8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 3, 2010

CISCO SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

California

(State or other jurisdiction of incorporation)

0-18225	77-0059951
(Commission File Number)	(IRS Employer Identification No.)

170 West Tasman Drive, San Jose, California	95134-1706
(Address of principal executive offices)	(Zip Code)

(408) 526-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On February 3, 2010, Cisco Systems, Inc. (the “Registrant”) reported its results of operations for its fiscal second quarter 2010 ended January 23, 2010. A copy of the press release issued by the Registrant concerning the foregoing results is furnished herewith as Exhibit 99.1. In addition, the transcript of a video of the Registrant’s Chief Financial Officer discussing second quarter results is furnished herewith as Exhibit 99.2.

The information contained herein and in the accompanying exhibits shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibits hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

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

These non-GAAP measures are not in accordance with, or an alternative for, 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. The Registrant believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Registrant’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Registrant’s results of operations in conjunction with the corresponding GAAP measures.

The Registrant believes that the presentation of non-GAAP net income, non-GAAP net income per share data and non-GAAP shares used in net income per share calculation for the periods in which such measures are presented, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations. In addition, the Registrant 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, the Registrant’s management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, other acquisition-related costs, enhanced early retirement benefits, the income tax effects of the foregoing, significant effects of retroactive tax legislation, and significant transfer pricing adjustments related to share-based compensation. The Registrant’s management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of the Registrant. In prior periods, the Registrant has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures; for example, effective in the third quarter of fiscal 2009, the Registrant no longer excludes payroll tax on stock option exercises, and effective in fiscal 2010, the Registrant no longer excludes in-process research and development upon acquisition as it is no longer expensed as a result of new accounting guidance. From time to time in the future, there may be other items that the Registrant may exclude for purposes of its internal budgeting process and in reviewing the financial results of the Registrant.

As described above, the Registrant excludes the following items from one or more of its non-GAAP measures when applicable:

Share-based compensation expense. These expenses consist primarily of expenses for employee stock options, employee stock purchase rights, employee restricted stock and employee restricted stock units, including such expenses associated with acquisitions. The Registrant excludes share-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses that the Registrant does not believe are reflective of ongoing operating results. Further, the Registrant believes that it is useful to investors to understand the impact of share-based compensation to its results of operations.

Amortization of acquisition-related intangible assets. The Registrant incurs amortization of intangible assets (which may include impairment charges from the write-downs of purchased intangible assets) in connection with acquisitions. The Registrant excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Registrant’s prior acquisitions and have no direct correlation to the operation of the Registrant’s business.

Other acquisition-related costs. In connection with its business combinations, the Registrant incurs compensation expenses, as well as professional fees and other direct expenses such as restructuring activities related to the acquired company. In addition, from time to time the Registrant enters into foreign currency transactions related to pending acquisitions, and may incur gains or losses on such transactions. The Registrant excludes such compensation expense, fees, other direct expenses, and gains and losses, as they are primarily related to acquisitions and have no direct correlation to the operation of the Registrant’s business.

Enhanced early retirement benefits. The Registrant excluded expenses related to an enhanced early retirement program, in the fourth quarter of fiscal 2009. The Registrant excludes these expenses because the Registrant does not believe they are reflective of ongoing business and operating results.

Income tax effects of the foregoing. This amount is used to present each of the amounts described above on an after-tax basis consistent with the presentation of non-GAAP net income.

Significant effects of retroactive tax legislation. The Registrant is subject to changes in tax legislation which have retroactive effects. The Registrant excludes such significant effects of retroactive tax legislation because this item is unrelated to the Registrant’s current ongoing business and operating results.

Significant transfer pricing adjustments related to share-based compensation. During the Registrant’s fourth quarter of fiscal 2009, the U.S. Court of Appeals for the Ninth Circuit overturned a 2005 U.S. Tax Court ruling. The decision changes the tax treatment of share-based compensation expenses for the purpose of determining intangible development costs under a company’s research and development cost sharing arrangement. While Cisco was not a named party to the case, the decision resulted in a change in Cisco’s tax benefits recognized in its financial statements. The Registrant excluded a related tax charge because it was unrelated to its current ongoing business and operating results.

