Cisco Reports Fourth Quarter and Fiscal Year 2014 Earnings

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

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

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

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

Q4 GAAP Results
	Q4 2014			Q4 2013			Vs. Q4 2013
Revenue		$12.4 billion			$12.4 billion		(0.5	)%
Net Income		$2.2 billion			$2.3 billion		(1.0	)%
Earnings per Share	$	0.43		$	0.42		2.4	%

Q4 Non-GAAP Results
	Q4 2014			Q4 2013			Vs. Q4 2013
Net Income		$2.8 billion			$2.8 billion		(0.4	)%
Earnings per Share	$	0.55		$	0.52		5.8	%

Fiscal Year GAAP Results
	FY 2014			FY 2013			Vs. FY 2013
Revenue		$47.1 billion			$48.6 billion		(3.0	)%
Net Income		$7.9 billion			$10.0 billion		(21.3	)%
Earnings per Share	$	1.49		$	1.86		(19.9	)%

Fiscal Year Non-GAAP Results
	FY 2014			FY 2013			Vs. FY 2013
Net Income		$10.9 billion			$10.9 billion		--	%
Earnings per Share	$	2.06		$	2.02		2.0	%

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

Cisco will discuss fourth quarter and fiscal year 2014 results and business outlook on a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.

Cash and Cash Equivalents and Investments

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

Dividends and Stock Repurchase Program

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

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

Internet of Everything

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

Fast IT

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

Innovation

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

Editor's Notes:

• The Q4 and fiscal year 2014 conference call to discuss Cisco's results along with its business outlook will be held on Wednesday, August 13, 2014 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).
• Conference call replay will be available from 4:00 p.m. Pacific Time, August 13, 2014 to 11:59 p.m. Pacific Time, on September 1, 2014 at 1-888-403-4665 (United States) or 1-203-369-3148 (international). The replay will also be available via webcast from August 13, 2014 through October 17, 2014 on the Cisco Investor Relations website at http://investor.cisco.com.
• Additional information regarding Cisco's financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, August 13, 2014. Text of the conference call's prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with GAAP reconciliation information, will be available on the Cisco Investor Relations website at http://investor.cisco.com.
  
  

About Cisco

Cisco (NASDAQ: CSCO) is the worldwide leader in IT that helps companies seize the opportunities of tomorrow by proving that amazing things can happen when you connect the previously unconnected. For ongoing news, please go to http://thenetwork.cisco.com.

This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our focus on growth, innovation and talent, especially in the areas of security, data center, software, cloud and IoE; our strategy and market leadership; our ability to help customers solve their biggest business problems; and our ability to deliver value to shareholders through our capital allocation strategy and our continued investment in long-term growth opportunities) and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the return on our investments in certain priorities, including our foundational priorities, and in certain geographical locations; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; our ability to achieve expected benefits of our partnerships; increased competition in our product and service markets, including the data center; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters, and governmental investigations; natural catastrophic events; a pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco's most recent reports on Forms 10-Q and 10-K filed on May 22, 2014 and September 10, 2013, respectively. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent reports on Forms 10-Q and 10-K as each may be amended from time to time. Cisco's results of operations for the three months and the year ended July 26, 2014 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

This release includes non-GAAP net income, non-GAAP effective tax rates, non-GAAP net income per share data, non-GAAP inventory turns and free cash flow.

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

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

For its internal budgeting process, Cisco's management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, impact to cost of sales from purchase accounting adjustments to inventory, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation and other contingencies (such as the supplier component remediation charge in the second quarter of fiscal 2014 and the patent litigation settlement with TiVo, Inc. incurred in the fourth quarter of fiscal 2013), the income tax effects of the foregoing, and significant tax matters. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future there may be other items that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results. For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

