CISCO SYSTEMS, INC., 8-K filed on 3/9/2011
Current report filing
Document and Entity Information
Year Ended
Jul. 31, 2010
Document and Entity Information
 
Document Type
8-K 
Amendment Flag
FALSE 
Document Period End Date
2011-03-09 
Trading Symbol
CSCO 
Entity Registrant Name
CISCO SYSTEMS INC 
Entity Central Index Key
0000858877 
Consolidated Balance Sheets (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Current assets:
 
 
Cash and cash equivalents
$ 4,581 
$ 5,718 
Investments
35,280 
29,283 
Accounts receivable, net of allowance for doubtful accounts of $235 at July 31, 2010 and $216 at July 25, 2009
4,929 
3,177 
Inventories
1,327 
1,074 
Deferred tax assets
2,126 
2,320 
Other current assets
3,178 
2,605 
Total current assets
51,421 
44,177 
Property and equipment, net
3,941 
4,043 
Goodwill
16,674 
12,925 
Purchased intangible assets, net
3,274 
1,702 
Other assets
5,820 
5,281 
TOTAL ASSETS
81,130 
68,128 
Current liabilities:
 
 
Short-term debt
3,096 
 
Accounts payable
895 
675 
Income taxes payable
90 
166 
Accrued compensation
3,129 
2,535 
Deferred revenue
7,664 
6,438 
Other current liabilities
4,359 
3,841 
Total current liabilities
19,233 
13,655 
Long-term debt
12,188 
10,295 
Income taxes payable
1,353 
2,007 
Deferred revenue
3,419 
2,955 
Other long-term liabilities
652 
539 
Total liabilities
36,845 
29,451 
Commitments and contingencies (Note 11)
 
 
Cisco shareholders' equity:
 
 
Preferred stock, no par value: 5 shares authorized; none issued and outstanding
 
 
Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 5,655 and 5,785 shares issued and outstanding at July 31, 2010 and July 25, 2009, respectively
37,793 
34,344 
Retained earnings
5,851 
3,868 
Accumulated other comprehensive income
623 
435 
Total Cisco shareholders' equity
44,267 
38,647 
Noncontrolling interests
18 
30 
Total equity
44,285 
38,677 
TOTAL LIABILITIES AND EQUITY
$ 81,130 
$ 68,128 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Per Share data
Jul. 31, 2010
Jul. 25, 2009
Consolidated Balance Sheets
 
 
Accounts receivable, allowance for doubtful accounts
$ 235 
$ 216 
Preferred stock, par value
Preferred stock, shares authorized
Preferred stock, issued
Preferred stock, outstanding
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
20,000 
20,000 
Common stock, shares issued
5,655 
5,785 
Common stock, shares outstanding
5,655 
5,785 
Consolidated Statements of Operations (USD $)
In Millions, except Per Share data
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
NET SALES:
 
 
 
Product
$ 32,420 
$ 29,131 
$ 33,099 
Service
7,620 
6,986 
6,441 
Total net sales
40,040 
36,117 
39,540 
COST OF SALES:
 
 
 
Product
11,620 
10,481 
11,660 
Service
2,777 
2,542 
2,534 
Total cost of sales
14,397 
13,023 
14,194 
GROSS MARGIN
25,643 
23,094 
25,346 
OPERATING EXPENSES:
 
 
 
Research and development
5,273 
5,208 
5,325 
Sales and marketing
8,716 
8,403 
8,690 
General and administrative
1,999 
1,565 
1,387 
Amortization of purchased intangible assets
491 
533 
499 
In-process research and development
 
63 
Total operating expenses
16,479 
15,772 
15,904 
OPERATING INCOME
9,164 
7,322 
9,442 
Interest income
635 
845 
1,143 
Interest expense
(623)
(346)
(319)
Other income (loss), net
239 
(128)
(11)
Interest and other income, net
251 
371 
813 
INCOME BEFORE PROVISION FOR INCOME TAXES
9,415 
7,693 
10,255 
Provision for income taxes
1,648 
1,559 
2,203 
NET INCOME
7,767 
6,134 
8,052 
Net income per share-basic
1.36 
1.05 
1.35 
Net income per share-diluted
$ 1.33 
$ 1.05 
$ 1.31 
Shares used in per-share calculation-basic
5,732 
5,828 
5,986 
Shares used in per-share calculation-diluted
5,848 
5,857 
6,163 
Consolidated Statements of Cash Flows (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Cash flows from operating activities:
 
 
 
Net income
$ 7,767 
$ 6,134 
$ 8,052 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and other noncash items
2,030 
1,768 
1,744 
Share-based compensation expense
1,517 
1,231 
1,112 
Provision for doubtful accounts
44 
54 
34 
Deferred income taxes
(477)
(574)
(772)
Excess tax benefits from share-based compensation
(211)
(22)
(413)
In-process research and development
 
63 
Net (gains) losses on investments
(223)
80 
(103)
Change in operating assets and liabilities, net of effects of acquisitions:
 
 
 
Accounts receivable
(1,528)
610 
171 
Inventories
(158)
187 
104 
Lease receivables, net
(387)
(222)
(488)
Accounts payable
139 
(208)
62 
Income taxes payable
55 
768 
178 
Accrued compensation
565 
175 
351 
Deferred revenue
1,531 
572 
1,812 
Other assets
(639)
(780)
(361)
Other liabilities
148 
61 
603 
Net cash provided by operating activities
10,173 
9,897 
12,089 
Cash flows from investing activities:
 
 
 
Purchases of investments
(48,690)
(41,225)
(22,399)
Proceeds from sales of investments
19,300 
20,473 
16,086 
Proceeds from maturities of investments
23,697 
12,352 
3,904 
Acquisition of property and equipment
(1,008)
(1,005)
(1,268)
Acquisition of businesses, net of cash and cash equivalents acquired
(5,279)
(426)
(398)
Change in investments in privately held companies
(79)
(89)
(101)
Other
128 
(39)
(17)
Net cash used in investing activities
(11,931)
(9,959)
(4,193)
Cash flows from financing activities:
 
 
 
Issuance of common stock
3,278 
863 
3,117 
Repurchase of common stock
(7,864)
(3,611)
(10,441)
Issuance of long-term debt
4,944 
3,991 
 
Short-term borrowings, net
41 
 
 
Repayment of long-term debt
 
(500)
 
Settlements of interest rate derivatives related to long-term debt
23 
(42)
432 
Excess tax benefits from share-based compensation
211 
22 
413 
Other
(12)
(134)
46 
Net cash provided by (used in) financing activities
621 
589 
(6,433)
Net (decrease) increase in cash and cash equivalents
(1,137)
527 
1,463 
Cash and cash equivalents, beginning of fiscal year
5,718 
5,191 
3,728 
Cash and cash equivalents, end of fiscal year
4,581 
5,718 
5,191 
Cash paid for:
 
 
 
Interest
692 
333 
366 
Income taxes
$ 2,068 
$ 1,364 
$ 2,787 
Consolidated Statements of Equity
In Millions
Shares of Common Stock [Member]
Common Stock and Additional Paid-In Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income [Member]
Total Cisco Shareholders' Equity [Member]
Noncontrolling Interests [Member]
Total
BALANCE, Shares at Jul. 28, 2007 (Scenario, Previously Reported [Member])
6,100 
 
 
 
 
 
 
BALANCE, Value at Jul. 28, 2007 (Scenario, Previously Reported [Member])
 
30,687 
231 
562 
31,480 
10 
31,490 
Cumulative effect of adoption of accounting standard - uncertain tax positions (Scenario, Adjustment [Member])
 
249 
202 
 
451 
 
451 
BALANCE, Shares at Jul. 28, 2007
6,100 
 
 
 
 
 
 
BALANCE, Value at Jul. 28, 2007
 
30,936 
433 
562 
31,931 
10 
31,941 
Net income
 
 
8,052 
 
8,052 
 
8,052 
Change in:
 
 
 
 
 
 
 
Unrealized gains and losses on investments
 
 
 
(61)
(61)
39 
(22)
Cumulative translation adjustment and other
 
 
 
227 
227 
 
227 
Comprehensive income (loss)
 
 
 
 
8,218 
39 
8,257 
Issuance of common stock, Shares
165 
 
 
 
 
 
 
Issuance of common stock, Value
 
3,117 
 
 
3,117 
 
3,117 
Repurchase of common stock, Shares
(372)
 
 
 
 
 
 
Repurchase of common stock, Value
 
(2,015)
(8,365)
 
(10,380)
 
(10,380)
Tax benefits from employee stock incentive plans, including transfer pricing adjustments
 
346 
 
 
346 
 
346 
Purchase acquisitions, Value
 
 
 
 
Share-based compensation expense
 
1,112 
 
 
1,112 
 
1,112 
BALANCE, Shares at Jul. 26, 2008
5,893 
 
 
 
 
 
 
BALANCE, Value at Jul. 26, 2008
 
33,505 
120 
728 
34,353 
49 
34,402 
Net income
 
 
6,134 
 
6,134 
 
6,134 
Change in:
 
 
 
 
 
 
 
Unrealized gains and losses on investments
 
 
 
(19)
(19)
(19)
(38)
Derivative instruments
 
 
 
(33)
(33)
 
(33)
Cumulative translation adjustment and other
 
 
 
(192)
(192)
 
(192)
Comprehensive income (loss)
 
 
 
 
5,890 
(19)
5,871 
Cumulative effect of adoption of accounting standard - other-than-temporary impairments of debt securities
 
 
49 
(49)
 
 
49 
Issuance of common stock, Shares
67 
 
 
 
 
 
 
Issuance of common stock, Value
 
863 
 
 
863 
 
863 
Repurchase of common stock, Shares
(202)
 
 
 
 
 
 
Repurchase of common stock, Value
 
(1,188)
(2,435)
 
(3,623)
 
(3,623)
Tax benefits from employee stock incentive plans, including transfer pricing adjustments
 
(582)
 
 
(582)
 
(582)
Purchase acquisitions, Shares
27 
 
 
 
 
 
 
Purchase acquisitions, Value
 
515 
 
 
515 
 
515 
Share-based compensation expense
 
1,231 
 
 
1,231 
 
1,231 
BALANCE, Shares at Jul. 25, 2009
5,785 
 
 
 
 
 
 
BALANCE, Value at Jul. 25, 2009
 
34,344 
3,868 
435 
38,647 
30 
38,677 
Net income
 
 
7,767 
 
7,767 
 
7,767 
Change in:
 
 
 
 
 
 
 
Unrealized gains and losses on investments
 
 
 
195 
195 
(12)
183 
Derivative instruments
 
 
 
48 
48 
 
48 
Cumulative translation adjustment and other
 
 
 
(55)
(55)
 
(55)
Comprehensive income (loss)
 
 
 
 
7,955 
(12)
7,943 
Issuance of common stock, Shares
201 
 
 
 
 
 
 
Issuance of common stock, Value
 
3,278 
 
 
3,278 
 
3,278 
Repurchase of common stock, Shares
(331)
 
 
 
 
 
 
Repurchase of common stock, Value
 
(2,148)
(5,784)
 
(7,932)
 
(7,932)
Tax benefits from employee stock incentive plans, including transfer pricing adjustments
 
719 
 
 
719 
 
719 
Purchase acquisitions, Value
 
83 
 
 
83 
 
83 
Share-based compensation expense
 
1,517 
 
 
1,517 
 
1,517 
BALANCE, Shares at Jul. 31, 2010
5,655 
 
 
 
 
 
 
BALANCE, Value at Jul. 31, 2010
 
37,793 
5,851 
623 
44,267 
18 
44,285 
Consolidated Statements of Equity Supplemental Information
Supplemental Information

Supplemental Information

In September 2001, the Company's Board of Directors authorized a stock repurchase program. As of July 31, 2010, the Company's Board of Directors had authorized an aggregate repurchase of up to $72 billion of common stock under this program with no termination date. For additional information regarding stock repurchases, see Note 12 to the Consolidated Financial Statements. The stock repurchases since the inception of this program and the related impacts on Cisco shareholders' equity are summarized in the following table (in millions):

 

     Shares of
Common
Stock
     Common Stock
and Additional
Paid-In Capital
     Retained
Earnings
     Total Cisco
Shareholders'
Equity
 

Repurchases of common stock under the repurchase program

           $       $          $   

 

Basis of Presentation
Basis of Presentation

1. Basis of Presentation

The fiscal year for Cisco Systems, Inc. (the "Company" or "Cisco") is the 52 or 53 weeks ending on the last Saturday in July. Fiscal 2010 was a 53-week fiscal year, while fiscal 2009 and 2008 were 52-week fiscal years. The Consolidated Financial Statements include the accounts of Cisco and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. 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. Prior to this change, there were five geographic theaters: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. The Company has reclassified the applicable geographic segment data for the periods presented in order to conform to this change. The Emerging Markets theater remains unchanged and includes Eastern Europe, Latin America, the Middle East and Africa, and Russia and the Commonwealth of Independent States.

The Company consolidates its investment in a venture fund managed by SOFTBANK Corp. and its affiliates ("SOFTBANK") as the Company is the primary beneficiary. The noncontrolling interests attributed to SOFTBANK are presented as a separate component from the Company's equity in the equity section of the Consolidated Balance Sheets. SOFTBANK's share of the earnings in the venture fund is not presented separately in the Consolidated Statements of Operations and is included in other income (loss), net, as this amount is not material for any of the fiscal years presented.

Certain other reclassifications have been made to amounts presented in order to conform to changes that have been made to certain other items effective in the first quarter of fiscal 2011, such as the presentation of net sales for similar groups of products, and gross margin by geographic segment. The Company has evaluated subsequent events through the date that the financial statements were issued.

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

(a) Cash and Cash Equivalents  The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions.

(b) Available-for-Sale Investments  The Company classifies its investments in both fixed income securities and publicly traded equity securities as available-for-sale investments. Fixed income securities primarily consist of U.S. government securities, U.S. agency securities, non-U.S. government and agency securities, corporate debt securities, and asset-backed securities. These available-for-sale investments are held in the custody of several major financial institutions. The specific identification method is used to determine the cost basis of fixed income securities sold. The weighted-average method is used to determine the cost basis of publicly traded equity securities sold. These investments are recorded in the Consolidated Balance Sheets at fair value. Unrealized gains and losses on these investments, to the extent the investments are unhedged, are included as a separate component of accumulated other comprehensive income (AOCI), net of tax. The Company classifies its investments as current based on the nature of the investments and their availability for use in current operations.

(c) Other-than-Temporary Impairments on Investments  Effective at the beginning of the fourth quarter of fiscal 2009, the Company was required to evaluate its fixed income securities for impairments in connection with an updated accounting standard. Under this updated standard, if the fair value of a debt security is less than its amortized cost, the Company assesses whether the impairment is other than temporary. An impairment is considered other than temporary if (i) the Company has the intent to sell the security, (ii) it is more likely than not that the Company will be required to sell the security before recovery of the entire amortized cost basis, or (iii) the Company does not expect to recover the entire amortized cost basis of the security. If impairment is considered other than temporary based on condition (i) or (ii) described above, the entire difference between the amortized cost and the fair value of the debt security is recognized in earnings. If an impairment is considered other than temporary based on condition (iii), the amount representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) will be recognized in earnings and the amount relating to all other factors will be recognized in OCI. Upon the adoption of the updated accounting standard, the Company recorded a cumulative effect adjustment of $49 million, which resulted in an increase to the balance of retained earnings with a corresponding decrease to OCI. Prior to the adoption of this accounting standard, the Company recognized impairment charges on fixed income securities using the impairment policy as is currently applied to publicly traded equity securities, as discussed below.

The Company recognizes an impairment charge on publicly traded equity securities when a decline in the fair value of its investments in publicly traded equity securities below the cost basis is judged to be other than temporary. The Company considers various factors in determining whether a decline in the fair value of these investments is other than temporary, including the length of time and extent to which the fair value of the security has been less than the Company's cost basis, the financial condition and near-term prospects of the issuer, and the Company's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Investments in privately held companies are included in other assets in the Consolidated Balance Sheets and are primarily accounted for using either the cost or equity method. The Company monitors these investments for impairments and makes appropriate reductions in carrying values if the Company determines that an impairment charge is required based primarily on the financial condition and near-term prospects of these companies.

(d) Inventories  Inventories are stated at the lower of cost or market. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. The Company provides inventory write-downs based on excess and obsolete inventories determined primarily by future demand forecasts. The write-down is measured as the difference between the cost of the inventory and market based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. In addition, the Company records a liability for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of the Company's future demand forecasts consistent with its valuation of excess and obsolete inventory.

(e) Allowance for Doubtful Accounts  The allowance for doubtful accounts is based on the Company's assessment of the collectibility of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, age of the accounts receivable balances, and economic conditions that may affect a customer's ability to pay.

(f) Financing Receivables and Guarantees  The Company provides financing arrangements, including leases, financed service contracts, and loans, for certain qualified end-user customers to build, maintain, and upgrade their networks. Lease receivables primarily represent sales-type and direct-financing leases. Leases and loans have on average a three-year term and are usually collateralized by a security interest in the underlying assets. Financed service contracts also typically have terms of one to three years and primarily relate to technical support services. The Company maintains an allowance for uncollectible financing receivables based on a variety of factors, including the risk rating of the portfolio, macroeconomic conditions, historical experience, and other market factors.

In addition, the Company facilitates third-party financing arrangements for channel partners, consisting of revolving short-term financing, generally with payment terms ranging from 60 to 90 days. In certain instances, these financing arrangements result in a transfer of the Company's receivables to the third party. The receivables are derecognized upon transfer, as these transfers qualify as true sales, and the Company receives a payment for the receivables from the third party based on the Company's standard payment terms. These financing arrangements facilitate the working capital requirements of the channel partners and, in some cases, the Company guarantees a portion of these arrangements. The Company also provides financing guarantees for third-party financing arrangements extended to end-user customers related to leases and loans, which typically have terms of up to three years. The Company could be called upon to make payments under these guarantees in the event of nonpayment by the channel partners or end-user customers. Deferred revenue relating to these financing arrangements is recorded in accordance with revenue recognition policies or for the fair value of the financing guarantees.

 

(g) Depreciation and Amortization  Property and equipment are stated at cost, less accumulated depreciation or amortization, whenever applicable. Depreciation and amortization are computed using the straight-line method, generally over the following periods:

      Period
Buildings    25years
Building improvements    10years
Furniture and fixtures    5years
Leasehold improvements    Shorter of remaining lease term or 5 years
Computer equipment and related software    30to 36 months
Production, engineering, and other equipment    Up to 5 years
Operating lease assets    Based on lease term—generally up to 3 years

(h) Business Combinations  Upon adoption of the revised accounting guidance for business combinations in the first quarter of fiscal 2010, the Company has applied the expanded definition of "business" and "business combination" as prescribed by the revised accounting guidance. Other significant changes in connection with the revised accounting guidance include (i) the recognition of assets acquired, liabilities assumed and noncontrolling interests (including goodwill) measured at fair value at the acquisition date with subsequent changes to the fair value of such assets acquired and liabilities assumed recognized in earnings after the expiration of the measurement period, a period not to exceed 12 months from the acquisition date; (ii) the recognition of acquisition-related expenses and acquisition-related restructuring costs in earnings; and (iii) the capitalization of in-process research and development (IPR&D) at fair value as an indefinite-lived intangible asset that will be assessed for impairment thereafter. Upon completion of development, the underlying R&D intangible asset will be amortized over its estimated useful life.

(i) Goodwill and Purchased Intangible Assets  Goodwill is tested for impairment on an annual basis in the fourth fiscal quarter and, when specific circumstances dictate, between annual tests. When impaired, the carrying value of goodwill is written down to fair value. The goodwill impairment test involves a two-step process. The first step, identifying a potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds its fair value, the second step would need to be conducted; otherwise, no further steps are necessary as no potential impairment exists. The second step, measuring the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. Any excess of the reporting unit goodwill carrying value over the respective implied fair value is recognized as an impairment loss. There was no impairment of goodwill identified in fiscal 2010, 2009, or 2008. Purchased intangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally two to seven years. See below related to the impairment test for purchased intangible assets with finite lives. Purchased intangible assets with indefinite lives are assessed for potential impairment annually or when events or circumstances indicate that their carrying amounts might be impaired.

(j) Long-Lived Assets  Long-lived assets that are held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability of long-lived assets is based on an estimate of the undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the difference between the fair value of the asset and its carrying value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

(k) Derivative Instruments  The Company recognizes derivative instruments as either assets or liabilities and measures those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For a derivative instrument designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. For a derivative instrument designated as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of AOCI and subsequently reclassified into earnings when the hedged exposure affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. For derivative instruments that are not designated as accounting hedges, changes in fair value are recognized in earnings in the period of change. The Company records derivative instruments in the statements of cash flows to operating, investing or financing activities consistent with the cash flows of the hedged item.

(l) Foreign Currency Translation  Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of AOCI. Income and expense accounts are translated at average exchange rates during the year. Remeasurement adjustments are recorded in other income (loss), net. The effect of foreign currency exchange rates on cash and cash equivalents was not material for any of the years presented.

(m) Concentrations of Risk  Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company seeks to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties.

The Company performs ongoing credit evaluations of its customers and, with the exception of certain financing transactions, does not require collateral from its customers. The Company receives certain of its components from sole suppliers. Additionally, the Company relies on a limited number of contract manufacturers and suppliers to provide manufacturing services for its products. The inability of a contract manufacturer or supplier to fulfill supply requirements of the Company could materially impact future operating results.

(o) Advertising Costs  The Company expenses all advertising costs as incurred. Advertising costs included within sales and marketing expenses were approximately $290 million, $165 million, and $195 million for fiscal 2010, 2009 and 2008, respectively.

(p) Share-Based Compensation Expense  The Company measures and recognizes the compensation expense for all share-based awards made to employees and directors including employee stock options and employee stock purchases related to the Employee Stock Purchase Plan ("employee stock purchase rights") based on estimated fair values. The fair value of employee stock options is estimated on the date of grant using a lattice-binomial option-pricing model ("lattice-binomial model") and for employee stock purchase rights the Company estimates the fair value using the Black-Scholes model. The Company measures the fair value of restricted stock and restricted stock units as if the awards were vested and issued on the grant date. The value of awards that are ultimately expected to vest is recognized as expense over the requisite service periods. Because share-based compensation expense is based on awards ultimately expected to vest, it has been reduced for forfeitures.

(q) Software Development Costs  Software development costs required to be capitalized for software sold, leased, or otherwise marketed have not been material to date. Software development costs required to be capitalized for internal use software have also not been material to date.

(r) Income Taxes  Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

(s) Computation of Net Income per Share  Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Diluted shares outstanding include the dilutive effect of in-the-money options, unvested restricted stock, and restricted stock units. The dilutive effect of such equity awards is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible, are collectively assumed to be used to repurchase shares.

(t) Consolidation of Variable Interest Entities  In the event that the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity will be included in the Company's Consolidated Financial Statements.

(u) Use of Estimates  The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Estimates are used for the following, among others:

 

 

Revenue recognition

 

Allowances for receivables and sales returns

 

Inventory valuation and liability for purchase commitments with contract manufacturers and suppliers

 

Warranty costs

 

Share-based compensation expense

 

Fair value measurements and other-than-temporary impairments

 

Goodwill and purchased intangible asset impairments

 

Income taxes

 

Loss contingencies

The actual results experienced by the Company may differ materially from management's estimates.

(v) Recent Accounting Standards or Updates  In June 2009, the FASB issued revised guidance for the consolidation of variable interest entities. In February 2010, the FASB issued amendments to the consolidation requirements, exempting certain investment funds from the June 2009 guidance for the consolidation of variable interest entities. The June 2009 guidance for the consolidation of variable interest entities replaces the quantitative-based risks and rewards approach with a qualitative approach that focuses on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and has the obligation to absorb losses or the right to receive benefits from the entity that could be potentially significant to the variable interest entity. The accounting guidance also requires an ongoing reassessment of whether an enterprise is the primary beneficiary and requires additional disclosures about an enterprise's involvement in variable interest entities. This accounting guidance is effective for the Company beginning in the first quarter of fiscal 2011. Upon adoption, the application of the revised guidance for the consolidation of variable interest entities did not have a material impact to the Company's Consolidated Financial Statements.

In June 2009, the FASB issued revised guidance for the accounting of transfers of financial assets. This guidance eliminates the concept of a qualifying special-purpose entity, removes the scope exception for qualifying special-purpose entities when applying the accounting guidance related to the consolidation of variable interest entities, changes the requirements for derecognizing financial assets, and requires enhanced disclosure. This accounting guidance is effective for the Company beginning in the first quarter of fiscal 2011. Upon adoption, the application of the revised guidance for the accounting of transfers of financial assets did not have a material impact to the Company's Consolidated Financial Statements.

In July 2010, the FASB issued an accounting update to provide guidance to enhance disclosures related to the credit quality of a company's financing receivables portfolio and the associated allowance for credit losses. Pursuant to this accounting update, a company is required to provide a greater level of disaggregated information about its allowance for credit loss with the objective of facilitating users' evaluation of the nature of credit risk inherent in the company's portfolio of financing receivables, how that risk is analyzed and assessed in arriving at the allowance for credit losses, and the changes and reasons for those changes in the allowance for credit losses. The revised disclosures as of the end of the reporting period are effective for the Company beginning in the second quarter of fiscal 2011, and the revised disclosures related to activities during the reporting period are effective for the Company beginning in the third quarter of fiscal 2011. The Company is currently evaluating the impact of this accounting update on its financial disclosures.

Business Combinations
Business Combinations

3. Business Combinations

The Company completed seven business combinations during fiscal 2010. A summary of the more significant acquisitions completed in fiscal 2010 is as follows:

 

 

In December 2009, the Company acquired ScanSafe, Inc. ("ScanSafe"), a provider of hosted web security to help build a borderless network security architecture that combines network and cloud-based services for advanced security enforcement.

 

 

In December 2009, the Company acquired Starent Networks, Corp. ("Starent"), a provider of IP-based mobile infrastructure for mobile and converged carriers, to enhance the Company's portfolio of products to provide an integrated architecture to offer rich, quality multimedia experiences to mobile subscribers.

 

 

In April 2010, the Company acquired Tandberg ASA ("Tandberg"), a leader in video communications. With this acquisition, the Company expects that it will be able to combine innovations with multivendor interoperability capabilities to provide a platform significantly more attractive to its customers and partners.

 

 

In July 2010, the Company acquired CoreOptics Inc. ("CoreOptics"), a designer of digital signal processing solutions for high-speed optical networking applications.

Allocation of the purchase consideration for business combinations completed in fiscal 2010 is summarized as follows (in millions):

 

Fiscal 2010    Shares Issued      Purchase
Consideration
     Net Tangible
Assets Acquired/
(Liabilities
Assumed)
    Purchased
Intangible
Assets
     Goodwill  

ScanSafe, Inc.

           $ 154       $ 2      $ 31       $ 121   

Starent Networks, Corp.

             2,636         (17 )     1,274         1,379   

Tandberg ASA

             3,268         17        980         2,271   

CoreOptics Inc.