From time to time in the future, there may be other items that the Registrant may exclude if it believes that doing so is consistent with the goal of providing useful information to investors and management.

The Registrant will incur share-based compensation expense, amortization of acquisition-related intangible assets, and other acquisition-related costs, in future periods. The Registrant may be subject to significant effects of retroactive tax legislation to the extent that any such legislation becomes effective retroactively in future periods. Enhanced early retirement benefit expenses are an unusual occurrence. The Registrant could experience significant transfer pricing adjustments related to share-based compensation to the extent that any court rulings or other guidance impacts this area in future periods.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CISCO SYSTEMS, INC.
Dated: February 3, 2010	By:	/s/ Frank A. Calderoni
	Name:	Frank A. Calderoni
	Title:	Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description of Document
99.1	Press Release of Registrant, dated February 3, 2010, reporting the results of operations for the Registrant’s fiscal second quarter ended January 23, 2010.
99.2	Transcript of video of the Registrant’s Chief Financial Officer discussing the results of operations for the Registrant’s fiscal second quarter ended January 23, 2010.

EX-99.1

EXHIBIT 99.1

PRESS RELEASE

Press Contact:	Investor Relations Contact:
Robyn Jenkins-Blum	Laura Graves
Cisco	Cisco
+1 (408) 853-9848	+1 (408) 526-6521
rojenkin@cisco.com	lagraves@cisco.com

CISCO REPORTS SECOND QUARTER EARNINGS

• Q2 Net Sales: $9.8 billion (increase of 8% year over year)

• Q2 Net Income: $1.9 billion GAAP; $2.3 billion non-GAAP

• Q2 Earnings per Share: $0.32 GAAP (increase of 23% year over year); $0.40 non-GAAP (increase of 25% year over year)

SAN JOSE, Calif. – February 3, 2010 – Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its second quarter results for the period ended January 23, 2010. Cisco reported second quarter net sales of $9.8 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.9 billion or $0.32 per share, and non-GAAP net income of $2.3 billion or $0.40 per share.

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

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

GAAP Results

	Q2 2010		Q2 2009		Vs. Q2 2009
Net Sales	$	9.8 billion	$	9.1 billion	8.0	%
Net Income	$	1.9 billion	$	1.5 billion	23.2	%
Earnings per Share	$	0.32	$	0.26	23.1	%

Non-GAAP Results

	Q2 2010		Q2 2009		Vs. Q2 2009
Net Income	$	2.3 billion	$	1.9 billion	25.3	%
Earnings per Share	$	0.40	$	0.32	25.0	%

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

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

Cisco will discuss second quarter results and business outlook on a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://www.cisco.com/go/investors. A Q&A with Cisco’s Chairman and CEO John Chambers and CFO Frank Calderoni will also be available at http://newsroom.cisco.com. To view a video of Cisco’s CFO discussing second quarter results, visit http://blogs.cisco.com.

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Other Financial Highlights

• Cash flows from operations were $2.5 billion for the second quarter of fiscal 2010, compared with $1.5 billion for the first quarter of fiscal 2010, and compared with $3.2 billion for the second quarter of fiscal 2009.

• Cash and cash equivalents and investments were $39.6 billion at the end of the second quarter of fiscal 2010, compared with $35.0 billion at the end of fiscal 2009, and compared with $35.4 billion at the end of the first quarter of fiscal 2010.

• During the second quarter of fiscal 2010, Cisco repurchased 63 million shares of common stock at an average price of $23.96 per share for an aggregate purchase price of $1.5 billion. As of January 23, 2010, Cisco had repurchased and retired 2.9 billion shares of Cisco common stock at an average price of $20.55 per share for an aggregate purchase price of approximately $60.4 billion since the inception of the stock repurchase program. The remaining authorized repurchase amount as of January 23, 2010 was $11.6 billion with no termination date.

• Days sales outstanding in accounts receivable (DSO) at the end of the second quarter of fiscal 2010 were 39 days, compared with 32 days at the end of the first quarter of fiscal 2010, and compared with 29 days at the end of the second quarter of fiscal 2009.

