16.

Segment Information and Major Customers

The Company designs, manufactures, and sells Internet Protocol (IP)-based networking and other products related to the communications and IT industry and provides services associated with these products and their use. Cisco products include Routers, Switches, New Products, and Other. These products, primarily integrated by Cisco IOS Software, link geographically dispersed local-area networks (LANs), metropolitan-area networks (MANs), and wide-area networks (WANs).

(a) Net Sales and Gross Margin by Segment

The Company conducts business globally and is primarily managed on a geographic basis. In the first quarter of fiscal 2011, in order to achieve operational efficiencies, the Company combined its Asia Pacific and Japan operations. Following this change, the Company is organized into the following four geographic segments: United States and Canada, European Markets, Emerging Markets, and Asia Pacific Markets.

The Company's management makes financial decisions and allocates resources based on the information it receives from its internal management system. Sales are attributed to a geographic segment based on the ordering location of the customer. The Company does not allocate research and development, sales and marketing, or general and administrative expenses to its geographic segments in this internal management system because management does not include the information in its measurement of the performance of the operating segments. In addition, the Company does not allocate amortization of acquisition-related intangible assets, share-based compensation expense, charges related to asset impairments and restructurings, and certain other charges to the gross margin for each segment because management does not include this information in its measurement of the performance of the operating segments.

Summarized financial information by segment for the three and nine months ended April 30, 2011 and May 1, 2010, based on the Company's internal management system and as utilized by the Company's Chief Operating Decision Maker (CODM), is as follows (in millions):


	Three Months Ended						Nine Months Ended
	April 30, 2011			May 1, 2010			April 30, 2011			May 1, 2010
Net sales:
United States and Canada ⁽¹⁾	$	5,785		$	5,555		$	17,209		$	15,869
European Markets		2,227			2,134			6,357			5,895
Emerging Markets		1,271			1,140			3,674			3,107
Asia Pacific Markets		1,583			1,539			4,783			4,333

Total	$	10,866		$	10,368		$	32,023		$	29,204

Gross margin⁽²⁾:
United States and Canada	$	3,683		$	3,596		$	10,919		$	10,316
European Markets		1,452			1,440			4,139			4,008
Emerging Markets		817			714			2,287			1,985
Asia Pacific Markets		989			1,007			2,999			2,867

Segment total		6,941			6,757			20,344			19,176
Unallocated corporate items ⁽³⁾		(282	)		(127	)		(669	)		(326	)

Total	$	6,659		$	6,630		$	19,675		$	18,850

⁽¹⁾	Net sales in the United States were $5.3 billion and $5.2 billion for the three months ended April 30, 2011 and May 1, 2010, respectively, and $16.0 billion and $14.9 billion for the nine months ended April 30, 2011 and May 1, 2010, respectively.

⁽²⁾	Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.

⁽³⁾	The unallocated corporate items include the effects of amortization and impairment of acquisition-related intangible assets, share-based compensation expense, and charges related to asset impairments and restructurings.

(b) Net Sales for Groups of Similar Products and Services

Effective at the end of the first quarter of fiscal 2011, the Company revised the categorization of certain of its products into a category called New Products. The New Products category replaces the prior category of Advanced Technologies and also includes certain products previously classified as Other products. The New Products category consists of products related to collaboration, data center, security, wireless, and video connected home. The Other category now consists primarily of optical networking products and emerging technologies.

The following table presents net sales for groups of similar products and services (in millions):


	Three Months Ended				Nine Months Ended
	April 30, 2011		May 1, 2010		April 30, 2011		May 1, 2010
Net sales ⁽¹⁾:
Routers	$	1,860	$	1,741	$	5,367	$	4,965
Switches		3,299		3,639		9,982		9,871
New Products		3,262		2,832		9,568		8,149
Other		248		224		688		627

Product		8,669		8,436		25,605		23,612
Service		2,197		1,932		6,418		5,592

Total	$	10,866	$	10,368	$	32,023	$	29,204

⁽ ¹⁾	Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.

(c) Additional Segment Information

The majority of the Company's assets, excluding cash and cash equivalents and investments, as of April 30, 2011 and July 31, 2010 were attributable to its U.S. operations. The Company's total cash and cash equivalents and investments held outside of the United States in various foreign subsidiaries was $38.8 billion as of April 30, 2011, and the remaining $4.6 billion was held in the United States. For the three and nine months ended April 30, 2011 and May 1, 2010, no single customer accounted for 10% or more of the Company's net sales.

Property and equipment information is based on the physical location of the assets. The following table presents property and equipment information for geographic areas (in millions):


	April 30, 2011		July 31, 2010
Property and equipment, net:
United States	$	3,385	$	3,283
International		638		658

Total	$	4,023	$	3,941