             86         (2 )     70         18   

Other

             42         4        25         13   

Total

           $ 6,186       $ 4      $ 2,380       $ 3,802   

The total purchase consideration related to the Company's business combinations completed during fiscal 2010 consisted of one, or both, of cash consideration and vested share-based awards assumed. Total cash and cash equivalents acquired from business combinations completed during fiscal 2010 were approximately $760 million.

Pursuant to the revised accounting guidance related to business combinations, transaction costs for the business combinations completed during fiscal 2010 were expensed as incurred. Such transaction costs, totaling $40 million for fiscal 2010, were recorded as G&A expenses. In addition, IPR&D of $199 million for fiscal 2010 has been capitalized at fair value as an intangible asset with an indefinite life (see Note 4) and is assessed for impairment in subsequent periods. Upon completion of development, the underlying R&D intangible asset will be amortized over its estimated useful life. Prior to the adoption of the revised accounting guidance, IPR&D was expensed upon acquisition if it had no alternative future use.

The Company continues to evaluate certain assets and liabilities related to business combinations completed during the period. Additional information, which existed as of the acquisition date but was at that time unknown to the Company, may become known to the Company during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Changes to amounts recorded as assets or liabilities may result in a corresponding adjustment to goodwill.

The goodwill generated from the Company's business combinations completed during the year ended July 31, 2010 is primarily related to expected synergies. The goodwill is generally not deductible for U.S. federal income tax purposes.

Fiscal 2009

Allocation of the purchase consideration for business combinations completed in fiscal 2009 is summarized as follows (in millions):

 

Fiscal 2009    Shares Issued      Purchase
Consideration
     Net Tangible
Assets Acquired/
(Liabilities
Assumed)
    Purchased
Intangible
Assets
     Goodwill      IPR&D  

PostPath, Inc.

           $ 197       $ (10   $ 52       $ 152       $ 3   

Pure Digital Technologies, Inc.

     27         533         (9     191         299         52   

Pure Networks, Inc.

             105         (4 )     30         79           

Tidal Software, Inc.

             92         (3     52         35         8   

Other

             54         (2 )     23         33           

Total

     27       $ 981       $ (28   $ 348       $ 598       $ 63   

Fiscal 2008

Allocation of the purchase consideration for business combinations completed in fiscal 2008 is summarized as follows (in millions):

 

Fiscal 2008    Shares Issued      Purchase
Consideration
     Net Tangible
Assets Acquired/
(Liabilities
Assumed)
    Purchased
Intangible
Assets
     Goodwill      IPR&D  

Navini Networks, Inc.

           $ 276       $ (4   $ 108       $ 172       $   

Securent, Inc.

             75         (5     24         56           

Other

             61         7        14         37         3   

Total

           $ 412       $ (2   $ 146       $ 265       $ 3   

The Consolidated Financial Statements include the operating results of each business from the date of acquisition. Pro forma results of operations for the acquisitions completed during fiscal 2010, 2009, and 2008 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to the Company's financial results.

Goodwill and Purchased Intangible Assets
Goodwill and Purchased Intangible Assets

4. Goodwill and Purchased Intangible Assets

(a) Goodwill

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 goodwill of the former Asia Pacific and Japan geographic segments as of the end of each reported period was allocated to the combined segment Asia Pacific Markets to conform to this change in the organizational structure.

The following tables present the goodwill allocated to the Company's reportable segments as of July 31, 2010 and July 25, 2009 and the changes to goodwill during fiscal 2010 and 2009 (in millions):

 

      Balance at
July 25, 2009
     Acquisitions      Other     Balance at
July 31, 2010
 

United States and Canada

   $ 9,512       $ 1,802       $ (25 )   $ 11,289   

European Markets

     1,669         1,089         (29 )     2,729   

Emerging Markets

     437         324         1        762   

Asia Pacific Markets

     1,307         587                1,894   

Total

   $ 12,925       $ 3,802       $ (53 )   $ 16,674   
      Balance at
July 26, 2008
     Acquisitions      Other     Balance at
July 25, 2009
 

United States and Canada

   $ 9,059       $ 467       $ (14   $ 9,512   

European Markets

     1,650         65         (46     1,669   

Emerging Markets

     405         37         (5     437   

Asia Pacific Markets

     1,278         29                1,307   

Total

   $ 12,392       $ 598       $ (65   $ 12,925   

In the preceding tables, "Other" primarily includes foreign currency translation and purchase accounting adjustments.

 

(b) Purchased Intangible Assets

The following tables present details of the intangible assets acquired through business combinations during fiscal 2010 and 2009 (in millions, except years):

 

    FINITE LIVES     INDEFINITE
LIVES
       
    TECHNOLOGY     CUSTOMER RELATIONSHIPS     OTHER     IPR&D     TOTAL  
Fiscal 2010   Weighted-
Average Useful
Life (in Years)
    Amount     Weighted-
Average Useful
Life (in Years)
    Amount     Weighted-
Average Useful
Life (in Years)
    Amount     Amount     Amount  

ScanSafe, Inc.

    5.0      $ 14        6.0      $ 11        3.0      $ 6      $      $ 31   

Starent Networks, Corp.

    6.0        691        7.0        434        0.3        35        114        1,274   

Tandberg ASA

    5.0        709        7.0        179        3.0        21        71        980   

CoreOptics Inc.

    4.0        60        1.0        1        1.0        1        8        70   

Other

    4.0        8        5.0        11                      6        25   

Total

          $ 1,482              $ 636              $ 63      $ 199      $ 2,380   

 

     FINITE LIVES  
     TECHNOLOGY      CUSTOMER RELATIONSHIPS      OTHER      TOTAL  
Fiscal 2009    Weighted-
Average Useful
Life (in Years)
     Amount      Weighted-
Average Useful
Life (in Years)
     Amount      Weighted-
Average Useful
Life (in Years)
     Amount      Amount  

PostPath, Inc.

     6.0       $ 52               $               $       $ 52   

Pure Digital Technologies, Inc.

     5.0         90         5.0         58         4.7         43         191   

Pure Networks, Inc.

     4.0         27         3.0         3                         30   

Tidal Software, Inc.

     5.0         28         6.8         22         1.6         2         52   

Other

     6.0         18         3.7         5                         23   

Total

            $ 215                $ 88                $ 45       $ 348   

The following tables present details of the Company's purchased intangible assets (in millions):

 

July 31, 2010    Gross      Accumulated
Amortization
    Net  

Purchased intangible assets with finite lives:

       

Technology

   $ 2,396       $ (686 )   $ 1,710   

Customer relationships

     2,326         (1,045 )     1,281   

Other

     172         (85 )     87   

Total purchased intangible assets with finite lives

     4,894         (1,816 )     3,078   

IPR&D, with indefinite lives

     196                196   

Total

   $ 5,090       $ (1,816 )   $ 3,274   

 

July 25, 2009    Gross      Accumulated
Amortization
    Net  

Purchased intangible assets with finite lives:

       

Technology

   $ 1,469       $ (803   $ 666   

Customer relationships

     1,730         (768     962   

Other

     184         (110     74   

Total

   $ 3,383       $ (1,681   $ 1,702   

Purchased intangible assets include intangible assets acquired through business combinations as well as through direct purchases or licenses.

The following table presents the amortization of purchased intangible assets (in millions):

 

Years Ended    July 31, 2010      July 25, 2009      July 26, 2008  

Amortization of purchased intangible assets:

        

Cost of sales

   $ 277       $ 211       $ 233   

Operating expenses

     491         533         499   

Total

   $ 768       $ 744       $ 732   

The Company recorded impairment charges of $28 million, $95 million and $33 million during fiscal 2010, 2009 and 2008, respectively, related to its purchased intangible assets. These impairment charges were due to reductions in expected future cash flows related to certain technologies and customer relationships and were recorded as amortization of purchased intangible assets.

For purchased intangible assets with finite lives, the estimated future amortization expense as of July 31, 2010 is as follows (in millions):

 

Fiscal Year    Amount  

2011

   $ 836   

2012

     720   

2013

     603   

2014

     420   

2015

     317   

Thereafter

     182   

Total

   $ 3,078   

 

Balance Sheet Details
Balance Sheet Details

5. Balance Sheet Details

The following tables provide details of selected balance sheet items (in millions):

 

Financing Receivables and Guarantees
Financing Receivables and Guarantees

6. Financing Receivables and Guarantees

(a) Financing Receivables

Financing receivables primarily consist of lease receivables, financed service contracts and loan receivables. Lease receivables represent sales-type and direct-financing leases resulting from the sale of the Company's and complementary third-party products. These lease arrangements have terms of on average three years and are generally collateralized by a security interest in the underlying assets. The revenue related to financed service contracts, which is primarily associated with technical support services, is deferred and included in deferred service revenue. The revenue is recognized ratably over the period during which the related services are to be performed, which is typically from one to three years.

A summary of the Company's financing receivables is presented as follows (in millions):

 

July 31, 2010      Lease
Receivables
     Financed
Service
Contracts
     Loan
Receivables
     Financing
Receivables
 

Gross

     $ 2,411       $ 1,773       $ 1,249       $ 5,433   

Unearned income

       (215 )                      (215 )

Allowances

       (207 )      (21      (73 )      (301 )

Total, net

     $ 1,989       $ 1,752       $ 1,176       $ 4,917   

Reported as:

             

Current

     $ 813       $ 989       $ 501       $ 2,303   

Noncurrent

       1,176         763         675         2,614   

Total, net

     $ 1,989       $ 1,752       $ 1,176       $ 4,917   
July 25, 2009      Lease
Receivables
     Financed
Service
Contracts
     Loan
Receivables
     Financing
Receivables
 

Gross

     $ 1,996       $ 1,642       $ 861       $ 4,499   

Unearned income

       (191                      (191 )

Allowances

       (213      (26      (88      (327 )

Total, net

     $ 1,592       $ 1,616       $ 773       $ 3,981   

Reported as:

             

Current

     $ 626       $ 940       $ 236       $ 1,802   

Noncurrent

       966         676         537         2,179   

Total, net

     $ 1,592       $ 1,616       $ 773       $ 3,981   

Contractual maturities of the gross lease receivables at July 31, 2010 are summarized as follows (in millions):

 

Fiscal Year    Amount  

2011

   $ 961   

2012

     706   

2013

     454   

2014

     223   

2015

     63   

Thereafter

     4   

Total

   $ 2,411   

Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.

(b) Financing Guarantees

In the ordinary course of business, the Company provides financing guarantees that are generally for various third-party financing arrangements extended to channel partners and end-user customers.

Channel Partner Financing Guarantees  The Company facilitates arrangements for third-party financing extended to channel partners, consisting of revolving short-term financing, generally with payment terms ranging from 60 to 90 days. These financing arrangements facilitate the working capital requirements of the channel partners and, in some cases, the Company guarantees a portion of these arrangements. The volume of channel partner financing was $17.2 billion, $14.2 billion and $14.4 billion for fiscal 2010, 2009, and 2008, respectively. As of July 31, 2010 and July 25, 2009, the balance of the channel partner financing subject to guarantees was $1.4 billion and $1.1 billion, respectively.

End-User Financing Guarantees  The Company also provides financing guarantees for third-party financing arrangements extended to end-user customers related to leases and loans that typically have terms of up to three years. The volume of financing provided by third parties for leases and loans on which the Company has provided guarantees was $944 million for fiscal 2010 and $1.2 billion for both fiscal 2009 and fiscal 2008.

Financing Guarantee Summary  The aggregate amount of financing guarantees outstanding at July 31, 2010 and July 25, 2009, representing the total maximum potential future payments under financing arrangements with third parties, and the related deferred revenue are summarized in the following table (in millions):

 

      July 31, 2010      July 25, 2009  

Maximum potential future payments relating to financing guarantees:

     

Channel partner

   $ 448       $ 334   

End user

     304         405   

Total

   $ 752       $ 739   

Deferred revenue associated with financing guarantees:

     

Channel partner

   $ 277       $ 218   

End user

     272         378   

Total

   $ 549       $ 596
Investments
Investments

7. Investments

(a) Summary of Available-for-Sale Investments

The following tables summarize the Company's available-for-sale investments (in millions):

 

  July 31, 2010    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair
Value
 

Fixed income securities:

       

U.S. government securities

  $ 16,570      $ 42      $      $ 16,612   

U.S. government agency securities (1) 

    13,511        68               13,579   

Non-U.S. government and agency securities (2) 

    1,452        15               1,467   

Corporate debt securities

    2,179        64        (21 )     2,222   

Asset-backed securities

    145        9        (5 )     149   

Total fixed income securities

    33,857        198        (26 )     34,029   

Publicly traded equity securities

    889        411        (49 )     1,251   

Total

  $ 34,746      $ 609      $ (75 )   $ 35,280   
July 25, 2009   Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair
Value
 

Fixed income securities:

       

U.S. government securities

  $ 10,266      $ 23      $ (5   $ 10,284   

U.S. government agency securities (1)

    15,501        104        (2     15,603   

Non-U.S. government and agency securities (2)

    528        12               540   

Corporate debt securities

    1,740        51        (86     1,705   

Asset-backed securities

    252        5        (34     223   

Total fixed income securities

    28,287        195        (127     28,355   

Publicly traded equity securities

    824        193        (89     928   

Total

  $ 29,111      $ 388      $ (216   $ 29,283   

The following tables present the gross and net realized gains and losses related to the Company's available-for-sale investments (in millions):

 

Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Gross realized gains

   $ 279      $ 435      $ 306   

Gross realized losses

     (110 )     (459     (197

Total

   $ 169      $ (24   $ 109   
Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Net gains on investments in publicly traded equity securities

   $ 66      $ 86      $ 88   

Net gains (losses) on investments in fixed income securities

     103        (110     21   

Total

   $ 169      $ (24   $ 109   

There were no impairment charges on available-for-sale investments for the years ended July 31, 2010 and July 26, 2008. For the year ended July 25, 2009, net losses on fixed income securities and net gains on publicly traded equity securities included impairment charges of $219 million and $39 million, respectively. The impairment charges for both types of securities were due to a decline in the fair value of the investments below their cost basis that were judged to be other than temporary and were recorded as a reduction to the amortized cost of the respective investments.

 

The following table summarizes the activity related to credit losses for fixed income securities (in millions):

 

      July 31, 2010     July 25, 2009(1)  

Balance at beginning of fiscal year

   $ (153 )   $ (159 )

Sales of other-than-temporarily impaired fixed income securities

     58        6   

Balance at end of fiscal year

   $ (95 )   $ (153 )

The following tables present the breakdown of the available-for-sale investments with gross unrealized losses and the duration that those losses had been unrealized at July 31, 2010 and July 25, 2009 (in millions):

 

     UNREALIZED LOSSES
LESS THAN 12 MONTHS
         UNREALIZED LOSSES
12 MONTHS OR GREATER
         TOTAL      
  July 31, 2010     Fair Value          Gross
Unrealized
Losses
         Fair Value          Gross
Unrealized
Losses
         Fair Value          Gross  
Unrealized  
Losses  
     

Fixed income securities:

                             

Corporate debt securities

   $ 140         $ (1 )      $ 304         $ (20 )      $ 444         $ (21 )  

Asset-backed securities

     2                       115             (5 )        117             (5 )  

Total fixed income securities

     142           (1 )        419           (25 )        561           (26 )  

Publicly traded equity securities

     168             (12 )        393             (37 )        561             (49 )  

Total

   $ 310           $ (13 )      $ 812           $ (62 )      $ 1,122           $ (75 )  
     UNREALIZED LOSSES
LESS THAN 12 MONTHS
         UNREALIZED LOSSES
12 MONTHS OR GREATER
         TOTAL      
  July 25, 2009    Fair Value           Gross
Unrealized
Losses
         Fair Value          Gross
Unrealized
Losses
         Fair Value          Gross  
Unrealized  
Losses  
     

Fixed income securities:

                             

U.S. government securities

   $ 1,850         $ (5      $         $         $ 1,850         $ (5  

U.S. government agency securities (1)

     1,346           (2                            1,346           (2  

Non-U.S. government and agency securities (2)

     16                     5                     21               

Corporate debt securities

     123           (10        613           (76        736           (86  

Asset-backed securities

     41             (11        141             (23        182             (34  

Total fixed income securities

     3,376           (28        759           (99        4,135           (127  

Publicly traded equity securities

     25             (3        328             (86        353             (89  

Total

   $ 3,401           $ (31      $ 1,087           $ (185      $ 4,488           $ (216  

(1) Includes corporate securities that are guaranteed by the FDIC.

(2) Includes agency and corporate securities that are guaranteed by non-U.S. governments.

For fixed income securities that have unrealized losses as of July 31, 2010, the Company has determined that (i) it does not have the intent to sell any of these investments and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. In addition, as of July 31, 2010, the Company anticipates that it will recover the entire amortized cost basis of such fixed income securities and has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the year ended July 31, 2010.

The Company has evaluated its publicly traded equity securities as of July 31, 2010 and has determined that there was no indication of other-than-temporary impairments in the respective categories of unrealized losses. This determination was based on several factors, which include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the issuer, and the Company's intent and ability to hold the publicly traded equity securities for a period of time sufficient to allow for any anticipated recovery in market value.

(c) Maturities of Fixed Income Securities

The following table summarizes the maturities of the Company's fixed income securities at July 31, 2010 (in millions):

 

      Amortized
Cost
     Fair Value  

Less than 1 year

   $ 24,004       $ 24,044   

Due in 1 to 2 years

     5,631         5,703   

Due in 2 to 5 years

     3,867         3,928   

Due after 5 years

     355         354   

Total

   $ 33,857       $ 34,029   

Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.

(d) Securities Lending

The Company periodically engages in securities lending activities with certain of its fixed income securities. These transactions, with a daily balance averaging less than 25% of the Company's total fixed income portfolio, are accounted for as a secured lending of the securities, and the securities are typically loaned only on an overnight basis. The Company requires collateral equal to at least 102% of the fair market value of the loaned security in the form of cash or liquid, high-quality assets. The Company engages in these secured lending transactions only with highly creditworthy counterparties, and the associated portfolio custodian has agreed to indemnify the Company against any collateral losses. The Company did not experience any losses in connection with the secured lending of securities during the years presented. As of July 31, 2010 and July 25, 2009, the Company had no outstanding securities lending transactions.

Fair Value
Fair Value

8. Fair Value

Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.

(a) Fair Value Hierarchy

The accounting guidance for fair value measurement also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

Level 1    Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2    L evel 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3    Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

(b) Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of July 31, 2010 and July 25, 2009 were as follows (in millions):

 

    

JULY 31, 2010

FAIR VALUE MEASUREMENTS

    

JULY 25, 2009

FAIR VALUE MEASUREMENTS

 
      Level 1      Level 2      Level 3      Total
Balance
     Level 1      Level 2      Level 3      Total
Balance
 

Assets

                       

Cash equivalents:

                       

Money market funds

   $ 2,521       $       $       $ 2,521       $ 4,514       $       $       $ 4,514   

U.S. government securities

             235                 235                 61                 61   

U.S. government agency securities (1)

             40                 40                 313                 313   

Corporate debt securities

             1                 1                 35                 35   

Available-for-sale investments:

                       

U.S. government securities

             16,612                 16,612                 10,284                 10,284   

U.S. government agency securities (1)

             13,579                 13,579                 15,603                 15,603   

Non-U.S. government and agency securities (2)

             1,467                 1,467                 540                 540   

Corporate debt securities

             2,222                 2,222                 1,705                 1,705   

Asset-backed securities

                     149         149                         223         223   

Publicly traded equity securities

     1,251                         1,251         928                         928   

Derivative assets

             160         3         163                 109         4         113   

Total

   $ 3,772       $ 34,316       $ 152       $ 38,240       $ 5,442       $ 28,650       $ 227       $ 34,319   

Liabilities:

                       

Derivative liabilities

   $       $ 19       $       $ 19       $       $ 66       $       $ 66   

Total

   $       $ 19       $       $ 19       $       $ 66       $       $ 66   

Level 2 fixed income securities are priced using quoted market prices for similar instruments; nonbinding market prices that are corroborated by observable market data; or in limited circumstances, discounted cash flow techniques. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. The Company uses such pricing data as the primary inputs to make its assessments and determinations as to the ultimate valuation of its investment portfolio and has not made, during the periods presented, any material adjustments to such inputs. The Company is ultimately responsible for the financial statements and underlying estimates. The Company's derivative instruments are primarily classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs. The Company did not have any transfers between Level 1 and Level 2 fair value measurements during fiscal 2010.

Level 3 assets include asset-backed securities and certain derivative instruments, the values of which are determined based on discounted cash flow models using inputs that the Company could not corroborate with market data.

 

The following tables present a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended July 31, 2010 and July 25, 2009 (in millions):

 

     

Asset-
Backed

Securities

   

Derivative

Assets

    Total  

Balance at July 25, 2009

   $ 223      $ 4      $ 227   

Total gains and losses (realized and unrealized):

      

Included in other income (loss), net

     (6 )            (6

Included in operating expenses

            (1 )     (1

Included in other comprehensive income

     34               34   

Purchases, sales and maturities

     (102 )            (102

Balance at July 31, 2010

   $ 149      $ 3      $ 152   

Losses attributable to assets still held as of July 31, 2010

   $      $ (1 )   $ (1
     

Asset-
Backed

Securities

   

Derivative

Assets

    Total  

Balance at July 27, 2008

   $      $      $   

Transfers into Level 3

     618        6        624   

Total gains and losses (realized and unrealized):

      

Included in other income (loss), net

     (28 )            (28

Included in operating expenses

            (2 )     (2 )

Included in other comprehensive income

     (9 )            (9

Purchases, sales and maturities

     (358 )            (358

Balance at July 25, 2009

   $ 223      $ 4      $ 227   

Losses attributable to assets still held as of July 25, 2009

   $ (13   $      $ (13

(c) Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table presents the Company's financial instruments and nonfinancial assets that were measured at fair value on a nonrecurring basis and the gains and losses recorded for the year ended July 31, 2010 (in millions):

 

          FAIR VALUE MEASUREMENTS USING                
     Net Carrying
Value as of
July 31, 2010
    Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
    Significant Other
Observable
Inputs (Level 2)
    Significant
Unobservable
Inputs
(Level 3)
    Total (Losses)
Gains
for the Year
Ended
July 31, 2010
 

Investments in privately held companies

  $ 45      $      $      $ 45      $ (25 )

Purchased intangible assets

  $      $      $      $        (28 )

Property held for sale

  $ 25      $      $      $ 25        (86 )

Gains on assets no longer held as of July 31, 2010

                                    2   

Total

                                  $ (137 )

The fair value for investments in privately held companies was measured using financial metrics, comparison to other private and public companies, and analysis of the financial condition and near-term prospects of the issuers, including recent financing activities and their capital structure as well as other economic variables. These investments were classified as Level 3 assets because the Company used unobservable inputs to value them, reflecting the Company's assessment of the assumptions market participants would use in pricing these investments due to the absence of quoted market prices and inherent lack of liquidity. The losses for the investments in privately held companies were recorded to other income (loss), net.

The fair values for purchased intangible assets and property held for sale were measured using discounted cash flow techniques. These assets were classified as Level 3 assets because the Company used unobservable inputs to value them, reflecting the Company's assessment of the assumptions market participants would use in valuing these assets. The losses for purchased intangible assets were included in amortization of purchased intangible assets, and the net losses for property held for sale were included in G&A expenses.

The following table presents the Company's financial instruments that were measured at fair value on a nonrecurring basis and the losses recorded for the year ended July 25, 2009 (in millions):

 

          FAIR VALUE MEASUREMENTS USING                
     Net Carrying
Value as of
July 25, 2009
    Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
    Significant Other
Observable
Inputs (Level 2)
    Significant
Unobservable
Inputs
(Level 3)
    Total Losses
for the Year
Ended
July 25, 2009
 

Investments in privately held companies

  $ 69      $      $      $ 69      $ (78 )

Losses on assets no longer held as of July 25, 2009

                                    (9 )

Total

                                  $ (87 )

(d) Other

The fair value of certain of the Company's financial instruments that are not measured at fair value, including accounts receivable, accounts payable, accrued compensation, and other current liabilities, approximates the carrying amount because of their short maturities. In addition, the fair value of the Company's loan receivables and financed service contracts also approximates the carrying amount. The fair value of the Company's debt is disclosed in Note 9 and was determined using quoted market prices for those securities.

 

.

Borrowings
Borrowings

 

9. Borrowings

(a) Debt

The following table summarizes the Company's debt (in millions, except percentages):

 

     July 31, 2010     July 25, 2009  
      Amount     Effective
Rate
    Amount     Effective
Rate
 

Senior notes:

        

 5.25% fixed-rate notes, due 2011 ("2011 Notes")

   $ 3,000        3.12   $ 3,000        3.12%   

 2.90% fixed-rate notes, due 2014 ("2014 Notes")

     500        3.11              

 5.50% fixed-rate notes, due 2016 ("2016 Notes")

     3,000        3.18     3,000        4.34%   

 4.95% fixed-rate notes, due 2019 ("2019 Notes")

     2,000        5.08     2,000        5.08%   

 4.45% fixed-rate notes, due 2020 ("2020 Notes")

     2,500        4.50              

 5.90% fixed-rate notes, due 2039 ("2039 Notes")

     2,000        6.11     2,000        6.11%   

 5.50% fixed-rate notes, due 2040 ("2040 Notes")

     2,000        5.67              

 Total senior notes

     15,000          10,000     

Other notes and borrowings

     59          2     

Unaccreted discount

     (73 )       (21  

Hedge accounting adjustment

     298          314     

 Total

   $   15,284        $   10,295     

Reported as:

        

Short-term debt

   $ 3,096        $     

Long-term debt

     12,188          10,295     

 Total

   $ 15,284        $ 10,295     

In November 2009, the Company issued senior unsecured notes in an aggregate principal amount of $5.0 billion. Of these notes, $500 million will mature in 2014 and bear interest at a fixed rate of 2.90% per annum (the "2014 Notes"), $2.5 billion will mature in 2020 and bear interest at a fixed rate of 4.45% per annum (the "2020 Notes"), and $2.0 billion will mature in 2040 and bear interest at a fixed rate of 5.50% per annum (the "2040 Notes"). To achieve its interest rate risk management objectives, the Company entered into interest rate swaps, in an aggregate notional amount of $1.5 billion, designated as fair value hedges for a portion of the 2016 Notes. In effect, these swaps convert the fixed interest rates of a portion of the 2016 Notes to floating interest rates based on LIBOR plus a fixed number of basis points. Gains and losses in the value of the interest rate swaps substantially offset changes in the fair value of the hedged portion of the underlying debt.

The effective rates for the fixed-rate debt include the interest on the notes; the accretion of the discount; and, if applicable, adjustments related to hedging. Based on market prices, the fair value of the Company's senior notes was $16.3 billion and $10.5 billion as of July 31, 2010 and July 25, 2009, respectively. Interest is payable semiannually on each class of the senior fixed-rate notes. The notes are redeemable by the Company at any time, subject to a make-whole premium. The Company was in compliance with all debt covenants as of July 31, 2010.

Other notes and borrowings include notes and credit facilities with a number of financial institutions that are available to certain foreign subsidiaries of the Company. The amount of borrowings outstanding under these arrangements was $59 million and $2 million at July 31, 2010 and July 25, 2009, respectively.