• Inventory turns on a GAAP basis were 12.1 in the second quarter of fiscal 2010, compared with 11.6 in both the first quarter of fiscal 2010 and the second quarter of fiscal 2009. Non-GAAP inventory turns were 11.7 in the second quarter of fiscal 2010, compared with 11.3 in both the first quarter of fiscal 2010 and the second quarter of fiscal 2009.

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

Select Global Business Highlights

• Cisco, EMC Corp., and VMware, Inc, announced the formation of a Virtual Computing Environment coalition designed to accelerate pervasive data center virtualization and private cloud infrastructure development.

• Cisco marked its 25th anniversary with a challenge to every Cisco employee to volunteer four hours of service in his or her local community.

Acquisitions and Investments

• Cisco completed its purchase of ScanSafe, Inc., a market leader of software-as-a-service (SaaS) web security solutions for organizations ranging from global enterprises to small businesses.

• Cisco completed the acquisition of Starent Networks, Corp., a leading supplier of IP-based mobile infrastructure solutions targeting mobile and converged carriers.

Cisco Innovation

• At its Collaboration Summit, Cisco introduced new products in Cisco TelePresence™, unified communications, enterprise social software, and hosted email technologies to facilitate fundamental changes to how organizations communicate and collaborate.

• At the 2010 International Consumer Electronics Show, Cisco showcased its vision to enable consumers to live a connected life through its momentum in home networking and consumer video products, new partnerships with media and entertainment companies, and plans to drive a new class of consumer video communication experiences.

Select Customer Announcements

• Cisco and Molina Healthcare, Inc. announced a telemedicine initiative designed to deliver better care to underserved and underinsured communities throughout the state of California with immersive doctor-patient interactions.

• TASER International, Inc. enhanced its evidence capabilities for law enforcement agencies with an innovative, cloud-based service built on the Cisco Unified Computing System™.

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• The Mandarin Oriental hotel in Kuala Lumpur, Malaysia announced it will provide highly secure high-speed wireless Internet access throughout its premises through an upgrade of its network infrastructure with Cisco’s next-generation 802.11n, or Wireless-N, technology.

• The Melbourne Airport modernized and digitized its International Terminal 2 operations with the deployment of Cisco business video and mobility technologies.

• BT and Cisco launched a hosted IP telephony service representing the world’s first global offering based on Cisco cloud-based unified communications as the platform for collaborative voice communications.

• Onet.pl Group in Poland chose the Cisco Nexus^® data center platform for its new data centre in Krakow to serve the fast-growing number of customers who would like to make use of the portal’s innovative video-based services.

Editor’s Note:

• Q2 FY10 conference call to discuss Cisco’s results along with its business outlook will be held at 1:30 p.m. Pacific Time, Wednesday, February 3, 2010. Conference call number is 888-848-6507 (United States) or 212-519-0847 (international).

• Conference call replay will be available from 4:30 p.m. Pacific Time, February 3, 2010 to 4:30 p.m. Pacific Time, February 10, 2010 at 866-357-4205 (United States) or 203-369-0122 (international). The replay also will be available via webcast from February 3, 2010 through April 23, 2010 on the Cisco Investor Relations website at http://www.cisco.com/go/investors.

• Additional information regarding Cisco’s financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, February 3, 2010. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with GAAP reconciliation information, will be available on the Cisco Investor Relations website at http://www.cisco.com/go/investors.

• A Q&A with Cisco’s Chairman and CEO John Chambers and CFO Frank Calderoni about Q2 FY10 results will be available at approximately 2:15 pm PT at http://newsroom.cisco.com.

• To view a video of Cisco’s CFO discussing Q2 FY10 results, visit Cisco’s blog site, The Platform, at http://blogs.cisco.com.

About Cisco

Cisco, (NASDAQ: CSCO), the worldwide leader in networking that transforms how people connect, communicate and collaborate, this year celebrates 25 years of technology innovation, operational excellence and corporate social responsibility. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com.

