CSCO » Topics » Service Gross Margin

This excerpt taken from the CSCO 10-K filed Sep 11, 2009.

Service Gross Margin

Fiscal 2009 Compared with Fiscal 2008

Our service gross margin percentage increased in fiscal 2009 compared with fiscal 2008, primarily due to higher margins for both technical support and advanced services, and also due to the mix of service revenue, with advanced services constituting a lower proportion of total service revenue. The higher margins for both technical support and advanced services were attributable primarily to the growth of our service revenue as well as to certain cost-control initiatives that have helped to limit costs. For advanced services, the higher gross margins also benefited from lower costs associated with delays in certain projects.

Our service gross margin normally experiences some fluctuations due to various factors such as the timing of technical support service contract initiations and renewals, our strategic investments in headcount, and resources to support this business. Other factors include the mix of service offerings, as the gross margin from our advanced services is typically lower than the gross margin from technical support services. Our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures, or other reasons, may cause advanced services to increase to a higher proportion of total service revenue.

Fiscal 2008 Compared with Fiscal 2007

Service gross margin percentage decreased slightly in fiscal 2008 compared with fiscal 2007, due primarily to advanced services constituting a higher proportion of total service revenue in fiscal 2008.

This excerpt taken from the CSCO 10-Q filed May 20, 2009.

Service Gross Margin

Our service gross margin percentage increased in the third quarter and the first nine months of fiscal 2009, compared with the corresponding periods of fiscal 2008, primarily due to higher technical support and advanced services margins as well as advanced services constituting a lower proportion of total service revenue. The increased margins for technical support and advanced services were attributable primarily to the growth of our service revenue at the same time as certain cost control initiatives have helped to limit costs. For advanced services gross margins also increased due to delays in certain projects. However, our service gross margin may decline in future periods due to the timing of our strategic investments in headcount and resources to support this business. Service gross margin normally will experience some fluctuations due to various factors such as the timing of technical support service contract initiations and renewals. Also, service gross margin from our advanced services is lower than the service gross margin from technical support services. In future periods, we will experience an unfavorable impact to our service gross margin if revenue from advanced services increases to a higher proportion of total service revenue, as a result of our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures, or for other reasons.

This excerpt taken from the CSCO 10-Q filed Feb 17, 2009.

Service Gross Margin

Our service gross margin percentage increased in the second quarter and the first six months of fiscal 2009 compared with the corresponding periods of fiscal 2008 primarily due to higher technical support and advanced services margins and the fact that advanced services constituted a lower proportion of total service revenue. Technical support margins will experience some variability due to various factors such as the timing of technical support service contract initiations and renewals and the timing of our strategic investments in headcount and resources to support this business. Our service gross margin from technical support services is higher than the service gross margin from our advanced services, and our revenue from advanced services may increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures. Additionally, we have continued to invest in building out our technical support and advanced services capabilities in the Emerging Markets theater.

This excerpt taken from the CSCO 10-Q filed Nov 18, 2008.

Service Gross Margin

Our service gross margin percentage decreased in the first quarter of fiscal 2009 compared with the first quarter of fiscal 2008 primarily due to lower technical support margins and the fact that advanced services constituted a higher proportion of total service revenue. Technical support margins will experience some variability due to various factors such as the timing of technical support service contract initiations and renewals, and the timing of our strategic investments in headcount and resources to support this business. Our service gross margin from technical support services is higher than the service gross margin from our advanced services, and our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures. Additionally, we have continued to invest in building out our technical support and advanced services capabilities in the Emerging Markets theater.

These excerpts taken from the CSCO 10-K filed Sep 15, 2008.

Service Gross Margin

Our service gross margin percentage for fiscal 2007 decreased from fiscal 2006, primarily due to strategic investments in headcount as well as advanced services representing a higher proportion of total service revenue. Additionally, we have continued to invest in building out our technical support and advanced services capabilities in the Emerging Markets theater.