(b) Credit Facility

The Company has a credit agreement with certain institutional lenders providing for a $3.0 billion unsecured revolving credit facility that is scheduled to expire on August 17, 2012. Any advances under the credit agreement will accrue interest at rates that are equal to, based on certain conditions, either (i) the higher of the Federal Funds rate plus 0.50% or Bank of America's "prime rate" as announced from time to time or (ii) LIBOR plus a margin that is based on the Company's senior debt credit ratings as published by Standard & Poor's Ratings Services and Moody's Investors Service, Inc. The credit agreement requires the Company to comply with certain covenants, including that it maintain an interest coverage ratio as defined in the agreement. The Company was in compliance with the required interest coverage ratio and the other covenants as of July 31, 2010.

The Company may also, upon the agreement of either the then-existing lenders or of additional lenders not currently parties to the agreement, increase the commitments under the credit facility by up to an additional $1.9 billion and/or extend the expiration date of the credit facility up to August 15, 2014. As of July 31, 2010, the Company had not borrowed any funds under the credit facility.

 

Derivative Instruments
Derivative Instruments

10. Derivative Instruments

(a) Summary of Derivative Instruments

The Company uses derivative instruments primarily to manage exposures to foreign currency exchange rate, interest rate, and equity price risks. The Company's primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates, interest rates, and equity prices. The Company's derivatives expose it to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. The Company does, however, seek to mitigate such risks by limiting its counterparties to major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counterparties.

The fair values of the Company's derivative instruments and the line items on the Consolidated Balance Sheets to which they were recorded are summarized as follows (in millions):

 

     DERIVATIVE ASSETS           DERIVATIVE LIABILITIES  
      Balance Sheet Line Item    July 31, 2010      July 25, 2009            Balance Sheet Line Item    July 31, 2010      July 25, 2009  

Derivatives designated as hedging instruments:

                    

Foreign currency derivatives

   Other current assets    $ 82       $ 87          Other current liabilities    $ 7       $ 36   

Interest rate derivatives

   Other assets      72                  Other long-term liabilities                

Total

        154         87               7         36   

Derivatives not designated as hedging instruments:

                    

Foreign currency derivatives

   Other current assets      6         22          Other current liabilities      12         30   

Equity derivatives

   Other current assets      1         2          Other current liabilities                

Equity derivatives

   Other assets      2         2          Other long-term liabilities                

Total

        9         26               12         30   

Total

      $ 163       $ 113             $ 19       $ 66   

The effects of the Company's cash flow hedging instruments on other comprehensive income (OCI) and the Consolidated Statements of Operations are summarized as follows (in millions):

 

GAINS (LOSSES) RECOGNIZED IN OCI ON DERIVATIVES FOR

THE YEARS ENDED (EFFECTIVE PORTION)

        

GAINS (LOSSES) RECLASSIFIED FROM AOCI INTO INCOME

FOR

THE YEARS ENDED (EFFECTIVE PORTION)

 
Derivatives Designated as Cash Flow
Hedging Instruments
   July 31, 2010      July 25, 2009           Line Item in Statements of Operations    July 31, 2010     July 25, 2009  

Foreign currency derivatives

   $ 33       $ (116 )      Operating expenses    $ (1   $ (95 )
           Cost of sales-service             (13 )

Interest rate derivatives

     23         (42      Interest expense               

Other derivatives

             (2 )      Operating expenses             (2 )

Total

   $ 56       $ (160 )           $ (1   $ (110 )

During the years ended July 31, 2010 and July 25, 2009, the amounts recognized in earnings on derivative instruments designated as cash flow hedges related to the ineffective portion were not material, and the Company did not exclude any component of the changes in fair value of the derivative instruments from the assessment of hedge effectiveness. As of July 31, 2010, the Company estimates that approximately $40 million of net derivative gains related to its cash flow hedges included in AOCI will be reclassified into earnings within the next 12 months.

The effect on the Consolidated Statements of Operations of derivative instruments designated as fair value hedges is summarized as follows (in millions):

 

         

GAINS (LOSSES) FOR THE

YEARS ENDED

 
Derivatives Designated as Fair Value Hedging Instruments    Line Item in Statements of Operations    July 31, 2010     July 25, 2009  

Equity derivatives

   Other income (loss), net    $ 3      $ 97   

Interest rate derivatives

   Other income (loss), net             (7 )

Interest rate derivatives

   Interest expense      72          

Total

        $ 75      $ 90   

 

The effect on the Consolidated Statements of Operations of derivative instruments not designated as hedges is summarized as follows (in millions):

 

 

 

         

GAINS (LOSSES) FOR THE

YEARS ENDED

 
Derivatives not Designated as Hedging Instruments    Line Item in Statements of Operations    July 31, 2010     July 25, 2009  

Foreign currency derivatives

   Other income (loss), net    $ (100 )   $ 1   

Equity derivatives

   Operating expenses      18        (14

Equity derivatives

   Other income (loss), net      12        11   

Total

        $ (70   $ (2

(b) Foreign Currency Exchange Risk

The Company conducts business globally in numerous currencies. Therefore, it is exposed to adverse movements in foreign currency exchange rates. To limit the exposure related to foreign currency changes, the Company enters into foreign currency contracts. The Company does not enter into such contracts for trading purposes.

The Company hedges foreign currency forecasted transactions related to certain operating expenses and service cost of sales with currency options and forward contracts. These currency option and forward contracts, designated as cash flow hedges, generally have maturities of less than 18 months. The Company assesses effectiveness based on changes in total fair value of the derivatives. The effective portion of the derivative instrument's gain or loss is initially reported as a component of AOCI and subsequently reclassified into earnings when the hedged exposure affects earnings. The ineffective portion, if any, of the gain or loss is reported in earnings immediately. The Company did not discontinue any hedges during any of the periods presented because it was probable that the original forecasted transaction would not occur.

The Company enters into foreign exchange forward and option contracts to reduce the short-term effects of foreign currency fluctuations on assets and liabilities such as foreign currency receivables, including long-term customer financings, investments, and payables. These derivatives are not designated as hedging instruments. Gains and losses on the contracts are included in other income (loss), net, and substantially offset foreign exchange gains and losses from the remeasurement of intercompany balances or other current assets, investments, or liabilities denominated in currencies other than the functional currency of the reporting entity.

The Company hedges certain net investments in its foreign subsidiaries with forward contracts, which generally have maturities of up to six months. The Company recognized a loss of $2 million in OCI for the effective portion of its net investment hedges for the year ended July 31, 2010. The Company's net investment hedges are not included in the preceding tables.

The notional amounts of the Company's foreign currency derivatives are summarized as follows (in millions):

 

      July 31, 2010      July 25, 2009  

Cash flow hedging instruments

   $ 2,611       $ 2,965   

No hedge designation

     4,619         4,423   

Net investment hedging instruments

     105         103   

Total

   $ 7,335       $ 7,491   

(c) Interest Rate Risk

Interest Rate Derivatives, Investments  The Company's primary objective for holding fixed income securities is to achieve an appropriate investment return consistent with preserving principal and managing risk. To realize these objectives, the Company may utilize interest rate swaps or other derivatives designated as fair value or cash flow hedges. As of July 31, 2010 and July 25, 2009 the Company did not have any outstanding interest rate derivatives related to its fixed income securities.

Interest Rate Derivatives Designated as Cash Flow Hedge, Long-Term Debt  In fiscal 2010 and 2009, the Company entered into contracts related to interest rate derivatives designated as cash flow hedges, with an aggregate notional amount of $3.7 billion and $3.9 billion, respectively, to hedge against interest rate movements in connection with its anticipated issuance of senior notes in each of those fiscal years. These derivative instruments were settled in connection with the actual issuance of the senior notes. The effective portion of these hedges was recorded to AOCI, net of tax, and is being amortized to interest expense over the respective lives of the notes.

Interest Rate Derivatives Designated as Fair Value Hedge, Long-Term Debt  In fiscal 2010, the Company entered into interest rate swaps with a $1.5 billion notional amount designated as fair value hedges of a portion of the 2016 Notes. Under these interest rate swaps, the Company receives fixed-rate interest payments and makes interest payments based on LIBOR plus a fixed number of basis points. The effect of these swaps is to convert fixed-rate interest expense on a portion of the 2016 Notes to a floating rate interest expense. The gains and losses related to changes in the fair value of the interest rate swaps are included in interest expense and substantially offset changes in the fair value of the hedged portion of the underlying hedged debt. The fair value of the interest rate swaps was $72 million as of July 31, 2010 and was reflected in other assets. The Company did not have any interest rate swaps outstanding at July 25, 2009.

(d) Equity Price Risk

The Company may hold equity securities for strategic purposes or to diversify its overall investment portfolio. The publicly traded equity securities in the Company's portfolio are subject to price risk. To manage its exposure to changes in the fair value of certain equity securities, the Company may enter into equity derivatives that are designated as fair value or cash flow hedges. The changes in the value of the hedging instruments are included in other income (loss), net, and offset the change in the fair value of the underlying hedged investment. The Company did not have any equity derivatives outstanding at July 31, 2010 and July 25, 2009.

In addition, the Company periodically manages the risk of its investment portfolio by entering into equity derivatives that are not designated as accounting hedges. The changes in the fair value of these derivatives were also included in other income (loss), net. The Company is also exposed to variability in compensation charges related to certain deferred compensation obligations to employees. Although not designated as accounting hedges, the Company utilizes equity derivatives to economically hedge this exposure. As of July 31, 2010 and July 25, 2009, the notional amount of the derivative instruments used to hedge such liabilities was $169 million and $91 million, respectively.

(e) Credit-Risk-Related Contingent Features

Certain derivative instruments are executed under agreements that have provisions requiring the Company and counterparty to maintain a specified credit rating from certain credit rating agencies. If the Company's or counterparty's credit rating falls below a specified credit rating, either party has the right to request collateral on the derivatives' net liability position. Such provisions did not affect the Company's financial position as of July 31, 2010 and July 25, 2009.

 

Commitments and Contingencies
Commitments and Contingencies

11. Commitments and Contingencies

(a) Operating Leases

The Company leases office space in several U.S. locations. Outside the United States, larger leased sites include sites in Australia, Belgium, China, Germany, India, Israel, Italy, Japan, Norway, and the United Kingdom. Rent expense totaled $364 million, $328 million, and $291 million in fiscal 2010, 2009, and 2008, respectively. The Company also leases equipment and vehicles. Future minimum lease payments under all noncancelable operating leases with an initial term in excess of one year as of July 31, 2010 are as follows (in millions):

 

Fiscal Year    Amount  

2011

   $ 343   

2012

     243   

2013

     167   

2014

     119   

2015

     122   

Thereafter

     310   

Total

   $ 1,304   

(b) Purchase Commitments with Contract Manufacturers and Suppliers

The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that either allow them to procure inventory based upon criteria as defined by the Company or that establish the parameters defining the Company's requirements. A significant portion of the Company's reported purchase commitments arising from these agreements consists of firm, noncancelable, and unconditional commitments. In certain instances, these agreements allow the Company the option to cancel, reschedule, and adjust the Company's requirements based on its business needs prior to firm orders being placed. As of July 31, 2010 and July 25, 2009, the Company had total purchase commitments for inventory of $4.319 billion and $1.962 billion, respectively.

The Company records a liability for firm, noncancelable, and unconditional purchase commitments for quantities in excess of its future demand forecasts consistent with the valuation of the Company's excess and obsolete inventory. As of July 31, 2010 and July 25, 2009, the liability for these purchase commitments was $135 million and $175 million, respectively, and was included in other current liabilities.

(c) Other Commitments

In connection with the Company's business combinations and asset purchases, the Company has agreed to pay certain additional amounts contingent upon the achievement of certain agreed-upon-technology, development, product, or other milestones or the continued employment with the Company of certain employees of the acquired entities. The Company recognized such compensation expense of $120 million, $291 million, and $340 million during fiscal 2010, 2009, and 2008, respectively. The largest component of such compensation expense during the fiscal years presented was related to milestone payments made to former noncontrolling interest holders of Nuova Systems, Inc. ("Nuova Systems"), the remaining interest of which the Company purchased in fiscal 2008. As of July 31, 2010, the Company estimated that future compensation expense and contingent consideration of up to $205 million may be required to be recognized pursuant to these business combination and asset purchase agreements. The remaining potential compensation expense is primarily related to Nuova Systems.

The Company also has certain funding commitments, primarily related to its investments in privately held companies and venture funds, some of which are based on the achievement of certain agreed-upon milestones, and some of which are required to be funded on demand. The funding commitments were $279 million and $313 million as of July 31, 2010 and July 25, 2009, respectively.

(d) Variable Interest Entities

In the ordinary course of business, the Company has investments in privately held companies and provides financing to certain customers. These privately held companies and customers may be considered to be variable interest entities. The Company has evaluated its investments in these privately held companies and its customer financings and has determined that there were no significant unconsolidated variable interest entities as of July 31, 2010.

 

(e) Product Warranties and Guarantees

The following table summarizes the activity related to the product warranty liability during fiscal 2010 and 2009 (in millions):

 

      July 31, 2010     July 25, 2009  

Balance at beginning of fiscal year

   $ 321      $ 399   

Provision for warranties issued

     469        374   

Payments

     (437     (452

Fair value of warranty liability acquired

     7          

Balance at end of fiscal year

   $  360      $  321   

The Company accrues for warranty costs as part of its cost of sales based on associated material product costs, labor costs for technical support staff, and associated overhead. The Company's products are generally covered by a warranty for periods ranging from 90 days to five years, and for some products the Company provides a limited lifetime warranty.

In the normal course of business, the Company indemnifies other parties, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed to hold the other parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors, and the Company's bylaws contain similar indemnification obligations to the Company's agents. It is not possible to determine the maximum potential amount under these indemnification agreements due to the Company's limited history with prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material effect on the Company's operating results, financial position, or cash flows.

The Company also provides financing guarantees, which are generally for various third-party financing arrangements to channel partners and other end-user customers. See Note 6. The Company's other guarantee arrangements as of July 31, 2010 that are subject to recognition and disclosure requirements were not material.

(f) Legal Proceedings

Brazilian authorities have investigated the Company's Brazilian subsidiary and certain of its current and former employees, as well as a Brazilian importer of the Company's products, and its affiliates and employees, relating to alleged evasion of import taxes and alleged improper transactions involving the subsidiary and the importer. Brazilian authorities have assessed claims against the Company's Brazilian subsidiary based on a theory of joint liability with the Brazilian importer for import taxes and related penalties. The claims are for calendar years 2003 through 2007 and aggregate to approximately $190 million for the alleged evasion of import taxes, $85 million for interest, and approximately $1.6 billion for various penalties, all determined using an exchange rate as of July 31, 2010. The Company has completed a thorough review of the matter and believes the asserted tax claims against it are without merit, and the Company intends to defend the claims vigorously. While the Company believes there is no legal basis for its alleged liability, due to the complexities and uncertainty surrounding the judicial process in Brazil and the nature of the claims asserting joint liability with the importer, the Company is unable to determine the likelihood of an unfavorable outcome against it and is unable to reasonably estimate a range of loss, if any. The Company does not expect a final judicial determination for several years.

The Company has investigated the alleged improper transactions referred to above. The Company communicated with United States authorities to provide information and report on its findings and the United States authorities have investigated such allegations.

The Company and other defendants were subject to patent claims asserted by Network-1 Security Solutions, Inc. on February 7, 2008 in the Federal District Court for the Eastern District of Texas. Network-1 alleged that various Cisco products implement a method for remotely powering equipment that infringes United States Patent No. 6,218,930. Network-1 sought monetary damages. The trial on these claims began on July 12, 2010. During trial, the Company and Network-1 settled the dispute on terms that are not material to the Company, and the lawsuit was dismissed with prejudice on August 6, 2010.

In addition, the Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business, including intellectual property litigation. While the outcome of these matters is currently not determinable, the Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Shareholders' Equity
Shareholders' Equity

12. Shareholders' Equity

(a) Stock Repurchase Program

In September 2001, the Company's Board of Directors authorized a stock repurchase program. As of July 31, 2010, the Company's Board of Directors had authorized an aggregate repurchase of up to $72 billion of common stock under this program and the remaining authorized repurchase amount was $7.0 billion with no termination date. A summary of the stock repurchase activity under the stock repurchase program, reported based on the trade date, is summarized as follows (in millions, except per-share amounts):

 

      Shares
Repurchased
     Weighted-
Average Price
per Share
    Amount
Repurchased
 

Cumulative balance at July 26, 2008

     2,600       $ 20.60       $ 53,579   

Repurchase of common stock under the stock repurchase program

     202         17.89        3,600   

Cumulative balance at July 25, 2009

     2,802       $  20.41      $  57,179   

Repurchase of common stock under the stock repurchase program

     325         24.02        7,803   

Cumulative balance at July 31, 2010

     3,127       $  20.78      $  64,982   

The purchase price for the shares of the Company's stock repurchased is reflected as a reduction to shareholders' equity. The Company is required to allocate the purchase price of the repurchased shares as (i) a reduction to retained earnings until retained earnings are zero and then as an increase to accumulated deficit and (ii) a reduction of common stock and additional paid-in capital. Issuance of common stock and the tax benefit related to employee stock incentive plans are recorded as an increase to common stock and additional paid-in capital.

(b) Other Repurchases of Common Stock

For the years ended July 31, 2010 and July 25, 2009, the Company repurchased approximately 5.6 million and 1.1 million shares, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock or stock units.

(c) Preferred Stock

Under the terms of the Company's Articles of Incorporation, the Board of Directors may determine the rights, preferences, and terms of the Company's authorized but unissued shares of preferred stock.

(d) Comprehensive Income

The components of comprehensive income, net of tax, are as follows (in millions):

 

Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Net income

   $ 7,767      $ 6,134      $ 8,052   

Net change in unrealized gains/losses on available-for-sale investments:

      

Change in net unrealized gains (losses), net of tax effects of $199, $(33), and $17, respectively

     334        (71     57   

Net unrealized (gains) losses reclassified into earnings, net of tax effects of $17, $10, and $30, respectively

     (151     33        (79

Net change in unrealized gains/losses on derivative instruments:

      

Change in derivative instruments, net of tax effects of $9 , $(16), and $0, respectively

     46        (141     60   

Net unrealized (gains) losses reclassified into earnings, net of tax effects

     2        108        (60

Net change in cumulative translation adjustment and other, net of tax effects

     (55 )     (192 )     227   

Comprehensive income

     7,943        5,871        8,257   

Comprehensive loss (income) attributable to noncontrolling interests

     12        19        (39

Comprehensive income attributable to Cisco Systems, Inc.

   $  7,955      $ 5,890      $ 8,218   

 

The components of AOCI, net of tax, are summarized as follows (in millions):

      
      July 31, 2010     July 25, 2009     July 26, 2008  

Net unrealized gains on investments

   $ 333      $ 138      $ 206   

Net unrealized gains (losses) on derivative instruments

     27        (21 )     12   

Cumulative translation adjustment and other

     263        318        510   

Total

   $  623      $  435      $  728   

 

Employee Benefit Plans
Employee Benefit Plans

13. Employee Benefit Plans

(a) Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan, which includes its subplan, the International Employee Stock Purchase Plan (together, the "Purchase Plan"), under which 471.4 million shares of the Company's common stock have been reserved for issuance as of July 31, 2010. Effective July 1, 2009, eligible employees are offered shares through a 24-month offering period, which consists of four consecutive 6-month purchase periods. Employees may purchase a limited number of shares of the Company's stock at a discount of up to 15% of the lesser of the market value at the beginning of the offering period or the end of each 6-month purchase period. Prior to July 1, 2009 the offering period was six months. The Purchase Plan is scheduled to terminate on January 3, 2020. The Company issued 27 million, 28 million, and 19 million shares under the Purchase Plan in fiscal 2010, 2009, and 2008, respectively. As of July 31, 2010, 156 million shares were available for issuance under the Purchase Plan.

(b) Employee Stock Incentive Plans

Stock Incentive Plan Program Description  As of July 31, 2010, the Company had five stock incentive plans: the 2005 Stock Incentive Plan (the "2005 Plan"); the 1996 Stock Incentive Plan (the "1996 Plan"); the 1997 Supplemental Stock Incentive Plan (the "Supplemental Plan"); the Cisco Systems, Inc. SA Acquisition Long-Term Incentive Plan (the "SA Acquisition Plan"); and the Cisco Systems, Inc. WebEx Acquisition Long-Term Incentive Plan (the "WebEx Acquisition Plan"). In addition, the Company has, in connection with the acquisitions of various companies, assumed the share-based awards granted under stock incentive plans of the acquired companies or issued share-based awards in replacement thereof. Share-based awards are designed to reward employees for their long-term contributions to the Company and provide incentives for them to remain with the Company. The number and frequency of share-based awards are based on competitive practices, operating results of the Company, government regulations, and other factors. Since the inception of the stock incentive plans, the Company has granted share-based awards to a significant percentage of its employees, and the majority has been granted to employees below the vice president level. The Company's primary stock incentive plans are summarized as follows:

2005 Plan  As amended on November 15, 2007, the maximum number of shares issuable under the 2005 Plan over its term is 559 million shares plus the amount of any shares underlying awards outstanding on November 15, 2007 under the 1996 Plan, the SA Acquisition Plan, and the WebEx Acquisition Plan that are forfeited or are terminated for any other reason before being exercised or settled. If any awards granted under the 2005 Plan are forfeited or are terminated for any other reason before being exercised or settled, then the shares underlying the awards will again be available under the 2005 Plan.

Prior to November 12, 2009, the number of shares available for issuance under the 2005 Plan was reduced by 2.5 shares for each share awarded as a stock grant or stock unit. Pursuant to an amendment approved by the Company's shareholders on November 12, 2009, following that amendment the number of shares available for issuance under the 2005 Plan is reduced by 1.5 shares for each share awarded as a stock grant or a stock unit, and any shares underlying awards outstanding under the 1996 Plan, the SA Acquisition Plan, and the WebEx Acquisition Plan that expire unexercised at the end of their maximum terms become available for reissuance under the 2005 Plan. The 2005 Plan permits the granting of stock options, stock, stock units, and stock appreciation rights to employees (including employee directors and officers), consultants of the Company and its subsidiaries and affiliates, and non-employee directors of the Company. Stock options and stock appreciation rights granted under the 2005 Plan have an exercise price of at least 100% of the fair market value of the underlying stock on the grant date and prior to November 12, 2009 have an expiration date no later than nine years from the grant date. The expiration date for stock options and stock appreciation rights granted subsequent to the amendment approved on November 12, 2009 shall be no later than ten years from the grant date. The stock options will generally become exercisable for 20% or 25% of the option shares one year from the date of grant and then ratably over the following 48 or 36 months, respectively. Stock grants and stock units will generally vest with respect to 20% or 25% of the shares covered by the grant on each of the first through fifth or fourth anniversaries of the date of the grant, respectively. The Compensation and Management Development Committee of the Board of Directors has the discretion to use different vesting schedules. Stock appreciation rights may be awarded in combination with stock options or stock grants, and such awards shall provide that the stock appreciation rights will not be exercisable unless the related stock options or stock grants are forfeited. Stock grants may be awarded in combination with non-statutory stock options, and such awards may provide that the stock grants will be forfeited in the event that the related non-statutory stock options are exercised.

1996 Plan  The 1996 Plan expired on December 31, 2006, and the Company can no longer make equity awards under the 1996 Plan. The maximum number of shares issuable over the term of the 1996 Plan was 2.5 billion shares. Stock options granted under the 1996 Plan have an exercise price of at least 100% of the fair market value of the underlying stock on the grant date and expire no later than nine years from the grant date. The stock options generally become exercisable for 20% or 25% of the option shares one year from the date of grant and then ratably over the following 48 or 36 months, respectively. Certain other grants have utilized a 60-month ratable vesting schedule. In addition, the Board of Directors, or other committees administering the plan, has the discretion to use a different vesting schedule and have done so from time to time.

 

Supplemental Plan The Supplemental Plan expired on December 31, 2007, and the Company can no longer make equity awards under the Supplemental Plan. Officers and members of the Company's Board of Directors were not eligible to participate in the Supplemental Plan. Nine million shares were reserved for issuance under the Supplemental Plan.

Acquisition Plans In connection with the Company's acquisitions of Scientific-Atlanta, Inc. ("Scientific-Atlanta") and WebEx Communications, Inc. ("WebEx"), the Company adopted the SA Acquisition Plan and the WebEx Acquisition Plan, respectively, each effective upon completion of the applicable acquisition. These plans constitute assumptions, amendments, restatements, and renamings of the 2003 Long-Term Incentive Plan of Scientific-Atlanta and the WebEx Communications, Inc. Amended and Restated 2000 Stock Incentive Plan, respectively. The plans permit the grant of stock options, stock, stock units, and stock appreciation rights to certain employees of the Company and its subsidiaries and affiliates who had been employed by Scientific-Atlanta or its subsidiaries or WebEx or its subsidiaries, as applicable. As a result of the shareholder approval of the amendment and extension of the 2005 Plan, as of November 15, 2007, the Company will no longer make stock option grants or direct share issuances under either the SA Acquisition Plan or the WebEx Acquisition Plan.

General Share-Based Award Information

Stock Option Awards A summary of the stock option activity is as follows (in millions, except per-share amounts):

 

     STOCK OPTIONS OUTSTANDING  
      Number
Outstanding
    Weighted-
Average
Exercise Price
per Share
 

BALANCE AT JULY 28, 2007

     1,289      $ 26.60   

Granted and assumed

     159        31.12   

Exercised(1)

     (146     18.50   

Canceled/forfeited/expired

     (103     30.74   

BALANCE AT JULY 26, 2008

     1,199        27.83   

Granted and assumed

     14        19.01   

Exercised(1)

     (33     14.67   

Canceled/forfeited/expired

     (176     49.79   

BALANCE AT JULY 25, 2009

     1,004        24.29   

Granted and assumed

     15        13.23   

Exercised(1)

     (158     17.88   

Canceled/forfeited/expired

     (129     47.31   

BALANCE AT JULY 31, 2010

     732      $ 21.39   

(1) The total pretax intrinsic value of stock options exercised during fiscal 2010, 2009, and 2008 was $1.0 billion, $158 million, and $1.6 billion, respectively.

The following table summarizes significant ranges of outstanding and exercisable stock options as of July 31, 2010 (in millions, except years and share prices):

 

     STOCK OPTIONS OUTSTANDING             STOCK OPTIONS EXERCISABLE  
Range of Exercise Prices    Number
Outstanding
    

Weighted-
Average
Remaining
Contractual
Life

(in Years)

     Weighted-
Average
Exercise
Price per
Share
     Aggregate
Intrinsic
Value
            Number
Exercisable
     Weighted-
Average
Exercise
Price per
Share
     Aggregate
Intrinsic
Value
 

$ 0.01 – 15.00

     71         2.50       $ 10.62       $ 884            65       $ 10.87       $ 782   

  15.01 – 18.00

     137         3.18         17.36         782            129         17.34         741   

  18.01 – 20.00

     177         2.90         19.29         669            173         19.29         654   

  20.01 – 25.00

     188         4.26         22.48         125            146         22.40         109   

  25.01 – 35.00

     158         6.02         30.63                    92         30.56           

  35.01 – 70.00

     1         0.61         54.22                    1         54.22           

Total

     732         3.94       $ 21.39       $ 2,460            606       $ 20.51       $ 2,286   

 

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company's closing stock price of $23.07 as of July 30, 2010, which would have been received by the option holders had those option holders exercised their stock options as of that date. The total number of in-the-money stock options exercisable as of July 31, 2010 was 500 million. As of July 25, 2009, 768 million outstanding stock options were exercisable and the weighted-average exercise price was $24.16.