# # #

This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as the entry into the second phase of the economic recovery, our momentum and growth in the market, that we are extremely well-positioned, and our ability to continue to focus on growing and capturing market transitions in our industry) and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the return on our investments in certain market adjacencies and geographical locations; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; increased competition in our product and service markets, including the data center; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters, and governmental investigations; natural catastrophic events; a pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales and engineering activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors, including relating to transactions to hedge foreign currency consideration for acquisitions; changes in provision for income taxes, including

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changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco’s most recent reports on Form 10-K and Form 10-Q. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco’s most recent reports on Form 10-K and Form 10-Q, as each may be amended from time to time. Cisco’s results of operations for the three and six months ended January 23, 2010 are not necessarily indicative of Cisco’s operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

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

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

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

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

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

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

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CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	January 23, 2010			January 24, 2009			January 23, 2010			January 24, 2009
NET SALES:
Product	$	7,976		$	7,347		$	15,176		$	15,982
Service		1,839			1,742			3,660			3,438
Total net sales		9,815			9,089			18,836			19,420
COST OF SALES:
Product		2,815			2,737			5,301			5,718
Service		668			629			1,315			1,298
Total cost of sales		3,483			3,366			6,616			7,016
GROSS MARGIN		6,332			5,723			12,220			12,404
OPERATING EXPENSES:
Research and development		1,247			1,279			2,471			2,685
Sales and marketing		2,110			2,155			4,105			4,438
General and administrative		467			380			907			775
Amortization of purchased intangible assets		138			136			243			248
In-process research and development		—			—			—			3
Total operating expenses		3,962			3,950			7,726			8,149
OPERATING INCOME		2,370			1,773			4,494			4,255
Interest income		155			222			323			481
Interest expense		(158	)		(63	)		(272	)		(127	)
Other income (loss), net		(12	)		(64	)		49			(136	)
Interest and other income (loss), net		(15	)		95			100			218
INCOME BEFORE PROVISION FOR INCOME TAXES		2,355			1,868			4,594			4,473
Provision for income taxes		502			364			954			768
NET INCOME	$	1,853		$	1,504		$	3,640		$	3,705
Net income per share:
Basic	$	0.32		$	0.26		$	0.63		$	0.63
Diluted	$	0.32		$	0.26		$	0.62		$	0.63
Shares used in per-share calculation:
Basic		5,741			5,848			5,754			5,865
Diluted		5,862			5,864			5,866			5,901

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

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RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

(In millions, except per-share amounts)

	Three Months Ended						Six Months Ended
	January 23, 2010			January 24, 2009			January 23, 2010			January 24, 2009
GAAP net income	$	1,853		$	1,504		$	3,640		$	3,705
Share-based compensation expense (1)		371			298			692			602
Payroll tax on stock option exercises (2)		—			—			—			1
In-process research and development (3)		—			—			—			3
Amortization of acquisition-related intangible assets		192			190			341			356
Other acquisition-related costs (4)		81			37			85			159
Total adjustments to GAAP income before provision for income taxes		644			525			1,118			1,121
Income tax effect		(158	)		(162	)		(303	)		(356	)
Effect of retroactive tax legislation (5)		—			—			—			(106	)
Total adjustments to GAAP provision for income taxes		(158	)		(162	)		(303	)		(462	)
Non-GAAP net income	$	2,339		$	1,867		$	4,455		$	4,364
Diluted net income per share:
GAAP	$	0.32		$	0.26		$	0.62		$	0.63
Non-GAAP	$	0.40		$	0.32		$	0.76		$	0.74
Shares used in diluted net income per share calculation:
GAAP		5,862			5,864			5,866			5,901
Non-GAAP		5,862			5,885			5,866			5,919

⁽¹⁾ Share-based compensation expense for the second quarter and first six months of fiscal 2010 includes $26 million and $54 million, respectively, and $22 million and $44 million for the second quarter and first six months of fiscal 2009, respectively, of share-based compensation related to acquisitions.

⁽²⁾ Effective in the third quarter of fiscal 2009, Cisco no longer excludes payroll tax on stock option exercises for purposes of its non-GAAP financial measures.

⁽³⁾ Effective in fiscal 2010, Cisco no longer excludes in-process research and development upon acquisition for purposes of its non-GAAP financial measures as it is no longer expensed as a result of new accounting guidance.

⁽⁴⁾ Other acquisition-related costs for the second quarter and first six months of fiscal 2010 include $38 million of losses and $4 million of gains, respectively, of mark-to-market impacts related to transactions to hedge a portion of the foreign currency consideration of a pending business combination.