Service Gross Margin

Our service
gross margin percentage decreased slightly in fiscal 2008 compared with fiscal 2007 due primarily to advanced services constituting a higher proportion of total service revenue in fiscal 2008. Our service gross margin from technical support services
is higher than the service gross margin from our advanced services, and our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our
customers’ networking devices, applications, and infrastructures. Additionally, we have continued to invest in building out our technical support and advanced services capabilities in the Emerging Markets theater.

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2008 Annual Report 29









Management’s Discussion and Analysis of Financial Condition and Results of Operations

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This excerpt taken from the CSCO 10-Q filed May 22, 2008.

Service Gross Margin

Our service gross margin percentage decreased slightly in the third quarter and first nine months of fiscal 2008 compared with the corresponding periods of fiscal 2007 due primarily to advanced services. Our service gross margin from technical support services is higher than the service gross margin from our advanced services, and our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures. Additionally, we have continued to invest in building out our technical support and advanced services capabilities in the Emerging Markets theater. Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our strategic investments in headcount and resources to support this business.

 

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This excerpt taken from the CSCO 10-Q filed Feb 19, 2008.

Service Gross Margin

Our service gross margin percentage decreased slightly in the second quarter and first six months of fiscal 2008 compared with the corresponding periods of fiscal 2007 due primarily to advanced services. Our service gross margin from technical support services is higher than the service gross margin from our advanced services, and our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures. Additionally, we have continued to invest in building out our technical support and advanced services capabilities in the Emerging Markets theater. Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our strategic investments in headcount and resources to support this business.

This excerpt taken from the CSCO 10-Q filed Nov 20, 2007.

Service Gross Margin

Our service gross margin percentage was flat in the first quarter of fiscal 2008 compared with the first quarter of fiscal 2007. Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our strategic investments in headcount and resources to support this business. Our service gross margin from technical support services is higher than the service gross margin from our advanced services, and our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures. Additionally, we have continued to invest in building out our technical support and advanced services capabilities in the Emerging Markets theater.

This excerpt taken from the CSCO 10-K filed Sep 18, 2007.

Service Gross Margin

Service gross margin for fiscal 2006 included the effect of employee share-based compensation expense under SFAS 123(R), which reduced service gross margin percentage by approximately 2.5% compared with fiscal 2005. Our service gross margin benefited from higher revenue on a relatively stable cost base.

 

34 Cisco Systems, Inc.


Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This excerpt taken from the CSCO 10-Q filed May 24, 2007.

Service Gross Margin

Our service gross margin percentage in the third quarter and first nine months of fiscal 2007 decreased from the corresponding periods of fiscal 2006, primarily due to strategic investments in headcount as well as advanced services representing a higher proportion of service revenue. Additionally, we have continued to invest in building out our technical support and advanced services capabilities in the Emerging Markets theater.

Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our adding personnel and resources to support this business. Our service gross margin from technical support services is higher than the service gross margin from our advanced services and our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures.

 

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This excerpt taken from the CSCO 10-Q filed Feb 20, 2007.

Service Gross Margin

Our service gross margin percentage in the second quarter and first six months of fiscal 2007 decreased from the corresponding periods of fiscal 2006, primarily due to strategic investments in headcount as well as advanced services representing a higher proportion of service revenue in the second quarter and first six months of fiscal 2007 compared with the corresponding periods of fiscal 2006. Additionally, we have continued to invest in building out our technical support and advance services capabilities in the Emerging Markets theater.

Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our adding personnel and resources to support this business. Our service gross margin from technical support services is higher than the service gross margin from our advanced services and our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures.

This excerpt taken from the CSCO 10-Q filed Nov 21, 2006.

Service Gross Margin

Our service gross margin percentage benefited from lower employee share-based compensation expense. Service gross margin will typically experience some variability over time due to various factors such as

 

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the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our adding personnel and resources to support this business. Our service gross margin from technical support services is higher than the service gross margin from our advanced services and our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures.

This excerpt taken from the CSCO 10-K filed Sep 18, 2006.

Service Gross Margin

Service gross margin percentage decreased by 1.8% compared to fiscal 2004. The decrease in service gross margin percentage was primarily due to increased investments in the service portion of our business during fiscal 2005. One specific area of investment is advanced services, comprising highly specialized employees. As we add personnel and resources to support growth in this business, our service margins will typically be adversely affected in the near term. We also added investments in our technical support business during fiscal 2005.

