Cisco 2014 Annual Report Download - page 25

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As a consequence, operating results for a particular future period are difficult to predict, and, therefore, prior results are not
necessarily indicative of results to be expected in future periods. Any of the foregoing factors, or any other factors discussed
elsewhere herein, could have a material adverse effect on our business, results of operations, and financial condition that could
adversely affect our stock price.
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY UNFAVORABLE ECONOMIC AND
MARKET CONDITIONS AND THE UNCERTAIN GEOPOLITICAL ENVIRONMENT
Challenging economic conditions worldwide have from time to time contributed, and may continue to contribute, to
slowdowns in the communications and networking industries at large, as well as in specific segments and markets in which we
operate, resulting in:
• Reduced demand for our products as a result of continued constraints on IT-related capital spending by our
customers, particularly service providers, and other customer markets as well
• Increased price competition for our products, not only from our competitors but also as a consequence of customers
disposing of unutilized products
• Risk of excess and obsolete inventories
• Risk of supply constraints
• Risk of excess facilities and manufacturing capacity
• Higher overhead costs as a percentage of revenue and higher interest expense
The global macroeconomic environment and recovery from the downturn has been challenging and inconsistent. Instability in
the global credit markets, the impact of uncertainty regarding the U.S. federal budget including the effect of the sequestration
beginning in 2013, global central bank monetary policy, the instability in the geopolitical environment in many parts of the
world and other disruptions may continue to put pressure on global economic conditions. If global economic and market
conditions, or economic conditions in key markets, remain uncertain or deteriorate further, we may experience material
impacts on our business, operating results, and financial condition.
Our operating results in one or more segments may also be affected by uncertain or changing economic conditions particularly
germane to that segment or to particular customer markets within that segment. For example, sales in several of our emerging
countries decreased in recent periods, including fiscal 2014, and we expect that this weakness will continue for at least several
quarters.
In addition, reports of certain intelligence gathering methods of the U.S. government could affect customers’ perception of the
products of IT companies which design and manufacture products in the United States. Trust and confidence in us as an IT
supplier is critical to the development and growth of our markets. Impairment of that trust, or foreign regulatory actions taken
in response to reports of certain intelligence gathering methods of the U.S. government, could affect the demand for our
products from customers outside of the United States and could have an adverse effect on our operating results.
WE HAVE BEEN INVESTING AND EXPECT TO CONTINUE TO INVEST IN KEY GROWTH AREAS AS WELL
AS MAINTAINING LEADERSHIP IN ROUTING, SWITCHING AND SERVICES, AND IF THE RETURN ON
THESE INVESTMENTS IS LOWER OR DEVELOPS MORE SLOWLY THAN WE EXPECT, OUR OPERATING
RESULTS MAY BE HARMED
We expect to realign and dedicate resources into key growth areas, such as data center virtualization, software, security, and
cloud, while also focusing on maintaining leadership in routing, switching and services. However, the return on our
investments may be lower, or may develop more slowly, than we expect. If we do not achieve the benefits anticipated from
these investments (including if our selection of areas for investment does not play out as we expect), or if the achievement of
these benefits is delayed, our operating results may be adversely affected.
OUR REVENUE FOR A PARTICULAR PERIOD IS DIFFICULT TO PREDICT, AND A SHORTFALL IN
REVENUE MAY HARM OUR OPERATING RESULTS
As a result of a variety of factors discussed in this report, our revenue for a particular quarter is difficult to predict, especially
in light of a challenging and inconsistent global macroeconomic environment and related market uncertainty.
Our revenue may grow at a slower rate than in past periods, or decline as it did in fiscal 2014 on a year-over-year basis. Our ability
to meet financial expectations could also be adversely affected if the nonlinear sales pattern seen in some of our past quarters
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