⁽⁵⁾ In the first quarter of fiscal 2009, the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 reinstated the U.S. federal R&D tax credit, retroactive to January 1, 2008. GAAP net income for the first six months of fiscal 2009 included a $106 million tax benefit related to fiscal 2008 R&D expenses. Non-GAAP net income for the first six months of fiscal 2009 excluded the $106 million tax benefit related to fiscal 2008 R&D expenses.

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

Additional reconciliations between GAAP and non-GAAP financial measures are provided in the tables that follow on page 10.

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CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

	January 23, 2010		July 25, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	4,710	$	5,718
Investments		34,928		29,283
Accounts receivable, net of allowance for doubtful accounts of $240 at January 23, 2010 and $216 at July 25, 2009		4,237		3,177
Inventories		1,215		1,074
Deferred tax assets		2,233		2,320
Other current assets		2,816		2,605
Total current assets		50,139		44,177
Property and equipment, net		3,958		4,043
Goodwill		14,423		12,925
Purchased intangible assets, net		2,661		1,702
Other assets		5,222		5,281
TOTAL ASSETS	$	76,403	$	68,128
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	750	$	675
Income taxes payable		103		166
Accrued compensation		2,207		2,535
Deferred revenue		6,751		6,438
Other current liabilities		4,594		3,841
Total current liabilities		14,405		13,655
Long-term debt		15,194		10,295
Income taxes payable		1,941		2,007
Deferred revenue		2,906		2,955
Other long-term liabilities		425		539
Total liabilities		34,871		29,451
Total equity		41,532		38,677
TOTAL LIABILITIES AND EQUITY	$	76,403	$	68,128

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended
	January 23, 2010			January 24, 2009
Cash flows from operating activities:
Net income	$	3,640		$	3,705
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other noncash items		942			818
Share-based compensation expense		692			602
Provision for doubtful accounts		36			59
Deferred income taxes		(117	)		(293	)
Excess tax benefits from share-based compensation		(49	)		(21	)
In-process research and development		—			3
Net (gains) losses on investments		(84	)		123
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(994	)		818
Inventories		(80	)		113
Lease receivables, net		(137	)		(109	)
Accounts payable		58			(228	)
Income taxes payable		(68	)		467
Accrued compensation		(346	)		(213	)
Deferred revenue		190			544
Other assets		(202	)		(470	)
Other liabilities		493			(2	)
Net cash provided by operating activities		3,974			5,916
Cash flows from investing activities:
Purchases of investments		(23,020	)		(24,110	)
Proceeds from sales of investments		6,282			12,545
Proceeds from maturities of investments		11,278			6,920
Acquisition of property and equipment		(408	)		(585	)
Acquisition of businesses, net of cash and cash equivalents acquired		(2,308	)		(327	)
Change in investments in privately held companies		(69	)		(53	)
Other		60			(54	)
Net cash used in investing activities		(8,185	)		(5,664	)
Cash flows from financing activities:
Issuance of common stock		1,436			441
Repurchase of common stock		(3,244	)		(1,603	)
Issuance of debt		4,944			—
Settlement of interest rate derivatives related to long-term debt		23			—
Excess tax benefits from share-based compensation		49			21
Other		(5	)		(127	)
Net cash provided by (used in) financing activities		3,203			(1,268	)
Net decrease in cash and cash equivalents		(1,008	)		(1,016	)
Cash and cash equivalents, beginning of period		5,718			5,191
Cash and cash equivalents, end of period	$	4,710		$	4,175

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

8

ADDITIONAL FINANCIAL INFORMATION

(In millions)

(Unaudited)