Restricted Stock and Stock Unit Awards  A summary of the restricted stock and stock unit activity is as follows (in millions, except per-share amounts):

 

      Restricted Stock/
Stock Units
    Weighted-Average
Grant Date Price
per Share
     Aggregated Fair
Market Value
 

BALANCE AT JULY 28, 2007

     11      $ 22.52      

Granted and assumed

     4        27.29      

Vested

     (4     22.49       $ 83   

Canceled/forfeited

     (1     24.24      

BALANCE AT JULY 26, 2008

     10      $ 24.27      

Granted and assumed

     57        20.90      

Vested

     (4     23.56       $ 69   

Canceled/forfeited

     (1     22.76      

BALANCE AT JULY 25, 2009

     62      $ 21.25      

Granted and assumed

     54        23.40      

Vested

     (16     21.56       $ 378   

Canceled/forfeited

     (3     22.40      

BALANCE AT JULY 31, 2010

     97      $  22.35      

Share-Based Awards Available for Grant  A summary of share-based awards available for grant is as follows (in millions):

 

      Share-Based Awards
Available for Grant
 

BALANCE AT JULY 28, 2007

     294   

Options granted and assumed

     (159

Restricted stock, stock units, and other share-based awards granted and assumed

     (11

Share-based awards canceled/forfeited/expired

     27   

Additional shares reserved

     211   

BALANCE AT JULY 26, 2008

     362   

Options granted and assumed

     (14

Restricted stock, stock units, and other share-based awards granted and assumed

     (140

Share-based awards canceled/forfeited/expired

     38   

Additional shares reserved

     7   

BALANCE AT JULY 25, 2009

     253   

Options granted and assumed

     (15

Restricted stock, stock units, and other share-based awards granted and assumed

     (81

Share-based awards canceled/forfeited/expired

     123   

Additional shares reserved

     15   

BALANCE AT JULY 31, 2010

     295   

As reflected in the preceding table, for each share awarded as restricted stock or subject to a restricted stock unit award under the 2005 Plan, beginning November 15, 2007 and prior to November 12, 2009, an equivalent of 2.5 shares was deducted from the available share-based award balance. Effective as of November 12, 2009, the equivalent number of shares was revised to 1.5 shares for each share awarded as restricted stock or subject to a restricted stock unit award under the 2005 Plan beginning on this date.

 

Expense and Valuation Information for Share-Based Awards

Share-Based Compensation Expense

Share-based compensation expense consists primarily of expenses for stock options, stock purchase rights, restricted stock, and restricted stock units granted to employees. The following table summarizes share-based compensation expense (in millions):

 

Years Ended    July 31, 2010      July 25, 2009      July 26, 2008  

Cost of sales—product

   $ 57       $ 46       $ 40   

Cost of sales—service

     164         128         108   

Share-based compensation expense in cost of sales

     221         174         148   

Research and development

     450         382         339   

Sales and marketing

     536         441         438   

General and administrative

     310         234         187   

Share-based compensation expense in operating expenses

     1,296         1,057         964   

Total share-based compensation expense

   $ 1,517       $ 1,231       $ 1,112   

As of July 31, 2010, the total compensation cost related to unvested share-based awards not yet recognized was $3.3 billion, which is expected to be recognized over approximately 2.5 years on a weighted-average basis. The income tax benefit for share-based compensation expense was $415 million, $317 million, and $362 million for fiscal 2010, 2009, and 2008, respectively.

Valuation of Employee Stock Options and Employee Stock Purchase Rights

The assumptions related to and the valuation of employee stock options and employee stock purchase rights are summarized as follows:

 

     EMPLOYEE STOCK OPTIONS            EMPLOYEE STOCK PURCHASE RIGHTS  
Years Ended    July 31, 2010      July 25, 2009     July 26, 2008            July 31, 2010      July 25, 2009      July 26, 2008  

Number of options granted (in millions)

     4         9        151           N/A         N/A         N/A   

Weighted-average assumptions:

                  

Expected volatility

     30.5%         36.0%        31.0%           30.9%         36.4%         32.6%   

Risk-free interest rate

     2.3%         3.0%        4.3%           0.5%         0.6%         2.7%   

Expected dividend

     0.0%         0.0%        0.0%           0.0%         0.0%         0.0%   

Kurtosis

     4.1         4.5        4.6           N/A         N/A         N/A   

Skewness

     0.20         (0.19     (0.80        N/A         N/A         N/A   

Weighted-average expected life (in years)

     5.1         5.9        6.3           1.3         1.1         0.5   

Weighted-average estimated grant date fair value (per option /per share)

   $ 6.50       $ 6.60      $ 9.60         $ 6.53       $ 5.46       $ 6.12   

The Company estimates the value of employee stock options on the date of grant using a lattice-binomial model and estimates the value of employee stock purchase rights on the date of grant using the Black-Scholes model. The lattice-binomial model is more capable of incorporating the features of the Company's employee stock options, such as the vesting provisions and various restrictions including restrictions on transfer and hedging, among others, and the options are often exercised prior to their contractual maturity. The use of the lattice-binomial model also requires extensive actual employee exercise behavior data for the relative probability estimation purpose, and a number of complex assumptions as presented in the preceding table. The probability estimation of the employees' exercise behavior is assumed to be a function of two variables: an option's remaining vested life and the extent to which the option is in-the-money. Both of these two variables are based on the entire history of exercises and cancellations on all past option grants made by the Company.

The determination of the fair value of employee stock options and employee stock purchase rights on the date of grant is impacted by the Company's stock price as well as assumptions regarding a number of highly complex and subjective variables. The weighted-average assumptions were determined as follows:

 

 

For employee stock options, the Company used the implied volatility for two-year traded options on the Company's stock as the expected volatility assumption required in the lattice-binomial model. For employee stock purchase rights, the Company used the implied volatility for traded options (with contract terms corresponding to the expected life of the employee stock purchase rights) on the Company's stock in the Black-Scholes model. The selection of the implied volatility approach was based upon the availability of actively traded options on the Company's stock and the Company's assessment that implied volatility is more representative of future stock price trends than historical volatility.

 

 

The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of the Company's employee stock options and employee stock purchase rights.

 

 

The dividend yield assumption is based on the history and expectation of dividend payouts at the grant date.

 

 

The estimated kurtosis and skewness are technical measures of the distribution of stock price returns, which affect expected employee stock option exercise behaviors, and are based on the Company's stock price return history as well as consideration of various academic analyses.

The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding and is a derived output of the lattice-binomial model. The expected life of employee stock options is impacted by all of the underlying assumptions and calibration of the Company's model. The lattice-binomial model assumes that employees' exercise behavior is a function of the option's remaining vested life and the extent to which the option is in-the-money. The lattice-binomial model estimates the probability of exercise as a function of these two variables based on the entire history of exercises and cancellations on all past option grants made by the Company. The Company measures the fair value of restricted stock and restricted stock units as if the awards were vested and issued on the grant date.

Accuracy of Fair Value Estimates   The Company uses third-party analyses to assist in developing the assumptions used in, as well as calibrating, its lattice-binomial and Black-Scholes models. The Company is responsible for determining the assumptions used in estimating the fair value of its share-based payment awards. The Company's determination of the fair value of share-based payment awards is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company's expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company's employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in management's opinion, the existing valuation models may not provide an accurate measure of the fair value or be indicative of the fair value that would be observed in a willing buyer/willing seller market for the Company's employee stock options.

 

(c) Employee 401(k) Plans

The Company sponsors the Cisco Systems, Inc. 401(k) Plan (the "Plan") to provide retirement benefits for its employees. As allowed under Section 401(k) of the Internal Revenue Code, the Plan provides for tax-deferred salary contributions for eligible employees. Effective January 1, 2009, the Plan allows employees to contribute from 1% to 75% of their annual compensation to the Plan on a pretax and after-tax basis. Employee contributions are limited to a maximum annual amount as set periodically by the Internal Revenue Code. Effective January 1, 2009, the Company matches pretax employee contributions up to 100% of the first 4.5% of eligible earnings that are contributed by employees. Therefore, the maximum matching contribution that the Company may allocate to each participant's account will not exceed $11,025 for the 2010 calendar year due to the $245,000 annual limit on eligible earnings imposed by the Internal Revenue Code. All matching contributions vest immediately. The Company's matching contributions to the Plan totaled $210 million, $202 million, and $171 million in fiscal 2010, 2009, and 2008, respectively.

The Plan allows employees who meet the age requirements and reach the Plan contribution limits to make a catch-up contribution not to exceed the lesser of 75% of their eligible compensation or the limit set forth in the Internal Revenue Code. The catch-up contributions are not eligible for matching contributions. In addition, the Plan provides for discretionary profit-sharing contributions as determined by the Board of Directors. Such contributions to the Plan are allocated among eligible participants in the proportion of their salaries to the total salaries of all participants. There were no discretionary profit-sharing contributions made in fiscal 2010, 2009, or 2008.

The Company also sponsors other 401(k) plans that arose from acquisitions of other companies. The Company's contributions to these plans were not material to the Company on either an individual or aggregate basis for any of the fiscal years presented.

(d) Deferred Compensation Plans

The Cisco Systems, Inc. Deferred Compensation Plan (the "Deferred Compensation Plan"), a nonqualified deferred compensation plan, became effective in 2007. As required by applicable law, participation in the Deferred Compensation Plan is limited to a select group of the Company's management employees. Under the Deferred Compensation Plan, which is an unfunded and unsecured deferred compensation arrangement, a participant may elect to defer base salary, bonus, and/or commissions, pursuant to such rules as may be established by the Company, up to the maximum percentages for each deferral election as described in the plan. The Company may also, at its discretion, make a matching contribution to the employee under the Deferred Compensation Plan. A matching contribution equal to 4.5% of eligible compensation in excess of the Internal Revenue Code limit for qualified plans for calendar year 2010 that is deferred by participants under the Deferred Compensation Plan, with a $1.5 million cap on eligible compensation, will be made to eligible participants' accounts at the end of calendar year 2010. The deferred compensation liability under the Deferred Compensation Plan, together with a deferred compensation plan assumed from Scientific-Atlanta, was approximately $280 million and $220 million as of July 31, 2010 and July 25, 2009, respectively, and was recorded primarily in other long-term liabilities.

Income Taxes
Income Taxes

14. Income Taxes

(a) Provision for Income Taxes

The provision for income taxes consists of the following (in millions):

 

Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Federal:

      

Current

   $ 1,469      $ 1,615      $ 2,384   

Deferred

     (435     (397     (693
       1,034        1,218        1,691   

State:

      

Current

     186        132        173   

Deferred

            (30     (62
       186        102        111   

Foreign:

      

Current

     470        386        418   

Deferred

     (42     (147     (17
       428        239        401   

Total

   $ 1,648      $ 1,559      $ 2,203   

Income before provision for income taxes consists of the following (in millions):

 

Years Ended    July 31, 2010      July 25, 2009      July 26, 2008  

United States

   $ 1,102       $ 1,650       $ 3,044   

International

     8,313         6,043         7,211   

Total

   $ 9,415       $ 7,693       $ 10,255   

The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consists of the following:

 

Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Federal statutory rate

     35.0%        35.0%        35.0%   

Effect of:

      

State taxes, net of federal tax benefit

     1.4        1.3        0.9   

Foreign income at other than U.S. rates

     (19.3     (18.9     (16.1

Tax credits

     (0.5     (2.4     (0.8

Tax audit settlement

                   (1.6

Transfer pricing adjustment related to share-based compensation

     (1.7     2.3          

Nondeductible compensation

     2.0        2.6        1.8   

International realignment

                   2.2   

Other, net

     0.6        0.4        0.1   

Total

     17.5%        20.3%        21.5%   

During fiscal 2010, the U.S. Court of Appeals for the Ninth Circuit (the "Ninth Circuit") withdrew its prior holding and reaffirmed the 2005 U.S. Tax Court ruling in Xilinx, Inc. v. Commissioner . This final decision impacted 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 the Company was not a named party to the case, this decision resulted in a change in the Company's tax benefits recognized in its financial statements. As a result of the decision, the Company recognized tax benefits of $158 million as a reduction to the provision for income taxes, or an impact of 1.7 percentage points as presented under the caption of "Transfer pricing adjustment related to share-based compensation" in the preceding table. In addition, an increase was recorded to additional paid-in capital for $566 million. The fiscal 2010 tax benefits above effectively reverse the related charges that the Company incurred during fiscal 2009.

 

The tax provision in fiscal 2009 included a net tax benefit of $106 million, related to the R&D tax credit for fiscal 2008, as a result of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 which reinstated the U.S. federal R&D tax credit retroactive to January 1, 2008. The tax provision in fiscal 2008 included tax expense of $229 million related to the intercompany realignment of certain of the Company's foreign operations and a net tax benefit of $162 million related to a settlement of certain tax matters with the IRS.

U.S. income taxes and foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries were not provided for on a cumulative total of $31.6 billion of undistributed earnings for certain foreign subsidiaries as of the end of fiscal 2010. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries. If these earnings were distributed to the United States in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, the Company would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. Determination of the amount of unrecognized deferred income tax liability related to these earnings is not practicable.

As a result of certain employment and capital investment actions, the Company's income in certain foreign countries is subject to reduced tax rates and in some cases is wholly exempt from taxes. A portion of these tax incentives will expire at the end of fiscal 2015 and the majority of the remaining balance will expire at the end of fiscal 2025. As of the end of the respective fiscal years, the gross income tax benefits attributable to these tax incentives were estimated to be $1.7 billion ($0.30 per diluted share) in fiscal 2010, $1.3 billion ($0.22 per diluted share) in fiscal 2009, and $1.6 billion ($0.26 per diluted share) in fiscal 2008. These gross income tax benefits for the respective years were partially offset by accruals of U.S. income taxes on undistributed earnings.

(b) Unrecognized Tax Benefits

The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in millions):

 

Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Beginning balance(1)

   $ 2,816      $ 2,505      $ 3,331   

Additions based on tax positions related to the current year

     246        190        488   

Additions for tax positions of prior years

     60        307        147   

Reductions for tax positions of prior years

     (250     (17     (466

Settlements

     (140     (109     (951

Lapse of statute of limitations

     (55     (60     (44

Ending Balance

   $ 2,677      $ 2,816      $ 2,505   

(1)The beginning balance of the unrecognized tax benefits for the year ended July 26, 2008 included a cumulative effect of a change in accounting principle for $451 million.

 As of July 31, 2010, $2.3 billion of the unrecognized tax benefits would affect the effective tax rate if realized. During fiscal 2010, the Company recognized $167 million of net interest income and $5 million of penalties. During 2009, the Company recognized $158 million of net interest expense and $5 million of penalties. The Company's total accrual for interest and penalties was $167 million and $329 million as of the end of fiscal 2010 and 2009, respectively. The Company is no longer subject to U.S. federal income tax audit for returns covering tax years through fiscal 2001. With limited exceptions, the Company is no longer subject to state and local or foreign income tax audits for returns covering tax years through fiscal 1997.

During fiscal 2010, the Ninth Circuit withdrew its prior holding and reaffirmed the 2005 U.S. Tax Court ruling in Xilinx, Inc. v. Commissioner . As a result of this final decision, the Company decreased the amount of gross unrecognized tax benefits by approximately $220 million and decreased the amount of accrued interest by $218 million.

During fiscal 2009, the Company increased the amount of unrecognized tax benefits by approximately $214 million and increased the amount of accrued interest by $197 million as a result of the Ninth Circuit's initial decision.

During fiscal 2008, the Company and the IRS agreed to a settlement with respect to certain tax issues related to U.S. income inclusions arising from the Company's international operations for fiscal years ended July 27, 2002 through July 29, 2006. As a result of the settlement, the Company reduced the amount of gross unrecognized tax benefits by approximately $1.0 billion. The Company also reduced the amount of accrued interest by $39 million. In addition, the IRS has proposed other adjustments that are not covered under the settlement agreement related to fiscal years ended July 27, 2002 through July 31, 2004. The Company timely filed a protest with IRS Appeals on these proposed adjustments. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations.

Although timing of the resolution of audits is highly uncertain, the Company does not believe it is reasonably possible that the total amount of unrecognized tax benefits as of July 31, 2010 will materially change in the next 12 months.

(c) Deferred Tax Assets and Liabilities

The following table presents the breakdown between current and noncurrent net deferred tax assets (in millions):

 

      July 31, 2010     July 25, 2009  

Deferred tax assets—current

   $ 2,126      $ 2,320   

Deferred tax liabilities—current

     (87     (12

Deferred tax assets—noncurrent

     2,079        2,122   

Deferred tax liabilities—noncurrent

     (276 )     (57

Total net deferred tax assets

   $ 3,842      $ 4,373   

The components of the deferred tax assets and liabilities are as follows (in millions):

 

      July 31, 2010      July 25, 2009  

ASSETS

     

Allowance for doubtful accounts and returns

   $ 248       $ 300   

Sales-type and direct-financing leases

     224         226   

Inventory write-downs and capitalization

     176         238   

Investment provisions

     329         333   

IPR&D, goodwill, and purchased intangible assets

     191         222   

Deferred revenue

     1,752         1,475   

Credits and net operating loss carryforwards

     752         817   

Share-based compensation expense

     970         809   

Accrued compensation

     339         405   

Other

     517        600   

Gross deferred tax assets

     5,498        5,425   

Valuation allowance

     (76     (66

Total deferred tax assets

     5,422        5,359   

LIABILITIES

    

Purchased intangible assets

     (1,224     (639

Depreciation

     (120     (288

Unrealized gains on investments

     (185     (12

Other

     (51     (47

Total deferred tax liabilities

     (1,580     (986

Total net deferred tax assets

   $             3,842      $             4,373   

As of July 31, 2010, the Company's federal, state, and foreign net operating loss carryforwards for income tax purposes were $325 million, $1.6 billion, and $252 million, respectively. If not utilized, the federal net operating loss carryforwards will begin to expire in fiscal 2019, the state net operating loss carryforwards will begin to expire in fiscal 2011, and the foreign net operating loss carryforwards will begin to expire in fiscal 2012. As of July 31, 2010, the Company's federal and state tax credit carryforwards for income tax purposes were approximately $8 million and $584 million, respectively. If not utilized, the federal and state tax credit carryforwards will begin to expire in fiscal 2011.

Segment Information and Major Customers
Segment Information and Major Customers

15. 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 Products. 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 Theater

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 has also recast its reportable segment data for the periods presented to reflect such change.

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 theater 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 theaters 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 theater because management does not include this information in its measurement of the performance of the operating segments.

Summarized financial information by theater for fiscal 2010, 2009, and 2008, 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):

 

Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Net sales:

      

United States and Canada(1)

   $ 21,740      $ 19,345      $ 21,242   

European Markets

     8,048        7,683        8,123   

Emerging Markets

     4,367        3,999        4,530   

Asia Pacific Markets

     5,885        5,090        5,645   

Total

   $ 40,040      $ 36,117      $ 39,540   

Gross margin:

      

United States and Canada

   $ 14,042      $ 12,660      $ 13,855   

European Markets

     5,425        5,116        5,358   

Emerging Markets

     2,805        2,438        2,789   

Asia Pacific Markets

     3,847        3,272        3,725   

Theater total

     26,119        23,486        25,727   

Unallocated corporate items(2)

     (476     (392     (381

Total

   $ 25,643      $ 23,094      $ 25,346   

(1) Net sales in the United States were $20.4 billion, $18.2 billion, and $20.1 billion for fiscal 2010, 2009, and 2008, respectively.

 (2) The unallocated corporate items include the effects of amortization of acquisition-related intangible assets; share-based compensation expense; and, for the year ended July 25, 2009, it also includes charges related to asset impairments and restructurings.

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

(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. Reclassifications have been made to the net sales for groups of similar products for the fiscal years presented to conform to the presentation of these items effective in the first quarter of fiscal 2011.

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

 

Years Ended    July 31, 2010      July 25, 2009      July 26, 2008  

Net sales:

        

Routers

   $ 6,728       $ 6,521       $ 8,225   

Switches

     13,454         11,923         13,330   

New Products

     11,386         9,859         10,492   

Other Products

     852         828         1,052   

Product

     32,420         29,131         33,099   

Service

     7,620         6,986         6,441   

Total

   $         40,040       $         36,117       $         39,540   

(c) Other Segment Information

The majority of the Company's assets, excluding cash and cash equivalents and investments, as of July 31, 2010 and July 25, 2009 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 $33.2 billion and $29.1 billion as of July 31, 2010 and July 25, 2009, respectively, and the remaining $6.7 billion and $5.9 billion at the respective year ends was held in the United States. In fiscal 2010, 2009, and 2008, 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):

      July 31, 2010      July 25, 2009      July 26, 2008  

Property and equipment, net:

        

United States

   $ 3,283       $ 3,330       $ 3,478   

International

     658         713         673   

Total

   $ 3,941       $ 4,043       $ 4,151   
Net Income per Share
Net Income per Share

16. Net Income per Share

The following table presents the calculation of basic and diluted net income per share (in millions, except per-share amounts):

 

Years Ended    July 31, 2010      July 25, 2009      July 26, 2008  

Net income

   $ 7,767       $ 6,134       $ 8,052   

Weighted-average shares—basic

     5,732         5,828         5,986   

Effect of dilutive potential common shares

     116         29         177   

Weighted-average shares—diluted

     5,848         5,857         6,163   

Net income per share—basic

   $ 1.36       $ 1.05       $ 1.35   

Net income per share—diluted

   $ 1.33       $ 1.05       $ 1.31   

Antidilutive employee share-based awards, excluded

     344         977         567   

Employee equity share options, unvested shares, and similar equity instruments granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share. Diluted shares outstanding include the dilutive effect of in-the-money options, unvested restricted stock, and restricted stock units. The dilutive effect of such equity awards is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible, are collectively assumed to be used to repurchase shares.

Supplementary Financial Data
Supplementary Financial Data

Supplementary Financial Data (Unaudited)

(in millions, except per-share amounts)

 

Quarters Ended    July 31, 2010      May 1, 2010      Jan. 23, 2010      Oct. 24, 2009      July 25, 2009      Apr. 25, 2009      Jan. 24, 2009      Oct. 25, 2008  

Net sales

   $ 10,836       $ 10,368       $ 9,815       $ 9,021       $ 8,535       $ 8,162       $ 9,089       $ 10,331   

Gross margin

   $ 6,793       $ 6,630       $ 6,332       $ 5,888       $ 5,461       $ 5,229       $ 5,723       $ 6,681   

Net income

   $ 1,935       $ 2,192       $ 1,853       $ 1,787       $ 1,081       $ 1,348       $ 1,504       $ 2,201   

Net income per share—basic

   $ 0.34       $ 0.38       $ 0.32       $ 0.31       $ 0.19       $ 0.23       $ 0.26       $ 0.37   

Net income per share—diluted

   $ 0.33       $ 0.37       $ 0.32       $ 0.30       $ 0.19       $ 0.23       $ 0.26       $ 0.37   

Cash and cash equivalents and investments

   $ 39,861       $ 39,106       $ 39,638       $ 35,365       $ 35,001       $ 33,551       $ 29,531       $ 26,763   
Summary of Significant Accounting Policies (Policy)

(a) Cash and Cash Equivalents  The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions.

(b) Available-for-Sale Investments  The Company classifies its investments in both fixed income securities and publicly traded equity securities as available-for-sale investments. Fixed income securities primarily consist of U.S. government securities, U.S. agency securities, non-U.S. government and agency securities, corporate debt securities, and asset-backed securities. These available-for-sale investments are held in the custody of several major financial institutions. The specific identification method is used to determine the cost basis of fixed income securities sold. The weighted-average method is used to determine the cost basis of publicly traded equity securities sold. These investments are recorded in the Consolidated Balance Sheets at fair value. Unrealized gains and losses on these investments, to the extent the investments are unhedged, are included as a separate component of accumulated other comprehensive income (AOCI), net of tax. The Company classifies its investments as current based on the nature of the investments and their availability for use in current operations.

(c) Other-than-Temporary Impairments on Investments  Effective at the beginning of the fourth quarter of fiscal 2009, the Company was required to evaluate its fixed income securities for impairments in connection with an updated accounting standard. Under this updated standard, if the fair value of a debt security is less than its amortized cost, the Company assesses whether the impairment is other than temporary. An impairment is considered other than temporary if (i) the Company has the intent to sell the security, (ii) it is more likely than not that the Company will be required to sell the security before recovery of the entire amortized cost basis, or (iii) the Company does not expect to recover the entire amortized cost basis of the security. If impairment is considered other than temporary based on condition (i) or (ii) described above, the entire difference between the amortized cost and the fair value of the debt security is recognized in earnings. If an impairment is considered other than temporary based on condition (iii), the amount representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) will be recognized in earnings and the amount relating to all other factors will be recognized in OCI. Upon the adoption of the updated accounting standard, the Company recorded a cumulative effect adjustment of $49 million, which resulted in an increase to the balance of retained earnings with a corresponding decrease to OCI. Prior to the adoption of this accounting standard, the Company recognized impairment charges on fixed income securities using the impairment policy as is currently applied to publicly traded equity securities, as discussed below.

The Company recognizes an impairment charge on publicly traded equity securities when a decline in the fair value of its investments in publicly traded equity securities below the cost basis is judged to be other than temporary. The Company considers various factors in determining whether a decline in the fair value of these investments is other than temporary, including the length of time and extent to which the fair value of the security has been less than the Company's cost basis, the financial condition and near-term prospects of the issuer, and the Company's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Investments in privately held companies are included in other assets in the Consolidated Balance Sheets and are primarily accounted for using either the cost or equity method. The Company monitors these investments for impairments and makes appropriate reductions in carrying values if the Company determines that an impairment charge is required based primarily on the financial condition and near-term prospects of these companies.

(d) Inventories  Inventories are stated at the lower of cost or market. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. The Company provides inventory write-downs based on excess and obsolete inventories determined primarily by future demand forecasts. The write-down is measured as the difference between the cost of the inventory and market based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. In addition, the Company records a liability for firm, noncancelable, and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of the Company's future demand forecasts consistent with its valuation of excess and obsolete inventory.

(e) Allowance for Doubtful Accounts  The allowance for doubtful accounts is based on the Company's assessment of the collectibility of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, age of the accounts receivable balances, and economic conditions that may affect a customer's ability to pay.

(f) Financing Receivables and Guarantees  The Company provides financing arrangements, including leases, financed service contracts, and loans, for certain qualified end-user customers to build, maintain, and upgrade their networks. Lease receivables primarily represent sales-type and direct-financing leases. Leases and loans have on average a three-year term and are usually collateralized by a security interest in the underlying assets. Financed service contracts also typically have terms of one to three years and primarily relate to technical support services. The Company maintains an allowance for uncollectible financing receivables based on a variety of factors, including the risk rating of the portfolio, macroeconomic conditions, historical experience, and other market factors.