Copyright © 2014 Cisco and/or its affiliates. All rights reserved. Cisco, the Cisco logo, Cisco Nexus, Cisco Visual Networking Index and Smart+Connected Communities are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. To view a list of Cisco trademarks, go to: www.cisco.com/go/trademarks. Third-party trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
				Three Months Ended								Fiscal Year Ended
				July 26, 2014				July 27, 2013				July 26, 2014				July 27, 2013
REVENUE:
		Product		$	9,532			$	9,736			$	36,172			$	38,029
		Service			2,825				2,681				10,970				10,578
			Total revenue		12,357				12,417				47,142				48,607
COST OF SALES:
		Product			3,976				4,154				15,641				15,541
		Service			976				916				3,732				3,626
			Total cost of sales		4,952				5,070				19,373				19,167
GROSS MARGIN					7,405				7,347				27,769				29,440
OPERATING EXPENSES:
		Research and development			1,593				1,517				6,294				5,942
		Sales and marketing			2,473				2,360				9,503				9,538
		General and administrative			508				590				1,934				2,264
		Amortization of purchased intangible assets			68				66				275				395
		Restructuring and other charges			82				--				418				105
			Total operating expenses		4,724				4,533				18,424				18,244
OPERATING INCOME					2,681				2,814				9,345				11,196
		Interest income			183				171				691				654
		Interest expense			(142	)			(143	)			(564	)			(583	)
		Other income (loss), net			56				29				243				(40	)
			Interest and other income (loss), net		97				57				370				31
INCOME BEFORE PROVISION FOR INCOME TAXES					2,778				2,871				9,715				11,227
Provision for income taxes					531				601				1,862				1,244
		NET INCOME		$	2,247			$	2,270			$	7,853			$	9,983
Net income per share:
	Basic			$	0.44			$	0.42			$	1.50			$	1.87
	Diluted			$	0.43			$	0.42			$	1.49			$	1.86
Shares used in per-share calculation:
	Basic				5,121				5,367				5,234				5,329
	Diluted				5,172				5,437				5,281				5,380
Cash dividends declared per common share				$	0.19			$	0.17			$	0.72			$	0.62

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)
			Three Months Ended								Fiscal Year Ended
			July 26, 2014				July 27, 2013				July 26, 2014				July 27, 2013
GAAP net income			$	2,247			$	2,270			$	7,853			$	9,983
	Adjustments to cost of sales:
		Share-based compensation expense		49				42				195				178
		Amortization of acquisition-related intangible assets		180				153				710				569
		Supplier component remediation charge		--				--				655				--
		Impact to cost of sales from purchase accounting adjustments to inventory		--				--				--				40
		TiVo patent litigation settlement		--				172				--				172
		Acquisition-related/divestiture costs		1				1				2				1
	Total adjustments to GAAP cost of sales			230				368				1,562				960
	Adjustments to operating expenses:
		Share-based compensation expense		291				198				1,158				947
		Amortization of acquisition-related intangible assets		68				66				275				395
		Acquisition-related/divestiture costs		102				59				585				129
		Significant asset impairments and restructurings		82				--				418				55
	Total adjustments to GAAP operating expenses			543				323				2,436				1,526
	Total adjustments to GAAP income before provision for income taxes			773				691				3,998				2,486
	Income tax effect of non-GAAP adjustments			(185	)			(114	)			(834	)			(620	)
	Significant tax matters			--				--				(154	)			(983	)
	Total adjustments to GAAP provision for income taxes			(185	)			(114	)			(988	)			(1,603	)
Non-GAAP net income			$	2,835			$	2,847			$	10,863			$	10,866
Diluted net income per share:
GAAP			$	0.43			$	0.42			$	1.49			$	1.86
Non-GAAP			$	0.55			$	0.52			$	2.06			$	2.02

RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE TAX RATE
	Three Months Ended				Fiscal Year Ended
	July 26, 2014		July 27, 2013		July 26, 2014		July 27, 2013
GAAP effective tax rate	19.1%		20.9%		19.2%		11.1%
Tax effect of non-GAAP adjustments to net income	1.1%		(0.8)%		1.6%		9.7%
Non-GAAP effective tax rate	20.2%		20.1%		20.8%		20.8%