	January 23, 2010			July 25, 2009
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents	$	4,710		$	5,718
Fixed income securities		33,856			28,355
Publicly traded equity securities		1,072			928
Total	$	39,638		$	35,001
INVENTORIES
Raw materials	$	248		$	165
Work in process		36			33
Finished goods:
Distributor inventory and deferred cost of sales		487			382
Manufactured finished goods		258			310
Total finished goods		745			692
Service-related spares		146			151
Demonstration systems		40			33
Total	$	1,215		$	1,074
PROPERTY AND EQUIPMENT, NET
Land, buildings, and building & leasehold improvements	$	4,505		$	4,618
Computer equipment and related software		1,602			1,823
Production, engineering, and other equipment		4,974			5,075
Operating lease assets		251			227
Furniture and fixtures		475			465
		11,807			12,208
Less accumulated depreciation and amortization		(7,849	)		(8,165	)
Total	$	3,958		$	4,043
OTHER ASSETS
Deferred tax assets	$	1,786		$	2,122
Investments in privately held companies		769			709
Lease receivables, net (1)		1,044			966
Financed service contracts, net (2)		588			676
Loan receivables, net (3)		726			537
Other		309			271
Total	$	5,222		$	5,281
DEFERRED REVENUE
Service	$	6,338		$	6,496
Product:
Unrecognized revenue on product shipments and other deferred revenue		2,789			2,490
Cash receipts related to unrecognized revenue from two-tier distributors		530			407
Total product deferred revenue		3,319			2,897
Total	$	9,657		$	9,393
Reported as:
Current	$	6,751		$	6,438
Noncurrent		2,906			2,955
Total	$	9,657		$	9,393

Note:

⁽¹⁾ The current portion of lease receivables, net, which was $714 million and $626 million as of January 23, 2010 and July 25, 2009, respectively, is recorded in other current assets.

⁽²⁾ The current portion of financed service contracts, net, which was $982 million and $940 million as of January 23, 2010 and July 25, 2009, respectively, is recorded in other current assets. These financed service contracts primarily relate to technical support services, and the associated revenue is deferred and recognized ratably over the period during which the services are to be performed, which is typically from one to three years.

⁽³⁾ The current portion of loan receivables, net, which was $365 million and $236 million as of January 23, 2010 and July 25, 2009, respectively, is recorded in other current assets.

9

SUMMARY OF SHARE-BASED COMPENSATION EXPENSE

(In millions)

	Three Months Ended				Six Months Ended
	January 23, 2010		January 24, 2009		January 23, 2010		January 24, 2009
Cost of sales—product	$	15	$	10	$	27	$	21
Cost of sales—service		41		32		74		63
Share-based compensation expense in cost of sales		56		42		101		84
Research and development		110		95		207		189
Sales and marketing		129		105		242		218
General and administrative		76		56		142		111
Share-based compensation expense in operating expenses		315		256		591		518
Total share-based compensation expense	$	371	$	298	$	692	$	602

The income tax benefit for share-based compensation expense was $100 million and $185 million for the second quarter and first six months of fiscal 2010, respectively, and $78 million and $160 million for the second quarter and first six months of fiscal 2009, respectively.

RECONCILIATION OF SHARES USED IN THE GAAP AND NON-GAAP

DILUTED NET INCOME PER SHARE CALCULATION

(In millions)

	Three Months Ended January 24, 2009	Six Months Ended January 24, 2009
Shares used in diluted net income per share calculation—GAAP	5,864	5,901
Effect of share-based compensation expense	21	18
Shares used in diluted net income per share calculation—Non-GAAP	5,885	5,919

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

RECONCILIATION OF GAAP TO NON-GAAP COST OF SALES

USED IN INVENTORY TURNS

(In millions)

	Three Months Ended
	January 23, 2010			October 24, 2009			January 24, 2009
GAAP cost of sales	$	3,483		$	3,133		$	3,366
Share-based compensation expense		(56	)		(45	)		(42	)
Amortization of acquisition-related intangible assets		(54	)		(44	)		(54	)
Non-GAAP cost of sales	$	3,373		$	3,044		$	3,270

10

EX-99.2

EXHIBIT 99.2

The following is the transcript of a video of the Registrant’s Chief Financial Officer discussing the results of operations for the Registrant’s fiscal second quarter ended January 23, 2010.

Hello, I am Frank Calderoni, Cisco’s Chief Financial Officer.

Today, we announced very strong results for the second quarter of our fiscal year 2010. We exceeded our expectations with $9.8 billion in net sales this quarter representing 8% year over year growth and marking the third quarter of sequentially positive revenue growth.