In addition, the Company facilitates third-party financing arrangements for channel partners, consisting of revolving short-term financing, generally with payment terms ranging from 60 to 90 days. In certain instances, these financing arrangements result in a transfer of the Company's receivables to the third party. The receivables are derecognized upon transfer, as these transfers qualify as true sales, and the Company receives a payment for the receivables from the third party based on the Company's standard payment terms. These financing arrangements facilitate the working capital requirements of the channel partners and, in some cases, the Company guarantees a portion of these arrangements. The Company also provides financing guarantees for third-party financing arrangements extended to end-user customers related to leases and loans, which typically have terms of up to three years. The Company could be called upon to make payments under these guarantees in the event of nonpayment by the channel partners or end-user customers. Deferred revenue relating to these financing arrangements is recorded in accordance with revenue recognition policies or for the fair value of the financing guarantees.

 

(g) Depreciation and Amortization  Property and equipment are stated at cost, less accumulated depreciation or amortization, whenever applicable. Depreciation and amortization are computed using the straight-line method, generally over the following periods:

      Period
Buildings    25years
Building improvements    10years
Furniture and fixtures    5years
Leasehold improvements    Shorter of remaining lease term or 5 years
Computer equipment and related software    30to 36 months
Production, engineering, and other equipment    Up to 5 years
Operating lease assets    Based on lease term—generally up to 3 years

(h) Business Combinations  Upon adoption of the revised accounting guidance for business combinations in the first quarter of fiscal 2010, the Company has applied the expanded definition of "business" and "business combination" as prescribed by the revised accounting guidance. Other significant changes in connection with the revised accounting guidance include (i) the recognition of assets acquired, liabilities assumed and noncontrolling interests (including goodwill) measured at fair value at the acquisition date with subsequent changes to the fair value of such assets acquired and liabilities assumed recognized in earnings after the expiration of the measurement period, a period not to exceed 12 months from the acquisition date; (ii) the recognition of acquisition-related expenses and acquisition-related restructuring costs in earnings; and (iii) the capitalization of in-process research and development (IPR&D) at fair value as an indefinite-lived intangible asset that will be assessed for impairment thereafter. Upon completion of development, the underlying R&D intangible asset will be amortized over its estimated useful life.

(i) Goodwill and Purchased Intangible Assets  Goodwill is tested for impairment on an annual basis in the fourth fiscal quarter and, when specific circumstances dictate, between annual tests. When impaired, the carrying value of goodwill is written down to fair value. The goodwill impairment test involves a two-step process. The first step, identifying a potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds its fair value, the second step would need to be conducted; otherwise, no further steps are necessary as no potential impairment exists. The second step, measuring the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. Any excess of the reporting unit goodwill carrying value over the respective implied fair value is recognized as an impairment loss. There was no impairment of goodwill identified in fiscal 2010, 2009, or 2008. Purchased intangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally two to seven years. See below related to the impairment test for purchased intangible assets with finite lives. Purchased intangible assets with indefinite lives are assessed for potential impairment annually or when events or circumstances indicate that their carrying amounts might be impaired.

(j) Long-Lived Assets  Long-lived assets that are held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability of long-lived assets is based on an estimate of the undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the difference between the fair value of the asset and its carrying value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

(k) Derivative Instruments  The Company recognizes derivative instruments as either assets or liabilities and measures those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For a derivative instrument designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. For a derivative instrument designated as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of AOCI and subsequently reclassified into earnings when the hedged exposure affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. For derivative instruments that are not designated as accounting hedges, changes in fair value are recognized in earnings in the period of change. The Company records derivative instruments in the statements of cash flows to operating, investing or financing activities consistent with the cash flows of the hedged item.

(l) Foreign Currency Translation  Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of AOCI. Income and expense accounts are translated at average exchange rates during the year. Remeasurement adjustments are recorded in other income (loss), net. The effect of foreign currency exchange rates on cash and cash equivalents was not material for any of the years presented.

(m) Concentrations of Risk  Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company seeks to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties.

The Company performs ongoing credit evaluations of its customers and, with the exception of certain financing transactions, does not require collateral from its customers. The Company receives certain of its components from sole suppliers. Additionally, the Company relies on a limited number of contract manufacturers and suppliers to provide manufacturing services for its products. The inability of a contract manufacturer or supplier to fulfill supply requirements of the Company could materially impact future operating results.

(o) Advertising Costs  The Company expenses all advertising costs as incurred. Advertising costs included within sales and marketing expenses were approximately $290 million, $165 million, and $195 million for fiscal 2010, 2009 and 2008, respectively.

(p) Share-Based Compensation Expense  The Company measures and recognizes the compensation expense for all share-based awards made to employees and directors including employee stock options and employee stock purchases related to the Employee Stock Purchase Plan ("employee stock purchase rights") based on estimated fair values. The fair value of employee stock options is estimated on the date of grant using a lattice-binomial option-pricing model ("lattice-binomial model") and for employee stock purchase rights the Company estimates the fair value using the Black-Scholes model. The Company measures the fair value of restricted stock and restricted stock units as if the awards were vested and issued on the grant date. The value of awards that are ultimately expected to vest is recognized as expense over the requisite service periods. Because share-based compensation expense is based on awards ultimately expected to vest, it has been reduced for forfeitures.

(q) Software Development Costs  Software development costs required to be capitalized for software sold, leased, or otherwise marketed have not been material to date. Software development costs required to be capitalized for internal use software have also not been material to date.

(r) Income Taxes  Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

(s) Computation of Net Income per Share  Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Diluted shares outstanding include the dilutive effect of in-the-money options, unvested restricted stock, and restricted stock units. The dilutive effect of such equity awards is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible, are collectively assumed to be used to repurchase shares.

(t) Consolidation of Variable Interest Entities  In the event that the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity will be included in the Company's Consolidated Financial Statements.

(u) Use of Estimates  The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Estimates are used for the following, among others:

 

 

Revenue recognition

 

Allowances for receivables and sales returns

 

Inventory valuation and liability for purchase commitments with contract manufacturers and suppliers

 

Warranty costs

 

Share-based compensation expense

 

Fair value measurements and other-than-temporary impairments

 

Goodwill and purchased intangible asset impairments

 

Income taxes

 

Loss contingencies

The actual results experienced by the Company may differ materially from management's estimates.

(v) Recent Accounting Standards or Updates  In June 2009, the FASB issued revised guidance for the consolidation of variable interest entities. In February 2010, the FASB issued amendments to the consolidation requirements, exempting certain investment funds from the June 2009 guidance for the consolidation of variable interest entities. The June 2009 guidance for the consolidation of variable interest entities replaces the quantitative-based risks and rewards approach with a qualitative approach that focuses on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and has the obligation to absorb losses or the right to receive benefits from the entity that could be potentially significant to the variable interest entity. The accounting guidance also requires an ongoing reassessment of whether an enterprise is the primary beneficiary and requires additional disclosures about an enterprise's involvement in variable interest entities. This accounting guidance is effective for the Company beginning in the first quarter of fiscal 2011. Upon adoption, the application of the revised guidance for the consolidation of variable interest entities did not have a material impact to the Company's Consolidated Financial Statements.

In June 2009, the FASB issued revised guidance for the accounting of transfers of financial assets. This guidance eliminates the concept of a qualifying special-purpose entity, removes the scope exception for qualifying special-purpose entities when applying the accounting guidance related to the consolidation of variable interest entities, changes the requirements for derecognizing financial assets, and requires enhanced disclosure. This accounting guidance is effective for the Company beginning in the first quarter of fiscal 2011. Upon adoption, the application of the revised guidance for the accounting of transfers of financial assets did not have a material impact to the Company's Consolidated Financial Statements.

In July 2010, the FASB issued an accounting update to provide guidance to enhance disclosures related to the credit quality of a company's financing receivables portfolio and the associated allowance for credit losses. Pursuant to this accounting update, a company is required to provide a greater level of disaggregated information about its allowance for credit loss with the objective of facilitating users' evaluation of the nature of credit risk inherent in the company's portfolio of financing receivables, how that risk is analyzed and assessed in arriving at the allowance for credit losses, and the changes and reasons for those changes in the allowance for credit losses. The revised disclosures as of the end of the reporting period are effective for the Company beginning in the second quarter of fiscal 2011, and the revised disclosures related to activities during the reporting period are effective for the Company beginning in the third quarter of fiscal 2011. The Company is currently evaluating the impact of this accounting update on its financial disclosures.

Consolidated Statements of Equity - Supplemental Information (Tables)
Stock Repurchases Since Inception of Program
     Shares of
Common
Stock
     Common Stock
and Additional
Paid-In Capital
     Retained
Earnings
     Total Cisco
Shareholders'
Equity
 

Repurchases of common stock under the repurchase program

           $       $          $   
Summary of Significant Accounting Policies (Tables)
      Period
Buildings    25years
Building improvements    10years
Furniture and fixtures    5years
Leasehold improvements    Shorter of remaining lease term or 5 years
Computer equipment and related software    30to 36 months
Production, engineering, and other equipment    Up to 5 years
Operating lease assets    Based on lease term—generally up to 3 years
     FISCAL YEAR ENDED JULY 31, 2010  
      As
Reported
    

Pro Forma Basis as if the

Previous Accounting Guidance Were

in Effect

 

Net sales

   $ 40,040       $ 39,802   
Business Combinations (Tables)
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Summary of Purchase Acquisitions
Fiscal 2010    Shares Issued      Purchase
Consideration
     Net Tangible
Assets Acquired/
(Liabilities
Assumed)
    Purchased
Intangible
Assets
     Goodwill  

ScanSafe, Inc.

           $ 154       $ 2      $ 31       $ 121   

Starent Networks, Corp.

             2,636         (17 )     1,274         1,379   

Tandberg ASA

             3,268         17        980         2,271   

CoreOptics Inc.

             86         (2 )     70         18   

Other

             42         4        25         13   

Total

           $ 6,186       $ 4      $ 2,380       $ 3,802   
Summary of Purchase Acquisitions
Fiscal 2009    Shares Issued      Purchase
Consideration
     Net Tangible
Assets Acquired/
(Liabilities
Assumed)
    Purchased
Intangible
Assets
     Goodwill      IPR&D  

PostPath, Inc.

           $ 197       $ (10   $ 52       $ 152       $ 3   

Pure Digital Technologies, Inc.

     27         533         (9     191         299         52   

Pure Networks, Inc.

             105         (4 )     30         79           

Tidal Software, Inc.

             92         (3     52         35         8   

Other

             54         (2 )     23         33           

Total

     27       $ 981       $ (28   $ 348       $ 598       $ 63   
Summary of Purchase Acquisitions
Fiscal 2008    Shares Issued      Purchase
Consideration
     Net Tangible
Assets Acquired/
(Liabilities
Assumed)
    Purchased
Intangible
Assets
     Goodwill      IPR&D  

Navini Networks, Inc.

           $ 276       $ (4   $ 108       $ 172       $   

Securent, Inc.

             75         (5     24         56           

Other

             61         7        14         37         3   

Total

           $ 412       $ (2   $ 146       $ 265       $ 3   
Goodwill and Purchased Intangible Assets (Tables)
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Goodwill and Purchased Intangible Assets
 
 
Goodwill by Reportable Segment
 
Schedule of Intangible Assets Acquired as Part of Business Combinations
 
Schedule of Intangible Assets Acquired through Business Combinations
 
Schedule of Intangible Assets Purchased
 
Schedule of Intangible Assets Purchased
 
Schedule of Amortization Expense of Purchased Intangible Assets
 
Schedule of Future Amortization Expense of Purchased Intangible Assets
 
      Balance at
July 25, 2009
     Acquisitions      Other     Balance at
July 31, 2010
 

United States and Canada

   $ 9,512       $ 1,802       $ (25 )   $ 11,289   

European Markets

     1,669         1,089         (29 )     2,729   

Emerging Markets

     437         324         1        762   

Asia Pacific Markets

     1,307         587                1,894   

Total

   $ 12,925       $ 3,802       $ (53 )   $ 16,674   
      Balance at
July 26, 2008
     Acquisitions      Other     Balance at
July 25, 2009
 

United States and Canada

   $ 9,059       $ 467       $ (14   $ 9,512   

European Markets

     1,650         65         (46     1,669   

Emerging Markets

     405         37         (5     437   

Asia Pacific Markets

     1,278         29                1,307   

Total

   $ 12,392       $ 598       $ (65   $ 12,925   
    FINITE LIVES     INDEFINITE
LIVES
       
    TECHNOLOGY     CUSTOMER RELATIONSHIPS     OTHER     IPR&D     TOTAL  
Fiscal 2010   Weighted-
Average Useful
Life (in Years)
    Amount     Weighted-
Average Useful
Life (in Years)
    Amount     Weighted-
Average Useful
Life (in Years)
    Amount     Amount     Amount  

ScanSafe, Inc.

    5.0      $ 14        6.0      $ 11        3.0      $ 6      $      $ 31   

Starent Networks, Corp.

    6.0        691        7.0        434        0.3        35        114        1,274   

Tandberg ASA

    5.0        709        7.0        179        3.0        21        71        980   

CoreOptics Inc.

    4.0        60        1.0        1        1.0        1        8        70   

Other

    4.0        8        5.0        11                      6        25   

Total

          $ 1,482              $ 636              $ 63      $ 199      $ 2,380   
     FINITE LIVES  
     TECHNOLOGY      CUSTOMER RELATIONSHIPS      OTHER      TOTAL  
Fiscal 2009    Weighted-
Average Useful
Life (in Years)
     Amount      Weighted-
Average Useful
Life (in Years)
     Amount      Weighted-
Average Useful
Life (in Years)
     Amount      Amount  

PostPath, Inc.

     6.0       $ 52               $               $       $ 52   

Pure Digital Technologies, Inc.

     5.0         90         5.0         58         4.7         43         191   

Pure Networks, Inc.

     4.0         27         3.0         3                         30   

Tidal Software, Inc.

     5.0         28         6.8         22         1.6         2         52   

Other

     6.0         18         3.7         5                         23   

Total

            $ 215                $ 88                $ 45       $ 348   
July 31, 2010    Gross      Accumulated
Amortization
    Net  

Purchased intangible assets with finite lives:

       

Technology

   $ 2,396       $ (686 )   $ 1,710   

Customer relationships

     2,326         (1,045 )     1,281   

Other

     172         (85 )     87   

Total purchased intangible assets with finite lives

     4,894         (1,816 )     3,078   

IPR&D, with indefinite lives

     196                196   

Total

   $ 5,090       $ (1,816 )   $ 3,274   
July 25, 2009    Gross      Accumulated
Amortization
    Net  

Purchased intangible assets with finite lives:

       

Technology

   $ 1,469       $ (803   $ 666   

Customer relationships

     1,730         (768     962   

Other

     184         (110     74   

Total

   $ 3,383       $ (1,681   $ 1,702   
Years Ended    July 31, 2010      July 25, 2009      July 26, 2008  

Amortization of purchased intangible assets:

        

Cost of sales

   $ 277       $ 211       $ 233   

Operating expenses

     491         533         499   

Total

   $ 768       $ 744       $ 732   
Fiscal Year    Amount  

2011

   $ 836   

2012

     720   

2013

     603   

2014

     420   

2015

     317   

Thereafter

     182   

Total

   $ 3,078   
Balance Sheet Details (Tables)
Balance Sheet Details
Financing Receivables and Guarantees (Tables)
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Financing Receivables and Guarantees
 
 
Financing Receivables
Contractual Maturities of Gross Lease Receivables
 
Financing Guarantees
 

July 31, 2010      Lease
Receivables
     Financed
Service
Contracts
     Loan
Receivables
     Financing
Receivables
 

Gross

     $ 2,411       $ 1,773       $ 1,249       $ 5,433   

Unearned income

       (215 )                      (215 )

Allowances

       (207 )      (21      (73 )      (301 )

Total, net

     $ 1,989       $ 1,752       $ 1,176       $ 4,917   

Reported as:

             

Current

     $ 813       $ 989       $ 501       $ 2,303   

Noncurrent

       1,176         763         675         2,614   

Total, net

     $ 1,989       $ 1,752       $ 1,176       $ 4,917   
July 25, 2009      Lease
Receivables
     Financed
Service
Contracts
     Loan
Receivables
     Financing
Receivables
 

Gross

     $ 1,996       $ 1,642       $ 861       $ 4,499   

Unearned income

       (191                      (191 )

Allowances

       (213      (26      (88      (327 )

Total, net

     $ 1,592       $ 1,616       $ 773       $ 3,981   

Reported as:

             

Current

     $ 626       $ 940       $ 236       $ 1,802   

Noncurrent

       966         676         537         2,179   

Total, net

     $ 1,592       $ 1,616       $ 773       $ 3,981   
Fiscal Year    Amount  

2011

   $ 961   

2012

     706   

2013

     454   

2014

     223   

2015

     63   

Thereafter

     4   

Total

   $ 2,411   
      July 31, 2010      July 25, 2009  

Maximum potential future payments relating to financing guarantees:

     

Channel partner

   $ 448       $ 334   

End user

     304         405   

Total

   $ 752       $ 739   

Deferred revenue associated with financing guarantees:

     

Channel partner

   $ 277       $ 218   

End user

     272         378   

Total

   $ 549       $ 596
Investments (Tables)
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Investments
 
 
Summary of Investments
Gains and Losses on Investments
 
Net Realized Gains and Losses on Fixed Income and Publicly Traded Equity Securities
 
Credit Losses for Fixed Income Securities
 
Investments with Gross Unrealized Losses
Maturities of Fixed Income Securities
 
July 31, 2010    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair
Value
 

Fixed income securities:

       

U.S. government securities

  $ 16,570      $ 42      $      $ 16,612   

U.S. government agency securities (1) 

    13,511        68               13,579   

Non-U.S. government and agency securities (2) 

    1,452        15               1,467   

Corporate debt securities

    2,179        64        (21 )     2,222   

Asset-backed securities

    145        9        (5 )     149   

Total fixed income securities

    33,857        198        (26 )     34,029   

Publicly traded equity securities

    889        411        (49 )     1,251   

Total

  $ 34,746      $ 609      $ (75 )   $ 35,280
July 25, 2009   Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair
Value
 

Fixed income securities:

       

U.S. government securities

  $ 10,266      $ 23      $ (5   $ 10,284   

U.S. government agency securities (1)

    15,501        104        (2     15,603   

Non-U.S. government and agency securities (2)

    528        12               540   

Corporate debt securities

    1,740        51        (86     1,705   

Asset-backed securities

    252        5        (34     223   

Total fixed income securities

    28,287        195        (127     28,355   

Publicly traded equity securities

    824        193        (89     928   

Total

  $ 29,111      $ 388      $ (216   $ 29,283   

(1) Includes corporate securities that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).

(2) Includes agency and corporate securities that are guaranteed by non-U.S. governments.

Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Gross realized gains

   $ 279      $ 435      $ 306   

Gross realized losses

     (110 )     (459     (197

Total

   $ 169      $ (24   $ 109   
Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Net gains on investments in publicly traded equity securities

   $ 66      $ 86      $ 88   

Net gains (losses) on investments in fixed income securities

     103        (110     21   

Total

   $ 169      $ (24   $ 109   
July 31, 2010     July 25, 2009(1)  

Balance at beginning of fiscal year

   $ (153 )   $ (159 )

Sales of other-than-temporarily impaired fixed income securities

     58        6   

Balance at end of fiscal year

   $ (95 )   $ (153 )

(1) The beginning balance for the year ended July 25, 2009 represents the credit loss balance as of April 26, 2009, the date on which the Company adopted the revised accounting guidance related to other-than-temporary impairments on debt securities.

UNREALIZED LOSSES
LESS THAN 12 MONTHS
         UNREALIZED LOSSES
12 MONTHS OR GREATER
         TOTAL      
  July 31, 2010     Fair Value          Gross
Unrealized
Losses
         Fair Value          Gross
Unrealized
Losses
         Fair Value          Gross  
Unrealized  
Losses  
     

Fixed income securities:

                             

Corporate debt securities

   $ 140         $ (1 )      $ 304         $ (20 )      $ 444         $ (21 )  

Asset-backed securities

     2                       115             (5 )        117             (5 )  

Total fixed income securities

     142           (1 )        419           (25 )        561           (26 )  

Publicly traded equity securities

     168             (12 )        393             (37 )        561             (49 )  

Total

   $ 310           $ (13 )      $ 812           $ (62 )      $ 1,122           $ (75 )  
UNREALIZED LOSSES
LESS THAN 12 MONTHS
         UNREALIZED LOSSES
12 MONTHS OR GREATER
         TOTAL      
  July 25, 2009    Fair Value           Gross
Unrealized
Losses
         Fair Value          Gross
Unrealized
Losses
         Fair Value          Gross  
Unrealized  
Losses  
     

Fixed income securities:

                             

U.S. government securities

   $ 1,850         $ (5      $         $         $ 1,850         $ (5  

U.S. government agency securities (1)

     1,346           (2                            1,346           (2  

Non-U.S. government and agency securities (2)

     16                     5                     21               

Corporate debt securities

     123           (10        613           (76        736           (86  

Asset-backed securities

     41             (11        141             (23        182             (34  

Total fixed income securities

     3,376           (28        759           (99        4,135           (127  

Publicly traded equity securities

     25             (3        328             (86        353             (89  

Total

   $ 3,401           $ (31      $ 1,087           $ (185      $ 4,488           $ (216  

(1) Includes corporate securities that are guaranteed by the FDIC.

(2) Includes agency and corporate securities that are guaranteed by non-U.S. governments.

      Amortized
Cost
     Fair Value  

Less than 1 year

   $ 24,004       $ 24,044   

Due in 1 to 2 years

     5,631         5,703   

Due in 2 to 5 years

     3,867         3,928   

Due after 5 years

     355         354   

Total

   $ 33,857       $ 34,029   
Fair Value (Tables)
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Fair Value
 
 
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
Reconciliation for All Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
 
Assets Measured at Fair Value on a Nonrecurring Basis and Gains and Losses Recorded
  

JULY 31, 2010

FAIR VALUE MEASUREMENTS

    

JULY 25, 2009

FAIR VALUE MEASUREMENTS

 
      Level 1      Level 2      Level 3      Total
Balance
     Level 1      Level 2      Level 3      Total
Balance
 

Assets

                       

Cash equivalents:

                       

Money market funds

   $ 2,521       $       $       $ 2,521       $ 4,514       $       $       $ 4,514   

U.S. government securities

             235                 235                 61                 61   

U.S. government agency securities (1)

             40                 40                 313                 313   

Corporate debt securities

             1                 1                 35                 35   

Available-for-sale investments:

                       

U.S. government securities

             16,612                 16,612                 10,284                 10,284   

U.S. government agency securities (1)

             13,579                 13,579                 15,603                 15,603   

Non-U.S. government and agency securities (2)

             1,467                 1,467                 540                 540   

Corporate debt securities

             2,222                 2,222                 1,705                 1,705   

Asset-backed securities

                     149         149                         223         223   

Publicly traded equity securities

     1,251                         1,251         928                         928   

Derivative assets

             160         3         163                 109         4         113   

Total

   $ 3,772       $ 34,316       $ 152       $ 38,240       $ 5,442       $ 28,650       $ 227       $ 34,319   

Liabilities:

                       

Derivative liabilities

   $       $ 19       $       $ 19       $       $ 66       $       $ 66   

Total

   $       $ 19       $       $ 19       $       $ 66       $       $ 66   

(1) Includes corporate securities that are guaranteed by the FDIC.

(2) Includes agency and corporate securities that are guaranteed by non-U.S. governments.