This excerpt taken from the CSCO 10-Q filed May 25, 2006.

Service Gross Margin

Service gross margin during the third quarter and first nine months of fiscal 2006 includes the effect on our service costs of sales of $28 million and $90 million, respectively, of stock-based compensation expense related to employee stock options and employee stock purchases under SFAS 123(R), which reduced service gross margin percentage by 2.4% and 2.7% during the respective periods. There was no stock-based compensation expense related to employee stock options and employee stock purchases in the corresponding periods of fiscal 2005. Our service gross margins benefited from higher revenue on a relatively stable cost base. Our service gross margin from technical support services is higher than the service gross margins from our advanced services. Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our adding personnel and resources to support this business. Our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures.

 

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This excerpt taken from the CSCO 10-Q filed Feb 21, 2006.

Service Gross Margin

 

Service gross margin during the second quarter and first six months of fiscal 2006 includes the effect on our service costs of sales of $28 million and $62 million, respectively, of stock-based compensation expense related to employee stock options and employee stock purchases under SFAS 123(R) which reduced service gross margin percentage by 2.6% and 2.9% during the respective periods. There was no stock-based compensation expense related to employee stock options and employee stock purchases in the corresponding periods of fiscal 2005. Our service gross margin from technical support services is higher than the service gross margins from our advanced services. Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our adding personnel and resources to support this business. Our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures.

 

This excerpt taken from the CSCO 8-K filed Feb 10, 2006.

Service Gross Margin

 

Service gross margin decreased by 1.3% but increased $80 million in absolute dollars. Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals.

 

This excerpt taken from the CSCO 10-Q filed Nov 23, 2005.

Service Gross Margin

 

Service gross margin includes the effect on our service cost of sales of $34 million of stock-based compensation expense related to employee stock options and employee stock purchases under SFAS 123(R) which reduced service gross margin percentage by 3.2%. There was no stock-based compensation expense related to employee stock options and employee stock purchases in the first quarter of fiscal 2005. Our service gross margin from technical support services is higher than the service gross margins from our advanced services. Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our adding personnel and resources to support this business. Our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures.

 

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

This excerpt taken from the CSCO 10-K filed Sep 19, 2005.

Service Gross Margin

 

Service gross margin decreased by 1.3% but increased $80 million in absolute dollars. Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals.

 

This excerpt taken from the CSCO 10-Q filed May 27, 2005.

Service Gross Margin

 

Service gross margin percentage decreased by 1.8% and 1.6% during the third quarter and first nine months of fiscal 2005, compared with the third quarter and nine months of fiscal 2004, respectively. The decrease in service gross margin was primarily due to increased investments in the service portion of our business during fiscal 2005. One specific area of investment is advanced services, comprising highly specialized employees. As we add personnel and resources to support growth in this business, our service margins will typically be adversely affected in the near term. We have also added investments in our technical support business.

 

Our service gross margin from technical support services is higher than service gross margin from our advanced services. Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our adding personnel and resources to support this business. Our revenue from advanced services may continue to increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures.

 

This excerpt taken from the CSCO 10-Q filed Feb 22, 2005.

Service Gross Margin

 

Service gross margin decreased by 3.2% and 1.4% during the second quarter and first six months of fiscal 2005, compared with the second quarter and first six months of fiscal 2004, respectively. The decrease in service gross margin was primarily due to increased investments in this portion of our business during fiscal 2005. One specific area of investment is advanced services, comprising highly specialized employees. As we add personnel and resources to support growth in this business, our service margins will typically be adversely affected in the near term. We have also added investments in our technical support business.

 

Our service gross margin from technical support services is higher than service gross margin from our advanced services. Service gross margin will typically experience some variability over time due to various factors such as the change in mix between technical support services and advanced services, as well as the timing of technical support service contract initiations and renewals and the timing of our adding personnel and resources to support this business. Our revenue from advanced services may increase to a higher proportion of total service revenue due to our continued focus on providing comprehensive support to our customers’ networking devices, applications, and infrastructures.

 

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