualized inventory turns - GAAP            11.6         11.0         11.1
  Cost of sales adjustments                  (0.5)        (0.5)        (0.3)
                                      -----------  -----------  -----------
Annualized inventory turns - non-GAAP        11.1         10.5         10.8

GAAP cost of sales                    $     4,755  $     4,637  $     4,462
Cost of sales adjustments:
  Share-based compensation expense            (47)         (45)         (54)
  Amortization of acquisition-related
   intangible assets                         (136)        (134)         (90)
  Impact to cost of sales from
   purchase accounting adjustments to
   inventory                                  (16)         (24)          --
  Significant asset impairments and
   restructurings                              --           --           16
                                      -----------  -----------  -----------
Non-GAAP cost of sales                $     4,556  $     4,434  $     4,334
                                      -----------  -----------  -----------


                REPURCHASE OF COMMON STOCK AND DIVIDENDS PAID
                                (In millions)

                                      Three Months Ended
                 -----------------------------------------------------------
                 January 26, October 27,  July 28,    April 28,  January 28,
                     2013        2012        2012        2012        2012
                 ----------- ----------- ----------- ----------- -----------
Repurchase of
 common stock
 under the stock
 repurchase
 program         $       500 $       253 $     1,800 $       550 $       466
Dividends paid           743         744         425         432         322
                 ----------- ----------- ----------- ----------- -----------
Total            $     1,243 $       997 $     2,225 $       982 $       788
                 ----------- ----------- ----------- ----------- -----------

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