     

Asset-
Backed

Securities

   

Derivative

Assets

    Total  

Balance at July 25, 2009

   $ 223      $ 4      $ 227   

Total gains and losses (realized and unrealized):

      

Included in other income (loss), net

     (6 )            (6

Included in operating expenses

            (1 )     (1

Included in other comprehensive income

     34               34   

Purchases, sales and maturities

     (102 )            (102

Balance at July 31, 2010

   $ 149      $ 3      $ 152   

Losses attributable to assets still held as of July 31, 2010

   $      $ (1 )   $ (1
     

Asset-
Backed

Securities

   

Derivative

Assets

    Total  

Balance at July 27, 2008

   $      $      $   

Transfers into Level 3

     618        6        624   

Total gains and losses (realized and unrealized):

      

Included in other income (loss), net

     (28 )            (28

Included in operating expenses

            (2 )     (2 )

Included in other comprehensive income

     (9 )            (9

Purchases, sales and maturities

     (358 )            (358

Balance at July 25, 2009

   $ 223      $ 4      $ 227   

Losses attributable to assets still held as of July 25, 2009

   $ (13   $      $ (13
          FAIR VALUE MEASUREMENTS USING                
     Net Carrying
Value as of
July 31, 2010
    Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
    Significant Other
Observable
Inputs (Level 2)
    Significant
Unobservable
Inputs
(Level 3)
    Total (Losses)
Gains
for the Year
Ended
July 31, 2010
 

Investments in privately held companies

  $ 45      $      $      $ 45      $ (25 )

Purchased intangible assets

  $      $      $      $        (28 )

Property held for sale

  $ 25      $      $      $ 25        (86 )

Gains on assets no longer held as of July 31, 2010

                                    2   

Total

                                  $ (137 )
          FAIR VALUE MEASUREMENTS USING                
     Net Carrying
Value as of
July 25, 2009
    Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
    Significant Other
Observable
Inputs (Level 2)
    Significant
Unobservable
Inputs
(Level 3)
    Total Losses
for the Year
Ended
July 25, 2009
 

Investments in privately held companies

  $ 69      $      $      $ 69      $ (78 )

Losses on assets no longer held as of July 25, 2009

                                    (9 )

Total

                                  $ (87 )
Borrowings (Tables)
Schedule of Long-term Debt
     July 31, 2010     July 25, 2009  
      Amount     Effective
Rate
    Amount     Effective
Rate
 

Senior notes:

        

 5.25% fixed-rate notes, due 2011 ("2011 Notes")

   $ 3,000        3.12   $ 3,000        3.12%   

 2.90% fixed-rate notes, due 2014 ("2014 Notes")

     500        3.11              

 5.50% fixed-rate notes, due 2016 ("2016 Notes")

     3,000        3.18     3,000        4.34%   

 4.95% fixed-rate notes, due 2019 ("2019 Notes")

     2,000        5.08     2,000        5.08%   

 4.45% fixed-rate notes, due 2020 ("2020 Notes")

     2,500        4.50              

 5.90% fixed-rate notes, due 2039 ("2039 Notes")

     2,000        6.11     2,000        6.11%   

 5.50% fixed-rate notes, due 2040 ("2040 Notes")

     2,000        5.67              

 Total senior notes

     15,000          10,000     

Other notes and borrowings

     59          2     

Unaccreted discount

     (73 )       (21  

Hedge accounting adjustment

     298          314     

 Total

   $   15,284        $   10,295     

Reported as:

        

Short-term debt

   $ 3,096        $     

Long-term debt

     12,188          10,295     

 Total

   $ 15,284        $ 10,295     
Derivative Instruments (Tables)
     DERIVATIVE ASSETS           DERIVATIVE LIABILITIES  
      Balance Sheet Line Item    July 31, 2010      July 25, 2009            Balance Sheet Line Item    July 31, 2010      July 25, 2009  

Derivatives designated as hedging instruments:

                    

Foreign currency derivatives

   Other current assets    $ 82       $ 87          Other current liabilities    $ 7       $ 36   

Interest rate derivatives

   Other assets      72                  Other long-term liabilities                

Total

        154         87               7         36   

Derivatives not designated as hedging instruments:

                    

Foreign currency derivatives

   Other current assets      6         22          Other current liabilities      12         30   

Equity derivatives

   Other current assets      1         2          Other current liabilities                

Equity derivatives

   Other assets      2         2          Other long-term liabilities                

Total

        9         26               12         30   

Total

      $ 163       $ 113             $ 19       $ 66   

GAINS (LOSSES) RECOGNIZED IN OCI ON DERIVATIVES FOR

THE YEARS ENDED (EFFECTIVE PORTION)

        

GAINS (LOSSES) RECLASSIFIED FROM AOCI INTO INCOME

FOR

THE YEARS ENDED (EFFECTIVE PORTION)

 
Derivatives Designated as Cash Flow
Hedging Instruments
   July 31, 2010      July 25, 2009           Line Item in Statements of Operations    July 31, 2010     July 25, 2009  

Foreign currency derivatives

   $ 33       $ (116 )      Operating expenses    $ (1   $ (95 )
           Cost of sales-service             (13 )

Interest rate derivatives

     23         (42      Interest expense               

Other derivatives

             (2 )      Operating expenses             (2 )

Total

   $ 56       $ (160 )           $ (1   $ (110 )

GAINS (LOSSES) FOR THE

YEARS ENDED

 
Derivatives Designated as Fair Value Hedging Instruments    Line Item in Statements of Operations    July 31, 2010     July 25, 2009  

Equity derivatives

   Other income (loss), net    $ 3      $ 97   

Interest rate derivatives

   Other income (loss), net             (7 )

Interest rate derivatives

   Interest expense      72          

Total

        $ 75      $ 90   

GAINS (LOSSES) FOR THE

YEARS ENDED

 
Derivatives not Designated as Hedging Instruments    Line Item in Statements of Operations    July 31, 2010     July 25, 2009  

Foreign currency derivatives

   Other income (loss), net    $ (100 )   $ 1   

Equity derivatives

   Operating expenses      18        (14

Equity derivatives

   Other income (loss), net      12        11   

Total

        $ (70   $ (2
      July 31, 2010      July 25, 2009  

Cash flow hedging instruments

   $ 2,611       $ 2,965   

No hedge designation

     4,619         4,423   

Net investment hedging instruments

     105         103   

Total

   $ 7,335       $ 7,491   
Commitments and Contingencies (Tables)
Fiscal Year    Amount  

2011

   $ 343   

2012

     243   

2013

     167   

2014

     119   

2015

     122   

Thereafter

     310   

Total

   $ 1,304   
      July 31, 2010     July 25, 2009  

Balance at beginning of fiscal year

   $ 321      $ 399   

Provision for warranties issued

     469        374   

Payments

     (437     (452

Fair value of warranty liability acquired

     7          

Balance at end of fiscal year

   $  360      $  321   
Shareholders' Equity (Tables)
      Shares
Repurchased
     Weighted-
Average Price
per Share
    Amount
Repurchased
 

Cumulative balance at July 26, 2008

     2,600       $ 20.60       $ 53,579   

Repurchase of common stock under the stock repurchase program

     202         17.89        3,600   

Cumulative balance at July 25, 2009

     2,802       $  20.41      $  57,179   

Repurchase of common stock under the stock repurchase program

     325         24.02        7,803   

Cumulative balance at July 31, 2010

     3,127       $  20.78      $  64,982   
Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Net income

   $ 7,767      $ 6,134      $ 8,052   

Net change in unrealized gains/losses on available-for-sale investments:

      

Change in net unrealized gains (losses), net of tax effects of $199, $(33), and $17, respectively

     334        (71     57   

Net unrealized (gains) losses reclassified into earnings, net of tax effects of $17, $10, and $30, respectively

     (151     33        (79

Net change in unrealized gains/losses on derivative instruments:

      

Change in derivative instruments, net of tax effects of $9 , $(16), and $0, respectively

     46        (141     60   

Net unrealized (gains) losses reclassified into earnings, net of tax effects

     2        108        (60

Net change in cumulative translation adjustment and other, net of tax effects

     (55 )     (192 )     227   

Comprehensive income

     7,943        5,871        8,257   

Comprehensive loss (income) attributable to noncontrolling interests

     12        19        (39

Comprehensive income attributable to Cisco Systems, Inc.

   $  7,955      $ 5,890      $ 8,218  

 

      
      July 31, 2010     July 25, 2009     July 26, 2008  

Net unrealized gains on investments

   $ 333      $ 138      $ 206   

Net unrealized gains (losses) on derivative instruments

     27        (21 )     12   

Cumulative translation adjustment and other

     263        318        510   

Total

   $  623      $  435      $  728   
Employee Benefit Plans (Tables)
   STOCK OPTIONS OUTSTANDING  
      Number
Outstanding
    Weighted-
Average
Exercise Price
per Share
 

BALANCE AT JULY 28, 2007

     1,289      $ 26.60   

Granted and assumed

     159        31.12   

Exercised(1)

     (146     18.50   

Canceled/forfeited/expired

     (103     30.74   

BALANCE AT JULY 26, 2008

     1,199        27.83   

Granted and assumed

     14        19.01   

Exercised(1)

     (33     14.67   

Canceled/forfeited/expired

     (176     49.79   

BALANCE AT JULY 25, 2009

     1,004        24.29   

Granted and assumed

     15        13.23   

Exercised(1)

     (158     17.88   

Canceled/forfeited/expired

     (129     47.31   

BALANCE AT JULY 31, 2010

     732      $ 21.39   

(1) The total pretax intrinsic value of stock options exercised during fiscal 2010, 2009, and 2008 was $1.0 billion, $158 million, and $1.6 billion, respectively.

     STOCK OPTIONS OUTSTANDING             STOCK OPTIONS EXERCISABLE  
Range of Exercise Prices    Number
Outstanding
    

Weighted-
Average
Remaining
Contractual
Life

(in Years)

     Weighted-
Average
Exercise
Price per
Share
     Aggregate
Intrinsic
Value
            Number
Exercisable
     Weighted-
Average
Exercise
Price per
Share
     Aggregate
Intrinsic
Value
 

$ 0.01 – 15.00

     71         2.50       $ 10.62       $ 884            65       $ 10.87       $ 782   

  15.01 – 18.00

     137         3.18         17.36         782            129         17.34         741   

  18.01 – 20.00

     177         2.90         19.29         669            173         19.29         654   

  20.01 – 25.00

     188         4.26         22.48         125            146         22.40         109   

  25.01 – 35.00

     158         6.02         30.63                    92         30.56           

  35.01 – 70.00

     1         0.61         54.22                    1         54.22           

Total

     732         3.94       $ 21.39       $ 2,460            606       $ 20.51       $ 2,286   
      Restricted Stock/
Stock Units
    Weighted-Average
Grant Date Price
per Share
     Aggregated Fair
Market Value
 

BALANCE AT JULY 28, 2007

     11      $ 22.52      

Granted and assumed

     4        27.29      

Vested

     (4     22.49       $ 83   

Canceled/forfeited

     (1     24.24      

BALANCE AT JULY 26, 2008

     10      $ 24.27      

Granted and assumed

     57        20.90      

Vested

     (4     23.56       $ 69   

Canceled/forfeited

     (1     22.76      

BALANCE AT JULY 25, 2009

     62      $ 21.25      

Granted and assumed

     54        23.40      

Vested

     (16     21.56       $ 378   

Canceled/forfeited

     (3     22.40      

BALANCE AT JULY 31, 2010

     97      $  22.35      
      Share-Based Awards
Available for Grant
 

BALANCE AT JULY 28, 2007

     294   

Options granted and assumed

     (159

Restricted stock, stock units, and other share-based awards granted and assumed

     (11

Share-based awards canceled/forfeited/expired

     27   

Additional shares reserved

     211   

BALANCE AT JULY 26, 2008

     362   

Options granted and assumed

     (14

Restricted stock, stock units, and other share-based awards granted and assumed

     (140

Share-based awards canceled/forfeited/expired

     38   

Additional shares reserved

     7   

BALANCE AT JULY 25, 2009

     253   

Options granted and assumed

     (15

Restricted stock, stock units, and other share-based awards granted and assumed

     (81

Share-based awards canceled/forfeited/expired

     123   

Additional shares reserved

     15   

BALANCE AT JULY 31, 2010

     295   
Years Ended    July 31, 2010      July 25, 2009      July 26, 2008  

Cost of sales—product

   $ 57       $ 46       $ 40   

Cost of sales—service

     164         128         108   

Share-based compensation expense in cost of sales

     221         174         148   

Research and development

     450         382         339   

Sales and marketing

     536         441         438   

General and administrative

     310         234         187   

Share-based compensation expense in operating expenses

     1,296         1,057         964   

Total share-based compensation expense

   $ 1,517       $ 1,231       $ 1,112   
     EMPLOYEE STOCK OPTIONS            EMPLOYEE STOCK PURCHASE RIGHTS  
Years Ended    July 31, 2010      July 25, 2009     July 26, 2008            July 31, 2010      July 25, 2009      July 26, 2008  

Number of options granted (in millions)

     4         9        151           N/A         N/A         N/A   

Weighted-average assumptions:

                  

Expected volatility

     30.5%         36.0%        31.0%           30.9%         36.4%         32.6%   

Risk-free interest rate

     2.3%         3.0%        4.3%           0.5%         0.6%         2.7%   

Expected dividend

     0.0%         0.0%        0.0%           0.0%         0.0%         0.0%   

Kurtosis

     4.1         4.5        4.6           N/A         N/A         N/A   

Skewness

     0.20         (0.19     (0.80        N/A         N/A         N/A   

Weighted-average expected life (in years)

     5.1         5.9        6.3           1.3         1.1         0.5   

Weighted-average estimated grant date fair value (per option /per share)

   $ 6.50       $ 6.60      $ 9.60         $ 6.53       $ 5.46       $ 6.12   
Income Taxes (Tables)
Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Federal:

      

Current

   $ 1,469      $ 1,615      $ 2,384   

Deferred

     (435     (397     (693
       1,034        1,218        1,691   

State:

      

Current

     186        132        173   

Deferred

            (30     (62
       186        102        111   

Foreign:

      

Current

     470        386        418   

Deferred

     (42     (147     (17
       428        239        401   

Total

   $ 1,648      $ 1,559      $ 2,203   
Years Ended    July 31, 2010      July 25, 2009      July 26, 2008  

United States

   $ 1,102       $ 1,650       $ 3,044   

International

     8,313         6,043         7,211   

Total

   $ 9,415       $ 7,693       $ 10,255   
Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Federal statutory rate

     35.0%        35.0%        35.0%   

Effect of:

      

State taxes, net of federal tax benefit

     1.4        1.3        0.9   

Foreign income at other than U.S. rates

     (19.3     (18.9     (16.1

Tax credits

     (0.5     (2.4     (0.8

Tax audit settlement

                   (1.6

Transfer pricing adjustment related to share-based compensation

     (1.7     2.3          

Nondeductible compensation

     2.0        2.6        1.8   

International realignment

                   2.2   

Other, net

     0.6        0.4        0.1   

Total

     17.5%        20.3%        21.5%   
Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Beginning balance(1)

   $ 2,816      $ 2,505      $ 3,331   

Additions based on tax positions related to the current year

     246        190        488   

Additions for tax positions of prior years

     60        307        147   

Reductions for tax positions of prior years

     (250     (17     (466

Settlements

     (140     (109     (951

Lapse of statute of limitations

     (55     (60     (44

Ending Balance

   $ 2,677      $ 2,816      $ 2,505   

(1)The beginning balance of the unrecognized tax benefits for the year ended July 26, 2008 included a cumulative effect of a change in accounting principle for $451 million.

 As of July 31, 2010, $2.3 billion of the unrecognized tax benefits would affect the effective tax rate if realized. During fiscal 2010, the Company recognized $167 million of net interest income and $5 million of penalties. During 2009, the Company recognized $158 million of net interest expense and $5 million of penalties. The Company's total accrual for interest and penalties was $167 million and $329 million as of the end of fiscal 2010 and 2009, respectively. The Company is no longer subject to U.S. federal income tax audit for returns covering tax years through fiscal 2001. With limited exceptions, the Company is no longer subject to state and local or foreign income tax audits for returns covering tax years through fiscal 1997.

      July 31, 2010     July 25, 2009  

Deferred tax assets—current

   $ 2,126      $ 2,320   

Deferred tax liabilities—current

     (87     (12

Deferred tax assets—noncurrent

     2,079        2,122   

Deferred tax liabilities—noncurrent

     (276 )     (57

Total net deferred tax assets

   $ 3,842      $ 4,373   
      July 31, 2010      July 25, 2009  

ASSETS

     

Allowance for doubtful accounts and returns

   $ 248       $ 300   

Sales-type and direct-financing leases

     224         226   

Inventory write-downs and capitalization

     176         238   

Investment provisions

     329         333   

IPR&D, goodwill, and purchased intangible assets

     191         222   

Deferred revenue

     1,752         1,475   

Credits and net operating loss carryforwards

     752         817   

Share-based compensation expense

     970         809   

Accrued compensation

     339         405   

Other

     517        600   

Gross deferred tax assets

     5,498        5,425   

Valuation allowance

     (76     (66

Total deferred tax assets

     5,422        5,359   

LIABILITIES

    

Purchased intangible assets

     (1,224     (639

Depreciation

     (120     (288

Unrealized gains on investments

     (185     (12

Other

     (51     (47

Total deferred tax liabilities

     (1,580     (986

Total net deferred tax assets

   $             3,842      $             4,373   
Segment Information and Major Customers (Tables)
Years Ended    July 31, 2010     July 25, 2009     July 26, 2008  

Net sales:

      

United States and Canada(1)

   $ 21,740      $ 19,345      $ 21,242   

European Markets

     8,048        7,683        8,123   

Emerging Markets

     4,367        3,999        4,530   

Asia Pacific Markets

     5,885        5,090        5,645   

Total

   $ 40,040      $ 36,117      $ 39,540   

Gross margin:

      

United States and Canada

   $ 14,042      $ 12,660      $ 13,855   

European Markets

     5,425        5,116        5,358   

Emerging Markets

     2,805        2,438        2,789   

Asia Pacific Markets

     3,847        3,272        3,725   

Theater total

     26,119        23,486        25,727   

Unallocated corporate items(2)

     (476     (392     (381

Total

   $ 25,643      $ 23,094      $ 25,346   

(1) Net sales in the United States were $20.4 billion, $18.2 billion, and $20.1 billion for fiscal 2010, 2009, and 2008, respectively.

 (2) The unallocated corporate items include the effects of amortization of acquisition-related intangible assets; share-based compensation expense; and, for the year ended July 25, 2009, it also includes charges related to asset impairments and restructurings.

Years Ended    July 31, 2010      July 25, 2009      July 26, 2008  

Net sales:

        

Routers

   $ 6,728       $ 6,521       $ 8,225   

Switches

     13,454         11,923         13,330   

New Products

     11,386         9,859         10,492   

Other Products

     852         828         1,052   

Product

     32,420         29,131         33,099   

Service

     7,620         6,986         6,441   

Total

   $         40,040       $         36,117       $         39,540   
      July 31, 2010      July 25, 2009      July 26, 2008  

Property and equipment, net:

        

United States

   $ 3,283       $ 3,330       $ 3,478   

International

     658         713         673   

Total

   $ 3,941       $ 4,043       $ 4,151   
Net Income per Share (Tables)
Net Income per Share
Years Ended    July 31, 2010      July 25, 2009      July 26, 2008  

Net income

   $ 7,767       $ 6,134       $ 8,052   

Weighted-average shares—basic

     5,732         5,828         5,986   

Effect of dilutive potential common shares

     116         29         177   

Weighted-average shares—diluted

     5,848         5,857         6,163   

Net income per share—basic

   $ 1.36       $ 1.05       $ 1.35   

Net income per share—diluted

   $ 1.33       $ 1.05       $ 1.31   

Antidilutive employee share-based awards, excluded

     344         977         567   
Supplementary Financial Data (Tables)
Supplementary Financial Data
Quarters Ended    July 31, 2010      May 1, 2010      Jan. 23, 2010      Oct. 24, 2009      July 25, 2009      Apr. 25, 2009      Jan. 24, 2009      Oct. 25, 2008  

Net sales

   $ 10,836       $ 10,368       $ 9,815       $ 9,021       $ 8,535       $ 8,162       $ 9,089       $ 10,331   

Gross margin

   $ 6,793       $ 6,630       $ 6,332       $ 5,888       $ 5,461       $ 5,229       $ 5,723       $ 6,681   

Net income

   $ 1,935       $ 2,192       $ 1,853       $ 1,787       $ 1,081       $ 1,348       $ 1,504       $ 2,201   

Net income per share—basic

   $ 0.34       $ 0.38       $ 0.32       $ 0.31       $ 0.19       $ 0.23       $ 0.26       $ 0.37   

Net income per share—diluted

   $ 0.33       $ 0.37       $ 0.32       $ 0.30       $ 0.19       $ 0.23       $ 0.26       $ 0.37   

Cash and cash equivalents and investments

   $ 39,861       $ 39,106       $ 39,638       $ 35,365       $ 35,001       $ 33,551       $ 29,531       $ 26,763   
Consolidated Statements of Equity - Supplemental Information (Details) (USD $)
Share data in Millions
Jul. 31, 2010
Repurchases of common stock under the repurchase program
3,127 
Authorized common stock repurchase amount
$ 72,000,000,000 
Shares of Common Stock [Member]
 
Repurchases of common stock under the repurchase program
3,127 
Common Stock and Additional Paid-In Capital [Member]
 
Repurchases of common stock under the repurchase program
12,759,000,000 
Retained Earnings [Member]
 
Repurchases of common stock under the repurchase program
52,223,000,000 
Total Cisco Shareholders' Equity [Member]
 
Repurchases of common stock under the repurchase program
$ 64,982,000,000 
Summary of Significant Accounting Policies (Details) (USD $)
In Millions, unless otherwise specified
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Cumulative effect of adoption of accounting standard - other-than-temporary impairments of debt securities
 
49 
 
Proforma basis as if previous accounting guidance in effect
39,802 
 
 
Advertising cost
290 
165 
195 
Leasehold improvements shorter of remaining lease term
 
 
Operating lease assets based on lease term
 
 
Computer equipment and related software, in month, minimum
30 
 
 
Computer equipment and related software, in month, maximum
36 
 
 
Finite-lived intangible assets, useful life, minimum
 
 
Finite-lived intangible assets, useful life, maximum
 
 
Net sales
$ 40,040 
$ 36,117 
$ 39,540 
Production, Engineering and Other [Member]
 
 
 
Property and equipment, useful life, maximum
 
 
Buildings [Member]
 
 
 
Property and equipment, useful life, average
25 
 
 
Building Improvements [Member]
 
 
 
Property and equipment, useful life, average
10 
 
 
Furniture and Fixtures [Member]
 
 
 
Property and equipment, useful life, average
 
 
Business Combinations (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Number of business combinations
 
 
Shares Issued
 
27,000,000 
 
Purchase Consideration
$ 6,186 
$ 981 
$ 412 
Net Tangible Assets Acquired/(Liabilities Assumed)
(28)
(2)
Purchased Intangible Assets
2,380 
348 
146 
Goodwill
3,802 
598 
265 
Cash and cash equivalents acquired from business combinations
760 
 
 
Business combination related transaction costs
40 
 
 
IPR&D capitalized at fair value as an intangible asset with an indefinite life
199 
 
 
IPR&D
 
63 
PostPath, Inc. Acquisition [Member]
 
 
 
Purchase Consideration
 
197 
 
Net Tangible Assets Acquired/(Liabilities Assumed)
 
(10)
 
Purchased Intangible Assets
 
52 
 
Goodwill
 
152 
 
IPR&D
 
 
Pure Digital Technologies, Inc. Acquisition [Member]
 
 
 
Shares Issued
 
27,000,000 
 
Purchase Consideration
 
533 
 
Net Tangible Assets Acquired/(Liabilities Assumed)
 
(9)
 
Purchased Intangible Assets
 
191 
 
Goodwill
 
299 
 
IPR&D
 
52 
 
Pure Networks, Inc. Acquisition [Member]
 
 
 
Purchase Consideration
 
105 
 
Net Tangible Assets Acquired/(Liabilities Assumed)
 
(4)
 
Purchased Intangible Assets
 
30 
 
Goodwill
 
79 
 
Tidal Software, Inc. Acquisition [Member]
 
 
 
Purchase Consideration
 
92 
 
Net Tangible Assets Acquired/(Liabilities Assumed)
 
(3)
 
Purchased Intangible Assets
 
52 
 
Goodwill
 
35 
 
IPR&D
 
 
Other Acquisition [Member]
 
 
 
Purchase Consideration
42 
54 
61 
Net Tangible Assets Acquired/(Liabilities Assumed)
(2)
Purchased Intangible Assets
25 
23 
14 
Goodwill
13 
33 
37 
IPR&D
 
 
Navini Networks, Inc. [Member]
 
 
 
Purchase Consideration
 
 
276 
Net Tangible Assets Acquired/(Liabilities Assumed)
 
 
(4)
Purchased Intangible Assets
 
 
108 
Goodwill
 
 
172 
Securent, Inc. [Member]
 
 
 
Purchase Consideration
 
 
75 
Net Tangible Assets Acquired/(Liabilities Assumed)
 
 
(5)
Purchased Intangible Assets
 
 
24 
Goodwill
 
 
56 
ScanSafe, Inc. [Member]
 
 
 
Purchase Consideration
154 
 
 
Net Tangible Assets Acquired/(Liabilities Assumed)
 
 
Purchased Intangible Assets
31 
 
 
Goodwill
121 
 
 
Starent Networks Corp [Member]
 
 
 
Purchase Consideration
2,636 
 
 
Net Tangible Assets Acquired/(Liabilities Assumed)
(17)
 
 
Purchased Intangible Assets
1,274 
 
 
Goodwill
1,379 
 
 
Tandberg ASA [Member]
 
 
 
Purchase Consideration
3,268 
 
 
Net Tangible Assets Acquired/(Liabilities Assumed)
17 
 
 
Purchased Intangible Assets
980 
 
 
Goodwill
2,271 
 
 
CoreOptics, Inc. [Member]
 
 
 
Purchase Consideration
86 
 
 
Net Tangible Assets Acquired/(Liabilities Assumed)
(2)
 
 
Purchased Intangible Assets
70 
 
 
Goodwill
18 
 
 
Goodwill and Purchased Intangible Assets (Goodwill by Reportable Segment) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Balance, beginning
$ 12,925 
$ 12,392 
Acquisitions
3,802 
598 
Other
(53)
(65)
Balance, ending
16,674 
12,925 
United States and Canada [Member]
 
 
Balance, beginning
9,512 
9,059 
Acquisitions
1,802 
467 
Other
(25)
(14)
Balance, ending
11,289 
9,512 
European Markets [Member]
 
 
Balance, beginning
1,669 
1,650 
Acquisitions
1,089 
65 
Other
(29)
(46)
Balance, ending
2,729 
1,669 
Emerging Markets [Member]
 
 
Balance, beginning
437 
405 
Acquisitions
324 
37 
Other
(5)
Balance, ending
762 
437 
Asia Pacific Markets [Member]
 
 
Balance, beginning
1,307 
1,278 
Acquisitions
587 
29 
Balance, ending
$ 1,894 
$ 1,307 
Goodwill and Purchased Intangible Assets (Schedule of Intangible Assets Acquired as Part of Business Combination) (Details)
In Millions, unless otherwise specified
Jul. 31, 2010
Jul. 25, 2009
Amount, acquired finite-lived
 
348 
Amount, acquired
199 
 
Amount, acquired indefinite and finite-lived intangible assets
2,380 
348 
Post Path Acquisition [Member]
 
 
Amount, acquired finite-lived
 
52 
Post Path Acquisition [Member] | Customer Relationships [Member]
 
 
Weighted-Average Useful Life (in Years)
 
 
Amount, acquired finite-lived
 
 
Post Path Acquisition [Member] | Developed Technology Rights [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
52 
Post Path Acquisition [Member] | Other Major Classes [Member]
 
 
Weighted-Average Useful Life (in Years)
 
 
Amount, acquired finite-lived
 
 
Pure Digital Technologies, Inc. Acquisition [Member]
 
 
Amount, acquired finite-lived
 
191 
Pure Digital Technologies, Inc. Acquisition [Member] | Customer Relationships [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
58 
Pure Digital Technologies, Inc. Acquisition [Member] | Developed Technology Rights [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
90 
Pure Digital Technologies, Inc. Acquisition [Member] | Other Major Classes [Member]
 
 
Weighted-Average Useful Life (in Years)
 
4.7 
Amount, acquired finite-lived
 
43 
Pure Networks, Inc. Acquisition [Member]
 
 
Amount, acquired finite-lived
 
30 
Pure Networks, Inc. Acquisition [Member] | Customer Relationships [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
Pure Networks, Inc. Acquisition [Member] | Developed Technology Rights [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
27 
Pure Networks, Inc. Acquisition [Member] | Other Major Classes [Member]
 
 
Weighted-Average Useful Life (in Years)
 
 
Amount, acquired finite-lived
 
 
Tidal Software, Inc. Acquisition [Member]
 
 
Amount, acquired finite-lived
 
52 
Tidal Software, Inc. Acquisition [Member] | Customer Relationships [Member]
 
 
Weighted-Average Useful Life (in Years)
 
6.8 
Amount, acquired finite-lived
 
22 
Tidal Software, Inc. Acquisition [Member] | Developed Technology Rights [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
28 
Tidal Software, Inc. Acquisition [Member] | Other Major Classes [Member]
 
 
Weighted-Average Useful Life (in Years)
 
1.6 
Amount, acquired finite-lived
 
Other Acquisitions [Member]
 
 
Amount, acquired finite-lived
 
23 
Other Acquisitions [Member] | Customer Relationships [Member]
 
 
Weighted-Average Useful Life (in Years)
 
3.7 
Amount, acquired finite-lived
 
Other Acquisitions [Member] | Developed Technology Rights [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
18 
Other Acquisitions [Member] | Other Major Classes [Member]
 
 
Weighted-Average Useful Life (in Years)
 
 
Amount, acquired finite-lived
 
 
IPR&D With Indefinite Lives [Member]
 
 
Amount, acquired
199 
 
IPR&D With Indefinite Lives [Member] | CoreOptics, Inc. [Member]
 
 
Amount, acquired
 
IPR&D With Indefinite Lives [Member] | Tandberg ASA [Member]
 