On a GAAP basis, net income was $1.9 billion or $0.32 per share. On a non-GAAP basis, net income was $2.3 billion and earnings of $0.40 per share. This represents a 25% year over year increase in non-GAAP net income and earnings per share. We are quite pleased with the profitability we continue to return to investors driven by strength across our portfolio.

Today’s results demonstrate the continued successful execution of our strategy with the network becoming the platform for all forms of communications and IT.

We saw continuing good growth in our business validating our portfolio approach in strategically investing in our market adjacencies and core business with an intense focus on profitability and operational execution.

With $39.6 billion in total cash and investments and $2.5 billion in operating cash flow, we exit this quarter with a very compelling financial position and remain very confident in our strategic position in the industry.

Thank you.

February 3, 2010

Q2 Fiscal Year 2010

Frank Calderoni,

Executive Vice President and

Chief Financial Officer

2

GAAP RECONCILIATION

GAAP RECONCILIATION

During this presentation references to financial measures of

Cisco will include references to non-GAAP financial

measures. Cisco provides a reconciliation between GAAP

and non-GAAP at http://investor.cisco.com

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS

This presentation contains projections and other forward-

looking statements regarding future events or the future

financial performance of Cisco, including future operating

results. These projections and statements are only

predictions. Actual events or results may differ materially from

those in the projections or other forward-looking statements.

Please see Cisco’s filings with the SEC, including its most

recent filings on Form 10-K and Form 10-Q, for a discussion

of important risk factors that could cause actual events or

results to differ materially from those in the projections or

other forward-looking statements.

3

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

(In millions, except per-share amounts)

4

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

(In millions, except per-share amounts)

5

This video may be deemed to contain forward-looking

statements, which are subject to the safe harbor provisions of

the Private Securities Litigation Reform Act of 1995. These

forward-looking statements include, among other things,

statements regarding future events (such as the profitability we

continue to return to investors, the continued successful

execution of our strategy, our portfolio approach in strategically

investing in our market adjacencies and core business, and our

strategic position in the industry) and the future financial

performance of Cisco that involve risks and uncertainties. 

Readers are cautioned that these forward-looking statements

are only predictions and may differ materially from actual future

events or results due to a variety of factors, including: business

and economic conditions and growth trends in the networking

industry, our customer markets and various geographic regions;

global economic conditions and uncertainties in the geopolitical

environment; overall information technology spending;

Forward-Looking Statements

6

the growth and evolution of the Internet and levels of capital

spending on Internet-based systems; variations in customer

demand for products and services, including sales to the

service provider market and other customer markets; the

return on our investments in certain market adjacencies and

geographical locations; the timing of orders and manufacturing

and customer lead times; changes in customer order patterns

or customer mix; insufficient, excess or obsolete inventory;

variability of component costs; variations in sales channels,

product costs or mix of products sold; our ability to

successfully acquire businesses and technologies and to

successfully integrate and operate these acquired businesses

and technologies; increased competition in our product and

service markets, including the data center; dependence on the

introduction and market acceptance of new product offerings

and standards; rapid technological and market change;

manufacturing and sourcing risks; product defects and returns;

litigation involving patents, intellectual property, antitrust,

shareholder and other matters, and governmental

investigations; natural catastrophic events; a pandemic or

epidemic; our ability to achieve the benefits anticipated from

our

7

investments in sales and engineering activities; our ability to

recruit and retain key personnel; our ability to manage financial

risk, and to manage expenses during economic downturns; risks

related to the global nature of our operations, including our

operations in emerging markets; currency fluctuations and other

international factors, including relating to transactions to hedge

foreign currency consideration for acquisitions; changes in

provision for income taxes, including changes in tax laws and

regulations or adverse outcomes resulting from examinations of

our income tax returns; potential volatility in operating results; and

other factors listed in Cisco’s most recent reports on Form 10-K

and Form 10-Q. The financial information contained in this video

should be read in conjunction with the consolidated financial

statements and notes thereto included in Cisco’s most recent

reports on Form 10-K and Form 10-Q, as each may be amended

from time to time. Cisco’s results of operations for the three and

six months ended January 23, 2010 are not necessarily indicative

of Cisco’s operating results for any future periods. Any projections

in this video 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 video.

8

For more information on Cisco

and Cisco’s financials, please

visit:

http://investor.cisco.com