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
			July 26, 2014			July 27, 2013
ASSETS
Current assets:
	Cash and cash equivalents		$	6,726		$	7,925
	Investments			45,348			42,685
	Accounts receivable, net of allowance for doubtful accounts of $265 at July 26, 2014 and $228 at July 27, 2013			5,157			5,470
	Inventories			1,591			1,476
	Financing receivables, net			4,153			4,037
	Deferred tax assets			2,808			2,616
	Other current assets			1,331			1,312
		Total current assets		67,114			65,521
Property and equipment, net				3,252			3,322
Financing receivables, net				3,918			3,911
Goodwill				24,239			21,919
Purchased intangible assets, net				3,280			3,403
Other assets				3,331			3,115
TOTAL ASSETS			$	105,134		$	101,191
LIABILITIES AND EQUITY
Current liabilities:
	Short-term debt		$	508		$	3,283
	Accounts payable			1,032			1,029
	Income taxes payable			159			192
	Accrued compensation			3,181			3,182
	Deferred revenue			9,478			9,262
	Other current liabilities			5,451			5,048
		Total current liabilities		19,809			21,996
Long-term debt				20,401			12,928
Income taxes payable				1,851			1,748
Deferred revenue				4,664			4,161
Other long-term liabilities				1,748			1,230
Total liabilities				48,473			42,063
Total equity				56,661			59,128
TOTAL LIABILITIES AND EQUITY			$	105,134		$	101,191

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
					Fiscal Year Ended
					July 26, 2014				July 27, 2013
Cash flows from operating activities:
	Net income				$	7,853			$	9,983
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation, amortization, and other				2,432				2,451
		Share-based compensation expense				1,348				1,120
		Provision for receivables				79				44
		Deferred income taxes				(678	)			(37	)
		Excess tax benefits from share-based compensation				(118	)			(92	)
		(Gains) losses on investments and other, net				(299	)			(91	)
		Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
			Accounts receivable			340				(1,001	)
			Inventories			(109	)			218
			Financing receivables			(119	)			(723	)
			Other assets			33				(27	)
			Accounts payable			(23	)			164
			Income taxes, net			191				(239	)
			Accrued compensation			(42	)			134
			Deferred revenue			659				598
			Other liabilities			785				392
				Net cash provided by operating activities		12,332				12,894
Cash flows from investing activities:
	Purchases of investments					(36,317	)			(36,608	)
	Proceeds from sales of investments					18,193				14,799
	Proceeds from maturities of investments					15,660				17,909
	Acquisition of businesses, net of cash and cash equivalents acquired					(2,989	)			(6,766	)
	Purchases of investments in privately held companies					(384	)			(225	)
	Return of investments in privately held companies					213				209
	Acquisition of property and equipment					(1,275	)			(1,160	)
	Proceeds from sales of property and equipment					232				141
	Other					24				(67	)
				Net cash used in investing activities		(6,643	)			(11,768	)
Cash flows from financing activities:
	Issuances of common stock					1,907				3,338
	Repurchases of common stock - repurchase program					(9,413	)			(2,773	)
	Shares repurchased for tax withholdings on vesting of restricted stock units					(430	)			(330	)
	Short-term borrowings, original maturities less than 90 days, net					(2	)			(20	)
	Issuances of debt					8,001				24
	Repayments of debt					(3,276	)			(16	)
	Excess tax benefits from share-based compensation					118				92
	Dividends paid					(3,758	)			(3,310	)
	Other					(35	)			(5	)
				Net cash used in financing activities		(6,888	)			(3,000	)
Net decrease in cash and cash equivalents						(1,199	)			(1,874	)
Cash and cash equivalents, beginning of fiscal year						7,925				9,799
Cash and cash equivalents, end of fiscal year					$	6,726			$	7,925
Supplemental cash flow information:
Cash paid for interest					$	682			$	682
Cash paid for income taxes, net					$	2,349			$	1,519

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

CASH AND CASH EQUIVALENTS AND INVESTMENTS
(In millions)
				July 26, 2014			July 27, 2013
Cash and cash equivalents and investments:
	Cash and cash equivalents			$	6,726		$	7,925
	Fixed income securities				43,396			39,888
	Publicly traded equity securities				1,952			2,797
			Total	$	52,074		$	50,610

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW (NON-GAAP)
(In millions)
		Three Months Ended
		July 26, 2014				April 26, 2014				July 27, 2013
Net cash provided by operating activities		$	3,612			$	3,198			$	3,986
Acquisition of property and equipment			(325	)			(373	)			(317	)
Free cash flow		$	3,287			$	2,825			$	3,669

DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK
(In millions, except per-share amounts)
				DIVIDENDS						STOCK REPURCHASE PROGRAM								TOTAL
Quarter Ended				Per Share			Amount			Shares		Weighted-Average Price per Share			Amount			Amount
Fiscal 2014
	July 26, 2014			$	0.19		$	974		61		$	25.11		$	1,514		$	2,488
	April 26, 2014				0.19			974		90		$	22.24			2,005			2,979
	January 25, 2014				0.17			896		185		$	21.73			4,020			4,916
	October 26, 2013				0.17			914		84		$	23.65			2,000			2,914
			Total	$	0.72		$	3,758		420		$	22.71		$	9,539		$	13,297
Fiscal 2013
	July 27, 2013			$	0.17		$	918		47		$	24.80		$	1,160		$	2,078
	April 27, 2013				0.17			905		41		$	20.85			860			1,765
	January 26, 2013				0.14			743		25		$	20.15			500			1,243
	October 27, 2012				0.14			744		15		$	16.44			253			997
			Total	$	0.62		$	3,310		128		$	21.63		$	2,773		$	6,083

ACCOUNTS RECEIVABLE AND DSO
(In millions, except DSO)
	July 26, 2014			April 26, 2014			July 27, 2013
Accounts receivable, net	$	5,157		$	4,443		$	5,470
Days sales outstanding in accounts receivable (DSO)		38			35			40

INVENTORIES
(In millions)
				July 26, 2014			April 26, 2014			July 27, 2013
Inventories:
	Raw materials			$	77		$	57		$	105
	Work in process				5			5			24
	Finished goods:
		Distributor inventory and deferred cost of sales			595			623			572
		Manufactured finished goods			606			550			480
			Total finished goods		1,201			1,173			1,052
	Service-related spares				273			255			256
	Demonstration systems				35			38			39
			Total	$	1,591		$	1,528		$	1,476

INVENTORY TURNS AND RECONCILIATION OF GAAP TO NON-GAAP
COST OF SALES USED IN INVENTORY TURNS
(In millions, except annualized inventory turns)
			Three Months Ended
			July 26, 2014				April 26, 2014				July 27, 2013
Annualized inventory turns - GAAP				12.7				11.8				13.8
	Cost of sales adjustments			(0.6	)			(0.6	)			(1.0	)
Annualized inventory turns - non-GAAP				12.1				11.2				12.8
GAAP cost of sales			$	4,952			$	4,539			$	5,070
Cost of sales adjustments:
		Share-based compensation expense		(49	)			(51	)			(42	)
		Amortization of acquisition-related intangible assets		(180	)			(181	)			(153	)
		TiVo patent litigation settlement		--				--				(172	)
		Acquisition-related/divestiture costs		(1	)			(1	)			(1	)
Non-GAAP cost of sales			$	4,722			$	4,306			$	4,702

DEFERRED REVENUE
(In millions)
				July 26, 2014			April 26, 2014			July 27, 2013
Deferred revenue:
	Service			$	9,640		$	8,746		$	9,403
	Product:
		Unrecognized revenue on product shipments and other deferred revenue			3,924			3,669			3,340
		Cash receipts related to unrecognized revenue from two-tier distributors			578			736			680
		Total product deferred revenue			4,502			4,405			4,020
			Total	$	14,142		$	13,151		$	13,423
Reported as:
	Current			$	9,478		$	9,198		$	9,262
	Noncurrent				4,664			3,953			4,161
			Total	$	14,142		$	13,151		$	13,423

SUMMARY OF SHARE-BASED COMPENSATION EXPENSE
(In millions)
		Three Months Ended							Fiscal Year Ended
		July 26, 2014				July 27, 2013			July 26, 2014				July 27, 2013
Cost of sales - product		$	11			$	9		$	45			$	40
Cost of sales - service			38				33			150				138
	Share-based compensation expense in cost of sales		49				42			195				178
Research and development			105				58			411				286
Sales and marketing			141				101			549				484
General and administrative			45				39			198				175
Restructuring and other charges			(1	)			--			(5	)			(3	)
	Share-based compensation expense in operating expenses		290				198			1,153				942
	Total share-based compensation expense	$	339			$	240		$	1,348			$	1,120
Income tax benefit for share-based compensation		$	78			$	53		$	324			$	285