 
Amount, acquired
71 
 
IPR&D With Indefinite Lives [Member] | Starent Networks Corp [Member]
 
 
Amount, acquired
114 
 
IPR&D With Indefinite Lives [Member] | Other Acquisitions [Member]
 
 
Amount, acquired
 
CoreOptics, Inc. [Member]
 
 
Amount, acquired indefinite and finite-lived intangible assets
70 
 
CoreOptics, Inc. [Member] | Customer Relationships [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
CoreOptics, Inc. [Member] | Developed Technology Rights [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
60 
 
CoreOptics, Inc. [Member] | Other Major Classes [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
Tandberg ASA [Member]
 
 
Amount, acquired indefinite and finite-lived intangible assets
980 
 
Tandberg ASA [Member] | Developed Technology Rights [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
709 
 
Tandberg ASA [Member] | Other Major Classes [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
21 
 
Starent Networks Corp [Member]
 
 
Amount, acquired indefinite and finite-lived intangible assets
1,274 
 
Starent Networks Corp [Member] | Other Major Classes [Member]
 
 
Weighted-Average Useful Life (in Years)
0.3 
 
Amount, acquired finite-lived
35 
 
ScanSafe, Inc. [Member]
 
 
Amount, acquired indefinite and finite-lived intangible assets
31 
 
Other Acquisitions [Member]
 
 
Amount, acquired indefinite and finite-lived intangible assets
25 
 
Customer Relationships [Member]
 
 
Amount, acquired finite-lived
636 
88 
Customer Relationships [Member] | Tandberg ASA [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
179 
 
Customer Relationships [Member] | Starent Networks Corp [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
434 
 
Customer Relationships [Member] | ScanSafe, Inc. [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
11 
 
Customer Relationships [Member] | Other Acquisitions [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
11 
 
Developed Technology Rights [Member]
 
 
Amount, acquired finite-lived
1,482 
215 
Developed Technology Rights [Member] | Starent Networks Corp [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
691 
 
Developed Technology Rights [Member] | ScanSafe, Inc. [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
14 
 
Developed Technology Rights [Member] | Other Acquisitions [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
Other Major Classes [Member]
 
 
Amount, acquired finite-lived
63 
45 
Other Major Classes [Member] | ScanSafe, Inc. [Member]
 
 
Weighted-Average Useful Life (in Years)
 
Amount, acquired finite-lived
 
Other Major Classes [Member] | Other Acquisitions [Member]
 
 
Weighted-Average Useful Life (in Years)
 
 
Amount, acquired finite-lived
 
 
Goodwill and Purchased Intangible Assets (Schedule of Intangible Assets Purchased) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Jul. 25, 2009
Purchased intangible assets with finite lives, gross
$ 4,894 
$ 3,383 
Total, gross
5,090 
 
Purchased intangible assets with finite lives, accumulated amortization
(1,816)
(1,681)
Total purchased intangible assets with finite lives, net
3,078 
 
Purchased intangible assets, net
3,274 
1,702 
IPR&D With Indefinite Lives [Member]
 
 
IPR&D, with indefinite lives
196 
 
Customer Relationships [Member]
 
 
Purchased intangible assets with finite lives, gross
2,326 
1,730 
Purchased intangible assets with finite lives, accumulated amortization
(1,045)
(768)
Purchased intangible assets with finite lives, net
1,281 
962 
Developed Technology Rights [Member]
 
 
Purchased intangible assets with finite lives, gross
2,396 
1,469 
Purchased intangible assets with finite lives, accumulated amortization
(686)
(803)
Purchased intangible assets with finite lives, net
1,710 
666 
Other Major Classes [Member]
 
 
Purchased intangible assets with finite lives, gross
172 
184 
Purchased intangible assets with finite lives, accumulated amortization
(85)
(110)
Purchased intangible assets with finite lives, net
$ 87 
$ 74 
Goodwill and Purchased Intangible Assets (Schedule of Amortization Expense of Purchased Intangible Assets) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Total intangible assets amortization expense
$ 768 
$ 744 
$ 732 
Cost of Sales [Member]
 
 
 
Total intangible assets amortization expense
277 
211 
233 
Operating Expenses [Member]
 
 
 
Total intangible assets amortization expense
$ 491 
$ 533 
$ 499 
Goodwill and Purchased Intangible Assets (Schedule of Future Amortization Expense of Purchased Intangible Assets) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Goodwill and Purchased Intangible Assets
 
2011 (remaining six months)
$ 836 
2012
720 
2013
603 
2014
420 
2015
317 
Thereafter
182 
Total
$ 3,078 
Balance Sheet Details (Details) (USD $)
In Millions
Jul. 31, 2010
Jul. 25, 2009
Balance Sheet Details
 
 
Raw materials
$ 217 
$ 165 
Work in process
50 
33 
Distributor inventory and deferred cost of sales
587 
382 
Manufactured finished goods
260 
310 
Total finished goods
847 
692 
Service-related spares
161 
151 
Demonstration systems
52 
33 
Total
1,327 
1,074 
Land, buildings, and building & leasehold improvements
4,470 
4,618 
Computer equipment and related software
1,405 
1,823 
Production, engineering, and other equipment
4,702 
5,075 
Operating lease assets
255 
227 
Furniture and fixtures
476 
465 
Property, plant and equipment, gross
11,308 
12,208 
Less accumulated depreciation and amortization
(7,367)
(8,165)
Total
3,941 
4,043 
Deferred tax assets
2,079 
2,122 
Investments in privately held companies
756 
709 
Lease receivables, net
1,176 1
966 1
Financed service contracts, net
763 1
676 1
Loan receivables, net
675 1
537 1
Other
371 
271 
Total
5,820 
5,281 
Service
7,428 
6,496 
Unrecognized revenue on product shipments and other deferred revenue
2,788 
2,490 
Cash receipts related to unrecognized revenue from two-tier distributors
867 
407 
Total product deferred revenue
3,655 
2,897 
Total
11,083 
9,393 
Current
7,664 
6,438 
Noncurrent
$ 3,419 
$ 2,955 
Financing Receivables and Guarantees (Financing Receivables Summary) (Details) (USD $)
In Millions
Jul. 31, 2010
Jul. 25, 2009
Financing Receivables and Guarantees
 
 
Lease receivables, gross
$ 2,411 
$ 1,996 
Lease receivable, unearned income
(215)
(191)
Lease receivables, allowances
(207)
(213)
Lease receivables, net
1,989 
1,592 
Lease receivables, current
813 
626 
Lease receivables, noncurrent
1,176 1
966 1
Financed service contracts, gross
1,773 
1,642 
Financed service contracts, allowances
(21)
(26)
Financed service contracts, net
1,752 
1,616 
Financed service contracts, current
989 
940 
Financed service contracts, noncurrent
763 1
676 1
Loan receivables, gross
1,249 
861 
Loan receivables, allowances
(73)
(88)
Loan receivables, net
1,176 
773 
Loan receivables, current
501 
236 
Loan receivables, noncurrent
675 1
537 1
Financing receivables, gross
5,433 
4,499 
Financing receivables, unearned income
(215)
(191)
Financing receivables, allowances
(301)
(327)
Financing receivables, net
4,917 
3,981 
Financing receivables, current
2,303 
1,802 
Financing receivables, noncurrent
2,614 
2,179 
Loan and Lease Receivables, Net Reported Amount
4,917 
3,981 
2011 (remaining six months)
961 
 
2012
706 
 
2013
454 
 
2014
223 
 
2015
63 
 
Thereafter
 
Total
2,411 
 
Financing Receivables and Guarantees (Financing Guarantees) (Details) (USD $)
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Financing Receivables and Guarantees
 
 
 
Channel partner financing
$ 17,200,000,000 
$ 14,200,000,000 
$ 14,400,000,000 
Financing provided by third parties for leases and loans on which the Company has provided guarantees
944,000,000 
1,200,000,000 
1,200,000,000 
Average term of lease and loan arrangements
 
 
Balance of the channel partner financing subject to guarantees
1,400,000,000 
1,100,000,000 
 
Channel partner
448,000,000 
334,000,000 
 
End user
304,000,000 
405,000,000 
 
Total
752,000,000 
739,000,000 
 
Channel partner
277,000,000 
218,000,000 
 
End user
272,000,000 
378,000,000 
 
Total
549,000,000 
596,000,000 
 
Investments (Narrative) (Details)
In Millions
Year Ended
Jul. 25,
Year Ended
Jul. 31, 2010
2009
2009
Impairment charges on available-for-sale investments
 
219 
39 
Secured lending of securities
0.25 
 
 
Collateral of market value
1.02 
 
 
Investments (Summary of Investments) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Amortized Cost
$ 34,746 
$ 29,111 
Gross Unrealized Gains
609 
388 
Gross Unrealized Losses
(75)
(216)
Fair Value
35,280 
29,283 
U.S. Government Securities [Member]
 
 
Amortized Cost
16,570 
10,266 
Gross Unrealized Gains
42 
23 
Gross Unrealized Losses
 
(5)
Fair Value
16,612 
10,284 
U.S. Government Agency Securities [Member]
 
 
Amortized Cost
13,511 1
15,501 1
Gross Unrealized Gains
68 1
104 1
Gross Unrealized Losses
 
(2)1
Fair Value
13,579 1
15,603 1
Non-U.S. Government and Agency Securities [Member]
 
 
Amortized Cost
1,452 2
528 2
Gross Unrealized Gains
15 2
12 2
Fair Value
1,467 2
540 2
Corporate Debt Securities [Member]
 
 
Amortized Cost
2,179 
1,740 
Gross Unrealized Gains
64 
51 
Gross Unrealized Losses
(21)
(86)
Fair Value
2,222 
1,705 
Asset-Backed Securities [Member]
 
 
Amortized Cost
145 
252 
Gross Unrealized Gains
Gross Unrealized Losses
(5)
(34)
Fair Value
149 
223 
Total Fixed Income Securities [Member]
 
 
Amortized Cost
33,857 
28,287 
Gross Unrealized Gains
198 
195 
Gross Unrealized Losses
(26)
(127)
Fair Value
34,029 
28,355 
Publicly Traded Equity Securities [Member]
 
 
Amortized Cost
889 
824 
Gross Unrealized Gains
411 
193 
Gross Unrealized Losses
(49)
(89)
Fair Value
$ 1,251 
$ 928 
Investments (Net Realized Gains and Losses on Fixed Income and Publicly Traded Equity Securities) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Investments
 
 
 
Gross realized gains
$ 279 
$ 435 
$ 306 
Gross realized losses
(110)
(459)
(197)
Net gains on investments in publicly traded equity securities
66 
86 
88 
Net gains (losses) on investment in fixed income securities
103 
(110)
21 
Total
$ 169 
$ (24)
$ 109 
Investments (Credit Losses for Fixed Income Securities) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Investments
 
 
Balance at beginning of period
$ (153)1
$ (159)1
Sales of other-than-temporarily impaired fixed income securities
58 
1
Balance at end of period
$ (95)
$ (153)1
Investments (Investments with Gross Unrealized Losses) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
U.S. Government Securities [Member]
 
 
Gross unrealized losses less than 12 months, fair value
 
1,850 
Gross unrealized losses less than 12 months
 
(5)
Gross unrealized losses 12 months or greater, fair value
 
 
Gross unrealized losses 12 months or greater
 
 
Total gross unrealized losses, fair value
 
1,850 
Total gross unrealized losses
 
(5)
U.S. Government Agency Securities [Member]
 
 
Gross unrealized losses less than 12 months, fair value
 
1,346 1
Gross unrealized losses less than 12 months
 
(2)1
Gross unrealized losses 12 months or greater, fair value
 
 1
Gross unrealized losses 12 months or greater
 
 1
Total gross unrealized losses, fair value
 
1,346 1
Total gross unrealized losses
 
(2)1
Non-U.S. Government and Agency Securities [Member]
 
 
Gross unrealized losses less than 12 months, fair value
 
16 2
Gross unrealized losses less than 12 months
 
 2
Gross unrealized losses 12 months or greater, fair value
 
2
Gross unrealized losses 12 months or greater
 
 2
Total gross unrealized losses, fair value
 
21 2
Total gross unrealized losses
 
 2
Corporate Debt Securities [Member]
 
 
Gross unrealized losses less than 12 months, fair value
140 
123 
Gross unrealized losses less than 12 months
(1)
(10)
Gross unrealized losses 12 months or greater, fair value
304 
613 
Gross unrealized losses 12 months or greater
(20)
(76)
Total gross unrealized losses, fair value
444 
736 
Total gross unrealized losses
(21)
(86)
Asset-Backed Securities [Member]
 
 
Gross unrealized losses less than 12 months, fair value
41 
Gross unrealized losses less than 12 months
 
(11)
Gross unrealized losses 12 months or greater, fair value
115 
141 
Gross unrealized losses 12 months or greater
(5)
(23)
Total gross unrealized losses, fair value
117 
182 
Total gross unrealized losses
(5)
(34)
Total Fixed Income Securities [Member]
 
 
Gross unrealized losses less than 12 months, fair value
142 
3,376 
Gross unrealized losses less than 12 months
(1)
(28)
Gross unrealized losses 12 months or greater, fair value
419 
759 
Gross unrealized losses 12 months or greater
(25)
(99)
Total gross unrealized losses, fair value
561 
4,135 
Total gross unrealized losses
(26)
(127)
Publicly Traded Equity Securities [Member]
 
 
Gross unrealized losses less than 12 months, fair value
168 
25 
Gross unrealized losses less than 12 months
(12)
(3)
Gross unrealized losses 12 months or greater, fair value
393 
328 
Gross unrealized losses 12 months or greater
(37)
(86)
Total gross unrealized losses, fair value
561 
353 
Total gross unrealized losses
(49)
(89)
Total Equity and Fixed Income Securities [Member]
 
 
Gross unrealized losses less than 12 months, fair value
310 
3,401 
Gross unrealized losses less than 12 months
(13)
(31)
Gross unrealized losses 12 months or greater, fair value
812 
1,087 
Gross unrealized losses 12 months or greater
(62)
(185)
Total gross unrealized losses, fair value
1,122 
4,488 
Total gross unrealized losses
$ (75)
$ (216)
Investments (Maturities of Fixed Income Securities) (Details) (USD $)
In Millions
Jul. 31, 2010
Jul. 25, 2009
Amortized Cost
$ 34,746 
$ 29,111 
Fair Value
35,280 
29,283 
Fixed Income Securities Maturities Within One Year [Member]
 
 
Amortized Cost
24,004 
 
Fair Value
24,044 
 
Fixed Income Securities Maturities Between One and Two Years [Member]
 
 
Amortized Cost
5,631 
 
Fair Value
5,703 
 
Fixed Income Securities Maturities Between Two and Five Years [Member]
 
 
Amortized Cost
3,867 
 
Fair Value
3,928 
 
Fixed Income Securities Maturities Beyond Five Years [Member]
 
 
Amortized Cost
355 
 
Fair Value
354 
 
Fixed Income Securities Maturities Total [Member]
 
 
Amortized Cost
33,857 
 
Fair Value
34,029 
 
Fair Value (Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Derivative assets
163 
113 
 
Total assets
38,240 
34,319 
 
Derivative liabilities
19 
66 
 
Total liabilities
19 
66 
 
Transfers in to Level 3
 
624 
 
Purchased intangible assets
28 
95 
33 
Derivative Assets [Member]
 
 
 
Transfers in to Level 3
 
 
Asset-Backed Securities [Member]
 
 
 
Transfers in to Level 3
 
618 
 
Cash Equivalents [Member]
 
 
 
Money market funds
2,521 
4,514 
 
U.S. government securities
235 
61 
 
U.S. government agency securities
40 1
313 1
 
Corporate debt securities
35 
 
Cash Equivalents [Member] | Fair Value Inputs (Level 1) [Member]
 
 
 
Money market funds
2,521 
4,514 
 
U.S. government securities
 
 
 
U.S. government agency securities
 1
 1
 
Corporate debt securities
 
 
 
Cash Equivalents [Member] | Fair Value Inputs (Level 2) [Member]
 
 
 
Money market funds
 
 
 
U.S. government securities
235 
61 
 
U.S. government agency securities
40 1
313 1
 
Corporate debt securities
35 
 
Cash Equivalents [Member] | Fair Value Inputs (Level 3) [Member]
 
 
 
Money market funds
 
 
 
U.S. government securities
 
 
 
U.S. government agency securities
 1
 1
 
Corporate debt securities
 
 
 
Fair Value Inputs (Level 1) [Member]
 
 
 
Derivative assets
 
 
 
Total assets
3,772 
5,442 
 
Derivative liabilities
 
 
 
Total liabilities
 
 
 
Fair Value Inputs (Level 1) [Member] | Available-for-Sale Investments [Member]
 
 
 
U.S. government securities
 
 
 
U.S. government agency securities
 1
 1
 
Non-U.S. government and agency securities
 
 
 
Corporate debt securities
 
 
 
Asset-backed securities
 
 
 
Publicly traded equity securities
1,251 
928 
 
Fair Value Inputs (Level 2) [Member]
 
 
 
Derivative assets
160 
109 
 
Total assets
34,316 
28,650 
 
Derivative liabilities
19 
66 
 
Total liabilities
19 
66 
 
Fair Value Inputs (Level 2) [Member] | Available-for-Sale Investments [Member]
 
 
 
U.S. government securities
16,612 
10,284 
 
U.S. government agency securities
13,579 1
15,603 1
 
Non-U.S. government and agency securities
1,467 
540 
 
Corporate debt securities
2,222 
1,705 
 
Asset-backed securities
 
 
 
Publicly traded equity securities
 
 
 
Fair Value Inputs (Level 3) [Member]
 
 
 
Derivative assets
 
Total assets
152 
227 
 
Derivative liabilities
 
 
 
Total liabilities
 
 
 
Fair Value Inputs (Level 3) [Member] | Available-for-Sale Investments [Member]
 
 
 
U.S. government securities
 
 
 
U.S. government agency securities
 1
 1
 
Non-U.S. government and agency securities
 
 
 
Corporate debt securities
 
 
 
Asset-backed securities
149 
223 
 
Publicly traded equity securities
 
 
 
Available-for-Sale Investments [Member]
 
 
 
U.S. government securities
16,612 
10,284 
 
U.S. government agency securities
13,579 1
15,603 1
 
Non-U.S. government and agency securities
1,467 
540 
 
Corporate debt securities
2,222 
1,705 
 
Asset-backed securities
149 
223 
 
Publicly traded equity securities
1,251 
928 
 
Fair Value (Reconciliation for All Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)) (Details)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Beginning balance
227 
 
Included in other income (loss), net
(6)
(28)
Included in operating expenses
(1)
(2)
Included in other comprehensive income
34 
(9)
Purchases, sales and maturities
(102)
(358)
Ending balance
152 
227 
Losses attributable to assets still held
(1)
(13)
Derivative Assets [Member]
 
 
Beginning balance
 
Included in operating expenses
(1)
(2)
Ending balance
Losses attributable to assets still held
(1)
 
Asset-Backed Securities [Member]
 
 
Beginning balance
223 
 
Included in other income (loss), net
(6)
(28)
Included in other comprehensive income
34 
(9)
Purchases, sales and maturities
(102)
(358)
Ending balance
149 
223 
Losses attributable to assets still held
 
(13)
Fair Value (Fair Value on a Nonrecurring Basis) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Net Carrying Value as of July 252009 [Member]
 
 
Investments in privately held companies
 
69 
Net Carrying Value as of July 31, 2010 [Member]
 
 
Investments in privately held companies
45 
 
Property held for sale
25 
 
Fair Value Inputs (Level 3) [Member]
 
 
Investments in privately held companies
45 
69 
Property held for sale
25 
 
Total Losses Gains for Year End [Member]
 
 
Investments in privately held companies
(25)
(78)
Purchased intangible assets
(28)
 
Property held for sale
(86)
 
Gains on assets no longer held as of July 31, 2010
(9)
Total losses for nonrecurring measurements
$ (137)
$ (87)
Borrowings (Narrative) (Details) (USD $)
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Senior notes
$ 15,000,000,000 
$ 10,000,000,000 
Other notes and borrowings
59,000,000 
2,000,000 
Fair value of long-term debt
16,300,000,000 
10,500,000,000 
Notional amount of interest rate derivatives
1,500,000,000 
 
Repayment of long-term debt
 
500,000,000 
Unsecured revolving credit facility that is scheduled to expire on August 17, 2012
3,000,000,000 
 
Unsecured revolving credit facility maturity date
 
August 17, 2012 
Line of credit facility interest rate spread above federal funds rate
0.005 
 
Extended expiration date of credit facility
 
August 15, 2014 
Increase the commitments under the credit facility by up to an additional
1,900,000,000 
 
Senior Debt 2 Point 90 Fixed Rate Notes Due 2014 [Member]
 
 
Senior notes
500,000,000 
 
Effective rate
0.0311 
 
Fixed interest rate
0.029 
 
Debt instrument maturity
 
Senior Debt 5 Point 50 Fixed Rate Notes Due 2016 [Member]
 
 
Senior notes
3,000,000,000 
3,000,000,000 
Effective rate
0.0318 
0.0434 
Fixed interest rate
0.055 
 
Debt instrument maturity
 
Senior Debt 4 Point 45 Fixed Rate Notes Due 2020 [Member]
 
 
Senior notes
2,500,000,000 
 
Effective rate
0.045 
 
Fixed interest rate
0.0445 
 
Debt instrument maturity
 
Senior Debt 5 Point 50 Fixed Rate Notes Due 2040 [Member]
 
 
Senior notes
2,000,000,000 
 
Effective rate
0.0567 
 
Fixed interest rate
0.055 
 
Debt instrument maturity
 
2014
2016
2020
2040
Borrowings (Schedule of Long-term Debt) (Details) (USD $)
In Millions
Jul. 31, 2010
Jul. 25, 2009
Senior notes
$ 15,000 
$ 10,000 
Other notes and borrowings
59 
Unaccreted discount
(73)
(21)
Hedge accounting adjustment
298 
314 
Short-term debt
3,096 
 
Long-term debt
12,188 
10,295 
Total
15,284 
10,295 
Senior Debt 2 Point 90 Fixed Rate Notes Due 2014 [Member]
 
 
Senior notes
500 
 
Effective rate
0.0311 
 
Fixed interest rate
0.029 
 
Debt instrument maturity
 
Senior Debt 5 Point 25 Fixed Rate Notes Due 2011 [Member]
 
 
Senior notes
3,000 
3,000 
Effective rate
0.0312 
0.0312 
Fixed interest rate
0.0525 
 
Debt instrument maturity
 
Senior Debt 5 Point 50 Fixed Rate Notes Due 2016 [Member]
 
 
Senior notes
3,000 
3,000 
Effective rate
0.0318 
0.0434 
Fixed interest rate
0.055 
 
Debt instrument maturity
 
Senior Debt 4 Point 45 Fixed Rate Notes Due 2020 [Member]
 
 
Senior notes
2,500 
 
Effective rate
0.045 
 
Fixed interest rate
0.0445 
 
Debt instrument maturity
 
Senior Debt 4 Point 95 Fixed Rate Notes Due 2019 [Member]
 
 
Senior notes
2,000 
2,000 
Effective rate
0.0508 
0.0508 
Fixed interest rate
0.0495 
 
Debt instrument maturity
 
Senior Debt 5 Point 50 Fixed Rate Notes Due 2040 [Member]
 
 
Senior notes
2,000 
 
Effective rate
0.0567 
 
Fixed interest rate
0.055 
 
Debt instrument maturity
 
Senior Debt 5 Point 90 Fixed Rate Notes Due 2039 [Member ]
 
 
Senior notes
$ 2,000 
$ 2,000 
Effective rate
0.0611 
0.0611 
Fixed interest rate
0.059 
 
Debt instrument maturity
 
2014
2011
2016
2020
2019
2040
2039
Derivative Instruments (Narrative) (Details) (USD $)
Year Ended
Jul. 31, 2010
Jul. 25, 2009
Net derivative gains to be reclassified from AOCI into earnings in next twelve months
40,000,000 
 
Interest rate derivatives designated as cash flow hedge long-term debt
3,700,000,000 
3,900,000,000 
Notional amount of interest rate derivatives
1,500,000,000 
 
Derivative assets, designated
154,000,000 
87,000,000 
Foreign Currency Forecasted Transactions Hedge Maximum Maturity Period
18 
 
Other Assets [Member] | Interest Rate Derivatives [Member]
 
 
Derivative assets, designated
72,000,000 
 
Interest Rate Swap [Member]
 
 
Notional amount of interest rate derivatives
1,500,000,000 
 
Equity Derivatives [Member]
 
 
Gain loss net investments in foreign subsidiaries
2,000,000 
 
Foreign currency hedging amounts
$ 169,000,000 
$ 91,000,000 
Derivative Instruments (Derivatives Recorded at Fair Value) (Details) (USD $)
In Millions
Jul. 31, 2010
Jul. 25, 2009
Derivative assets, designated
$ 154 
$ 87 
Derivative liabilities, designated
36 
Derivative assets, not designated
26 
Derivative liabilities, not designated
12 
30 
Total derivative assets, fair value
163 
113 
Total derivative liability, fair value
19 
66 
Other Current Liabilities [Member] | Foreign Currency Derivatives [Member]
 
 
Derivative liabilities, designated
36 
Derivative liabilities, not designated
12 
30 
Foreign Currency Derivatives [Member] | Other Current Assets [Member]
 
 
Derivative assets, designated
82 
87 
Derivative assets, not designated
22 
Other Assets [Member] | Interest Rate Derivatives [Member]
 
 
Derivative assets, designated
72 
 
Other Assets [Member] | Equity Derivatives [Member]
 
 
Derivative assets, not designated
Other Current Assets [Member] | Equity Derivatives [Member]
 
 
Derivative assets, not designated
$ 1 
$ 2 
Derivative Instruments (Gains and Losses on Derivatives Designated as Cash Flow Hedges)(Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Gains (losses) recognized in OCI on derivatives (effective portion)
$ 56 
$ (160)
Gains (losses) reclassified from AOCI into income (effective portion)
(1)
(110)
Foreign Currency Derivatives [Member]
 
 
Gains (losses) recognized in OCI on derivatives (effective portion)
33 
(116)
Foreign Currency Derivatives [Member] | Operating Expenses [Member]
 
 
Gains (losses) reclassified from AOCI into income (effective portion)
(1)
(95)
Foreign Currency Derivatives [Member] | Cost of Sales- Service [Member]
 
 
Gains (losses) reclassified from AOCI into income (effective portion)
 
(13)
Operating Expenses [Member] | Other Derivatives [Member]
 
 
Gains (losses) reclassified from AOCI into income (effective portion)
 
(2)
Interest Rate Derivatives [Member]
 
 
Gains (losses) recognized in OCI on derivatives (effective portion)
23 
(42)
Other Derivatives [Member]
 
 
Gains (losses) recognized in OCI on derivatives (effective portion)
 
(2)
Derivative Instruments (Effect of Derivative Instruments Designated as Fair Value Hedges on Consolidated Statement of Operations Summary) (Details) (Derivatives Designated as Fair Value Hedging Instruments [Member], USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Other Income Loss Net [Member] | Derivatives Designated as Fair Value Hedging Instruments [Member] | Interest Rate Derivatives [Member]
 
 
Gain (losses) on derivative instruments
 
(7)
Other Income Loss Net [Member] | Derivatives Designated as Fair Value Hedging Instruments [Member] | Equity Derivatives [Member]
 
 
Gain (losses) on derivative instruments
97 
Interest Expense [Member] | Derivatives Designated as Fair Value Hedging Instruments [Member] | Interest Rate Derivatives [Member]
 
 
Gain (losses) on derivative instruments
72 
 
Derivatives Designated as Fair Value Hedging Instruments [Member]
 
 
Gain (losses) on derivative instruments
$ 75 
$ 90 
Derivative Instruments (Effect of Derivative Instruments Not Designated as Fair Value Hedges on Consolidated Statement of Operations Summary) (Details) (Derivatives Not Designated as Hedging Instruments [Member], USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Foreign Currency Derivatives [Member] | Other Income Loss Net [Member] | Derivatives Not Designated as Hedging Instruments [Member]
 
 
Gain (losses) recognized in income
$ (100)
$ 1 
Operating Expenses [Member] | Derivatives Not Designated as Hedging Instruments [Member] | Equity Derivatives [Member]
 
 
Gain (losses) recognized in income
18 
(14)
Other Income Loss Net [Member] | Derivatives Not Designated as Hedging Instruments [Member] | Equity Derivatives [Member]
 
 
Gain (losses) recognized in income
12 
11 
Derivatives Not Designated as Hedging Instruments [Member]
 
 
Gain (losses) recognized in income
$ (70)
$ (2)
Derivative Instruments (Summary of Notional Amount of Foreign Currency Derivatives) (Details) (USD $)
In Millions
Jul. 31, 2010
Jul. 25, 2009
Total
$ 7,335 
$ 7,491 
Derivatives Designated as Cash Flow Hedging Instruments [Member]
 
 
Cash flow hedging instruments
2,611 
2,965 
Derivatives Designated as Net Investment Hedging Instruments [Member]
 
 
Net investment hedging instruments
105 
103 
Derivatives Not Designated as Hedging Instruments [Member]
 
 
No hedge designation
$ 4,619 
$ 4,423 
Commitments and Contingencies (Narrative) (Details) (USD $)
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Commitments and Contingencies
 
 
 
Operating lease rent expense
$ 364,000,000 
$ 328,000,000 
$ 291,000,000 
Total purchase commitments for inventory
4,319,000,000 
1,962,000,000 
 
Liability for unconditional purchase agreements
135,000,000 
175,000,000 
 
Additional employees compensation
120,000,000 
291,000,000 
340,000,000 
Future contingent consideration for employees compensation
205,000,000 
 
 
Funding commitments
279,000,000 
313,000,000 
 
Minimum warranty period for products, in days
90 
 
 
Maximum warranty period for products, in years
 
 
Brazilian authority claim of import tax evasion by importer, tax portion
190,000,000 
 
 
Brazilian authority claim of import tax evasion by importer, interest portion
85,000,000 
 
 
Brazilian authority claim of import tax evasion by importer, penalties portion
1,600,000,000 
 
 
Commitments and Contingencies (Schedule of Future Annual Minimum Lease Payments Under All Noncancelable Operating Leases) (Details) (USD $)
In Millions
Jul. 31, 2010
Commitments and Contingencies
 
2011
$ 343 
2012
243 
2013
167 
2014
119 
2015
122 
Thereafter
310 
Total
$ 1,304 
Commitments and Contingencies (Schedule of Product Warranty Liability) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Commitments and Contingencies
 
 
Balance at beginning of fiscal year
$ 321 
$ 399 
Provision for warranties issued
469 
374 
Payments
(437)
(452)
Fair value of warranty liability acquired
 
Balance at end of fiscal year
$ 360 
$ 321 
Shareholders' Equity (Narrative) (Details)
In Billions, except Share data in Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Shareholders' Equity
 
 
Authorized common stock repurchase amount
72 
 
Remaining authorized repurchase amount
 
Shares repurchased in settlement of employee tax withholding obligations shares
Shareholders' Equity (Stock Repurchase Program) (Details) (USD $)
In Millions, unless otherwise specified
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Jul. 31, 2010
Shareholders' Equity
 
 
 
Cumulative shares repurchased, beginning balance
2,802 
2,600 
 
Repurchase of common stock under the stock repurchase program, shares
325 
202 
 
Cumulative shares repurchased, ending balance
3,127 
2,802 
 
Cumulative weighted-average price per share balance
20.41 
20.60 
 
Repurchase of common stock under the stock repurchase program, weighted -average price per share
24.02 
17.89 
 
Cumulative weighted-average price per share balance
20.78 
20.41 
 
Cumulative amount repurchased, beginning balance
$ 57,179 
$ 53,579 
$ 64,982 
Repurchase of common stock under the stock repurchase program
7,803 
3,600 
 
Shareholders' Equity (Comprehensive Income) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Shareholders' Equity
 
 
 
Net income
$ 7,767 
$ 6,134 
$ 8,052 
Change in net unrealized gains (losses), net of tax effects of $199, $(33), and $17, respectively
334 
(71)
57 
Net unrealized (gains) losses reclassified into earnings, net of tax effects of $17, $10, and $30, respectively
(151)
33 
(79)
Change in derivative instruments, net of tax effects of $9 , $(16), and $0, respectively
46 
(141)
60 
Net unrealized (gains) losses reclassified into earnings, net of tax effects
108 
(60)
Net change in cumulative translation adjustment and other, net of tax effects
(55)
(192)
227 
Comprehensive income (loss)
7,943 
5,871 
8,257 
Comprehensive loss (income) attributable to noncontrolling interests
12 
19 
(39)
Comprehensive income attributable to Cisco Systems, Inc.
7,955 
5,890 
8,218 
Net unrealized (gains) losses reclassified into earnings, tax effect
17 
10 
30 
Other comprehensive income, unrealized holding gain (loss) on securities arising during period, tax
199 
(33)
17 
Change in derivative instruments tax effects
$ 9 
$ (16)
$ 0 
Shareholders' Equity (Components of AOCI, Net of Tax) (Details) (USD $)
In Millions
Jul. 31, 2010
Jul. 25, 2009
Jul. 26, 2008
Shareholders' Equity
 
 
 
Net unrealized gains on investments
$ 333 
$ 138 
$ 206 
Net unrealized gains (losses) on derivative instruments
27 
(21)
12 
Cumulative translation adjustment and other
263 
318 
510 
Total
$ 623 
$ 435 
$ 728 
Employee Benefit Plans (Narrative) (Details)
Share data in Millions, except Per Share data, unless otherwise specified
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Nov. 15, 2007
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Stock purchase plan - shares of the Company's common stock reserved for issuance
 
 
 
471,400,000 
 
 
 
 
 
 
Shares issued under employee purchase plan
 
 
 
27,000,000 
28,000,000 
19,000,000 
 
 
 
 
Shares available under employee purchase plans
 
 
 
156,000,000 
 
 
 
 
 
 
Shares reserved in employee stock incentive plan
 
 
 
2,500,000,000 
 
 
559,000,000 
 
 
 
Closing stock price
23.07 
 
 
 
 
 
 
 
 
 
Compensation cost related to unvested share-based awards not yet recognized
3,300,000,000 
 
 
 
 
 
 
 
 
 
Compensation cost related to unvested share-based awards not yet recognized period, years
2.5 
 
 
 
 
 
 
 
 
 
Income tax benefit for employee share-based compensation expense
415,000,000 
317,000,000 
362,000,000 
 
 
 
 
 
 
 
Stock options exercisable
606,000,000 
768,000,000 
 
 
 
 
 
 
 
 
Stock options exercisable, weighted-average exercise price per share
20.51 
24.16 
 
 
 
 
 
 
 
 
In-the-money exercisable stock option shares
500,000,000 
 
 
 
 
 
 
 
 
 
Company's matching contributions to the 401k Plan
 
 
 
 
 
 
 
210,000,000 
202,000,000 
171,000,000 
Maximum matching contribution made by the Company
11,025 
 
 
 
 
 
 
 
 
 
Deferred compensation liability classified noncurrent]
280,000,000 
220,000,000 
 
 
 
 
 
 
 
 
Employee contribution minimum
0.01 
 
 
 
 
 
 
 
 
 
Employee contribution maximum
0.75 
 
 
 
 
 
 
 
 
 
Employer contribution maximum
 
 
 
 
 
 
 
 
 
Company match on employee contribution
0.045 
 
 
 
 
 
 
 
 
 
Annual limit on eligible earnings
245,000 
 
 
 
 
 
 
 
 
 
Eligible compensation not to exceed
1,500,000 
 
 
 
 
 
 
 
 
 
Employee Benefit Plans (Summary of Stock Option Activity) (Details) (USD $)
In Millions, except Per Share data
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Number outstanding, beginning balance
1,004 
1,199 
1,289 
Granted and assumed, number outstanding
15 
14 
159 
Exercised, number outstanding
(158)1
(33)1
(146)1
Canceled/forfeited/expired, number outstanding
(129)
(176)
(103)
Number outstanding, ending balance
732 
1,004 
1,199 
Canceled/forfeited/expired, weighted average exercise price
$ 47.31 
$ 49.79 
$ 30.74 
Weighted-average exercise price per share, beginning balance
24.29 
27.83 
26.60 
Granted and assumed, weighted-average exercise price
13.23 
19.01 
31.12 
Exercised, weighted-average exercise price
17.88 1
14.67 1
18.50 1
Weighted-average exercise price per share, ending balance
21.39 
24.29 
27.83 
Total Pretax Intrinsic Value
$ 1,000 
$ 158 
$ 1,600 
Employee Benefit Plans (Outstanding and Exercisable Stock Options) (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
Year Ended
Jul. 31, 2010
Stock options outstanding
732,000,000 
Stock options outstanding, weighted-average remaining contractual life (in years)
3.94 
Stock options outstanding, weighted-average exercise price per share
$ 21.39 
Stock options outstanding, aggregate intrinsic value
2,460 
Stock options exercisable
606,000,000 
Stock options exercisable, weighted-average exercise price per share
20.51 
Stock options exercisable, aggregate intrinsic value
2,286 
Price 0.01 to 15.00 [Member]
 
Stock options outstanding
71,000,000 
Stock options outstanding, weighted-average remaining contractual life (in years)
2.50 
Stock options outstanding, weighted-average exercise price per share
10.62 
Stock options outstanding, aggregate intrinsic value
884 
Stock options exercisable
65,000,000 
Stock options exercisable, weighted-average exercise price per share
10.87 
Stock options exercisable, aggregate intrinsic value
782 
Price 15.01 to 18.00 [Member]
 
Stock options outstanding
137,000,000 
Stock options outstanding, weighted-average remaining contractual life (in years)
3.18 
Stock options outstanding, weighted-average exercise price per share
17.36 
Stock options outstanding, aggregate intrinsic value
782 
Stock options exercisable
129,000,000 
Stock options exercisable, weighted-average exercise price per share
17.34 
Stock options exercisable, aggregate intrinsic value
741 
Price 18.01 to 20.00 [Member]
 
Stock options outstanding
177,000,000 
Stock options outstanding, weighted-average remaining contractual life (in years)
2.90 
Stock options outstanding, weighted-average exercise price per share
19.29 
Stock options outstanding, aggregate intrinsic value
669 
Stock options exercisable
173,000,000 
Stock options exercisable, weighted-average exercise price per share
19.29 
Stock options exercisable, aggregate intrinsic value
654 
Price 20.01 to 25.00 [Member]
 
Stock options outstanding
188,000,000 
Stock options outstanding, weighted-average remaining contractual life (in years)
4.26 
Stock options outstanding, weighted-average exercise price per share
22.48 
Stock options outstanding, aggregate intrinsic value
125 
Stock options exercisable
146,000,000 
Stock options exercisable, weighted-average exercise price per share
22.40 
Stock options exercisable, aggregate intrinsic value
109 
Price 25.01 to 35.00 [Member]
 
Stock options outstanding
158,000,000 
Stock options outstanding, weighted-average remaining contractual life (in years)
6.02 
Stock options outstanding, weighted-average exercise price per share
30.63 
Stock options exercisable
92,000,000 
Stock options exercisable, weighted-average exercise price per share
30.56 
Price 35.01 to 70.00 [Member]
 
Stock options outstanding
1,000,000 
Stock options outstanding, weighted-average remaining contractual life (in years)
0.61 
Stock options outstanding, weighted-average exercise price per share
54.22 
Stock options exercisable
1,000,000 
Stock options exercisable, weighted-average exercise price per share
$ 54.22 
Employee Benefit Plans (Restricted Stock and Stock Unit Awards) (Details) (USD $)
In Millions, except Per Share data
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Number of Shares Restricted Stock [Member]
 
 
 
Beginning balance, restricted stock/stock units
62 
10 
11 
Granted and assumed, restricted stock/stock units
54 
57 
Vested, restricted stock/stock units
(16)
(4)
(4)
Canceled/forfeited, restricted stock/stock units
(3)
(1)
(1)
Ending balance, restricted stock/stock units
97 
62 
10 
Weighted-Average Grant Date Price of Restricted Stock [Member]
 
 
 
Beginning balance, weighted-average grant date price per share
21.25 
24.27 
22.52 
Granted and assumed, weighted-average grant date price per share
23.40 
20.90 
27.29 
Vested, weighted-average grant date price per share
21.56 
23.56 
22.49 
Canceled/forfeited, weighted-average grant date price per share
22.40 
22.76 
24.24 
Ending balance, weighted-average grant date price per share
22.35 
21.25 
24.27 
Aggregated Fair Market Value of Restricted Stock [Member]
 
 
 
Vested, aggregated fair market value
378 
69 
83 
Employee Benefit Plans (Share-Based Awards Available for Grant) (Details)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Jul. 28, 2007
Employee Benefit Plans
 
 
 
 
Balance
295 
253 
362 
294 
Options granted and assumed
(15)
(14)
(159)
 
Restricted stock, stock units, and other share-based awards granted and assumed
(81)
(140)
(11)
 
Share-based awards canceled/forfeited/expired
123 
38 
27 
 
Additional shares reserved
15 
211 
 
Employee Benefit Plans (Share-Based Compensation Expense) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Allocated share-based compensation expense
$ 1,517 
$ 1,231 
$ 1,112 
Cost of Sales - Product [Member]
 
 
 
Allocated share-based compensation expense
57 
46 
40 
Cost of Sales- Service [Member]
 
 
 
Allocated share-based compensation expense
164 
128 
108 
Share-Based Compensation Expense in Cost of Sales [Member]
 
 
 
Allocated share-based compensation expense
221 
174 
148 
Research and Development [Member]
 
 
 
Allocated share-based compensation expense
450 
382 
339 
Sales and Marketing [Member]
 
 
 
Allocated share-based compensation expense
536 
441 
438 
General and Administrative [Member]
 
 
 
Allocated share-based compensation expense
310 
234 
187 
Share-Based Compensation Expense in Operating Expenses [Member]
 
 
 
Allocated share-based compensation expense
$ 1,296 
$ 1,057 
$ 964 
Employee Benefit Plans (Employee Stock Options and Employee Stock Purchase Rights) (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Employee Stock Option [Member]
 
 
 
Number of options
4,000,000 
9,000,000 
151,000,000 
Expected volatility
0.305 
0.36 
0.31 
Risk-free interest rate
0.023 
0.03 
0.043 
Expected dividend
Kurtosis
4.1 
4.5 
4.6 
Skewness
0.20 
(0.19)
(0.80)
Weighted-average expected life (in years)
5.1 
5.9 
6.3 
Weighted-average estimated grant date fair value (per option/per share)
$ 6.50 
$ 6.60 
$ 9.60 
Employee Stock Purchase Rights [Member]
 
 
 
Expected volatility
0.309 
0.364 
0.326 
Risk-free interest rate
0.005 
0.006 
0.027 
Expected dividend
Weighted-average expected life (in years)
1.3 
1.1 
0.5 
Weighted-average estimated grant date fair value (per option/per share)
$ 6.53 
$ 5.46 
$ 6.12 
Income Taxes (Details) (USD $)
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Current, federal
$ 1,469,000,000 
$ 1,615,000,000 
$ 2,384,000,000 
Deferred, federal
(435,000,000)
(397,000,000)
(693,000,000)
Total federal income tax provision
1,034,000,000 
1,218,000,000 
1,691,000,000 
Current, state
186,000,000 
132,000,000 
173,000,000 
Deferred, state
 
(30,000,000)
(62,000,000)
Total state income tax provision
186,000,000 
102,000,000 
111,000,000 
Current, foreign
470,000,000 
386,000,000 
418,000,000 
Deferred, foreign
(42,000,000)
(147,000,000)
(17,000,000)
Total foreign income tax provision
428,000,000 
239,000,000 
401,000,000 
Total
1,648,000,000 
1,559,000,000 
2,203,000,000 
United States
1,102,000,000 
1,650,000,000 
3,044,000,000 
International
8,313,000,000 
6,043,000,000 
7,211,000,000 
Total
9,415,000,000 
7,693,000,000 
10,255,000,000 
Federal statutory rate
0.35 
0.35 
0.35 
State taxes, net of federal tax benefit
0.014 
0.013 
0.009 
Foreign income at other than U.S. rates
(0.193)
(0.189)
(0.161)
Tax credits
(0.005)
(0.024)
(0.008)
Tax audit settlement
 
 
(0.016)
Transfer pricing adjustment related to share-based compensation
(0.017)
0.023 
 
Nondeductible compensation
0.02 
0.026 
0.018 
International realignment
 
 
0.022 
Other, net
0.006 
0.004 
0.001 
Total
0.175 
0.203 
0.215 
Court decision on share based compensation impact on income tax benefit
158,000,000 
 
 
Court decision on share based compensation impact on income tax benefit percent
0.017 
 
 
Court decision on share based compensation impact on paid-in capital
566,000,000 
 
 
Retroactive research and development tax credit tax benefit in tax provision
 
106,000,000 
 
Tax expense resulting from intercompany realignment of foreign operations
 
 
229,000,000 
Tax benefit resulting from tax matters settlement
 
 
162,000,000 
Undistributed foreign earnings in which U.S. income taxes were not provided
31,600,000,000 
 
 
Employment and capital investment actions tax incentive effect on income tax rates
1,700,000,000 
1,300,000,000 
1,600,000,000 
Employment and capital investment actions tax incentive effect on income tax rates
$ 0.30 
$ 0.22 
$ 0.26 
Unrecognized Tax Benefits, Beginning Balance
2,816,000,000 1
2,505,000,000 1
3,331,000,000 1
Additions based on tax positions related to the current year
246,000,000 
190,000,000 
488,000,000 
Additions for tax positions of prior years
60,000,000 
307,000,000 
147,000,000 
Reductions for tax positions of prior years
(250,000,000)
(17,000,000)
(466,000,000)
Settlements
(140,000,000)
(109,000,000)
(951,000,000)
Lapse of statute of limitations
(55,000,000)
(60,000,000)
(44,000,000)
Cumulative Effect Of Initial Adoption Of FIN48 To Retained Earnings And Additional Paid In Capital
 
 
451,000,000 
Unrecognized Tax Benefits, Ending Balance
2,677,000,000 
2,816,000,000 1
2,505,000,000 1
Interest accrued related to unrecognized tax benefits in fiscal years
167,000,000 
158,000,000 
 
Penalties accrued related to unrecognized tax benefits in fiscal years
5,000,000 
5,000,000 
 
Interest and penalties accrued related to unrecognized tax benefits
167,000,000 
329,000,000 
 
Change in gross unrecognized tax benefits resulting from court decision
(220,000,000)
214,000,000 
 
Change in accrued interest resulting from court decision
(218,000,000)
197,000,000 
 
Accrued interest decreases resulting from IRS settlements
 
 
39,000,000 
Decrease in gross unrecognized tax benefits with settlements
 
 
1,000,000,000 
Deferred tax assets - current
2,126,000,000 
2,320,000,000 
 
Deferred tax assets - noncurrent
2,079,000,000 
2,122,000,000 
 
Deferred tax liabilities - current
(87,000,000)
(12,000,000)
 
Deferred tax liabilities - noncurrent
(276,000,000)
(57,000,000)
 
Allowance for doubtful accounts and returns
248,000,000 
300,000,000 
 
Sales-type and direct-financing leases
224,000,000 
226,000,000 
 
Inventory write-downs and capitalization
176,000,000 
238,000,000 
 
Investment provisions
329,000,000 
333,000,000 
 
IPR&D, goodwill, and purchased intangible assets
191,000,000 
222,000,000 
 
Deferred revenue
1,752,000,000 
1,475,000,000 
 
Credits and net operating loss carryforwards
752,000,000 
817,000,000 
 
Share-based compensation expense
970,000,000 
809,000,000 
 
Accrued compensation
339,000,000 
405,000,000 
 
Other
517,000,000 
600,000,000 
 
Gross deferred tax assets
5,498,000,000 
5,425,000,000 
 
Valuation allowance
(76,000,000)
(66,000,000)
 
Total deferred tax assets
5,422,000,000 
5,359,000,000 
 
Purchased intangible assets
(1,224,000,000)
(639,000,000)
 
Depreciation
(120,000,000)
(288,000,000)
 
Unrealized gains on investments
(185,000,000)
(12,000,000)
 
Other
(51,000,000)
(47,000,000)
 
Total deferred tax liabilities
(1,580,000,000)
(986,000,000)
 
Total net deferred tax assets
3,842,000,000 
4,373,000,000 
 
Unrecognized tax benefits that would impact tax rate
2,300,000,000 
 
 
Domestic Country [Member]
 
 
 
Operating loss carryforwards
325,000,000 
 
 
Federal and State Tax credit carryforwards
8,000,000 
 
 
Foreign Country [Member]
 
 
 
Operating loss carryforwards
252,000,000 
 
 
State and Local Jurisdiction [Member]
 
 
 
Operating loss carryforwards
1,600,000,000 
 
 
Federal and State Tax credit carryforwards
584,000,000 
 
 
Segment Information and Major Customers (Narrative) (Details)
In Millions
Jul. 25, 2010
Jul. 25, 2009
Jul. 26, 2008
Customer concentration risk, percentage
0.1 
0.1 
0.1 
Cash and cash equivalents and investments
 
35,001 
 
United States [Member]
 
 
 
Cash and cash equivalents and investments
 
5,900 
 
International [Member]
 
 
 
Cash and cash equivalents and investments
 
29,100 
 
Segment Information and Major Customers (Reportable Segments) (Details) (USD $)
In Millions
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Net sales
$ 40,040 
$ 36,117 
$ 39,540 
Gross margin
25,643 
23,094 
25,346 
Theater total
26,119 
23,486 
25,727 
Unallocated corporate items
(476)1
(392)1
(381)1
United States and Canada [Member]
 
 
 
Net sales
21,740 2
19,345 2
21,242 2
Gross margin
14,042 
12,660 
13,855 
European Markets [Member]
 
 
 
Net sales
8,048 
7,683 
8,123 
Gross margin
5,425 
5,116 
5,358 
Emerging Markets [Member]
 
 
 
Net sales
4,367 
3,999 
4,530 
Gross margin
2,805 
2,438 
2,789 
Asia Pacific Markets [Member]
 
 
 
Net sales
5,885 
5,090 
5,645 
Gross margin
3,847 
3,272 
3,725 
United States [Member]
 
 
 
Net sales
$ 20,400 
$ 18,200 
$ 20,100 
Segment Information and Major Customers (Net Sales for Groups of Similar Products and Services) (Details) (USD $)
In Millions
3 Months Ended
Jul. 31, 2010
3 Months Ended
May 01, 2010
3 Months Ended
Jan. 23, 2010
3 Months Ended
Oct. 24, 2009
3 Months Ended
Jul. 25, 2009
3 Months Ended
Apr. 25, 2009
3 Months Ended
Jan. 24, 2009
3 Months Ended
Oct. 25, 2008
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Net sales
$ 10,836 
$ 10,368 
$ 9,815 
$ 9,021 
$ 8,535 
$ 8,162 
$ 9,089 
$ 10,331 
$ 40,040 
$ 36,117 
$ 39,540 
Routers [Member]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
6,728 
6,521 
8,225 
Switches [Member]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
13,454 
11,923 
13,330 
New Products [Member]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
11,386 
9,859 
10,492 
Other Products [Member]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
852 
828 
1,052 
Total Product [Member]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
32,420 
29,131 
33,099 
Total Service [Member]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
7,620 
6,986 
6,441 
Segment Information and Major Customers (Property and Equipment, Net) (Details) (USD $)
In Millions
Jul. 31, 2010
Jul. 25, 2009
Jul. 26, 2008
Property and equipment, net
$ 3,941 
$ 4,043 
$ 4,151 
United States [Member]
 
 
 
Property and equipment, net
3,283 
3,330 
3,478 
International [Member]
 
 
 
Property and equipment, net
$ 658 
$ 713 
$ 673 
Net Income per Share (Details) (USD $)
In Millions, except Per Share data
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Net Income per Share
 
 
 
Net income
$ 7,767 
$ 6,134 
$ 8,052 
Weighted-average shares-basic
5,732 
5,828 
5,986 
Effect of dilutive potential common shares
116 
29 
177 
Weighted-average shares-diluted
5,848 
5,857 
6,163 
Net income per share-basic
1.36 
1.05 
1.35 
Net income per share-diluted
$ 1.33 
$ 1.05 
$ 1.31 
Antidilutive employee share-based awards, excluded
344 
977 
567 
Supplementary Financial Data (Details) (USD $)
In Millions, except Per Share data
3 Months Ended
Jul. 31, 2010
3 Months Ended
May 01, 2010
3 Months Ended
Jan. 23, 2010
3 Months Ended
Oct. 24, 2009
3 Months Ended
Jul. 25, 2009
3 Months Ended
Apr. 25, 2009
3 Months Ended
Jan. 24, 2009
3 Months Ended
Oct. 25, 2008
Year Ended
Jul. 31, 2010
Year Ended
Jul. 25, 2009
Year Ended
Jul. 26, 2008
Supplementary Financial Data
 
 
 
 
 
 
 
 
 
 
 
Net sales
$ 10,836 
$ 10,368 
$ 9,815 
$ 9,021 
$ 8,535 
$ 8,162 
$ 9,089 
$ 10,331 
$ 40,040 
$ 36,117 
$ 39,540 
Gross margin
6,793 
6,630 
6,332 
5,888 
5,461 
5,229 
5,723 
6,681 
25,643 
23,094 
25,346 
Net income
1,935 
2,192 
1,853 
1,787 
1,081 
1,348 
1,504 
2,201 
7,767 
6,134 
8,052 
Net income per share-basic
0.34 
0.38 
0.32 
0.31 
0.19 
0.23 
0.26 
0.37 
1.36 
1.05 
1.35 
Net income per share-diluted
$ 0.33 
$ 0.37 
$ 0.32 
$ 0.30 
$ 0.19 
$ 0.23 
$ 0.26 
$ 0.37 
$ 1.33 
$ 1.05 
$ 1.31 
Cash and cash equivalents and investments
39,861 
39,106 
39,638 
35,365 
35,001 
33,551 
29,531 
26,763 
39,861 
35,001