Cisco 2012 Annual Report Download - page 67

Fiscal 2011 Compared with Fiscal 2010
Our service gross margin percentage increased by 1.5 percentage points for fiscal 2011, as compared with fiscal
2010, with both technical support services and advanced services experiencing higher gross margins. The
increase was primarily due to higher sales volume. Partially offsetting the volume increases were unfavorable
mix impacts, primarily due to advanced services representing a higher proportion of service revenue in fiscal
2011 and due to increased service delivery costs. Gross margin in technical support services increased primarily
as a result of increased sales volume and lower headcount-related cost impacts. These benefits were partially
offset by increased support service delivery costs, particularly from outside services. Advanced services gross
margin increased primarily due to strong volume growth partially offset by higher delivery team costs, which
were partially headcount related.
Gross Margin by Segment
The following table presents the total gross margin for each segment (in millions, except percentages):
AMOUNT PERCENTAGE
Years Ended July 28, 2012 July 30, 2011 July 31, 2010 July 28, 2012 July 30, 2011 July 31, 2010
Gross margin:
Americas ..................... $16,639 $15,766 $15,042 62.8% 63.0% 64.5%
EMEA ....................... 7,605 7,452 7,235 63.0% 64.2% 66.8%
APJC ........................ 4,519 4,143 3,842 60.4% 62.8% 65.3%
Segment total .................. 28,763 27,361 26,119 62.4% 63.3% 65.2%
Unallocated corporate items (1) .... (554) (825) (476)
Total ..................... $28,209 $26,536 $25,643 61.2% 61.4% 64.0%
(1) The unallocated corporate items include the effects of amortization and impairments of acquisition-related
intangible assets, share-based compensation expense, and other asset impairments and restructuring. We do
not allocate these items to the gross margin for each segment because management does not include such
information in measuring the performance of the operating segments. The decrease in fiscal 2012 amounts is
primarily due to the absence in fiscal 2012 of significant restructuring and acquisition-related intangible
asset impairments that were recognized in fiscal 2011.
Fiscal 2012 Compared with Fiscal 2011
For fiscal 2012, we experienced a gross margin percentage decline across all of our geographic segments as
compared with fiscal 2011.
The Americas segment experienced a slight gross margin percentage decline with the impact of higher sales
discounts, rebates and unfavorable pricing being substantially offset by higher volume, higher service gross
margin, lower overall manufacturing and delivery costs, and favorable mix impacts. Significantly lower sales to
the consumer market resulted in a positive gross margin mix impact to the Americas segment for fiscal 2012.
The gross margin percentage decline in our EMEA segment was primarily the result of unfavorable mix impacts;
higher sales discounts, rebates and unfavorable pricing; and lower service gross margin due to increased
headcount-related costs. These decreases were partially offset by lower overall manufacturing and delivery costs
and increased volume in this segment.
The APJC segment experienced the largest gross margin percentage decline of all of our geographic segments
due primarily to the impact of higher sales discounts, rebates and unfavorable pricing, lower service gross
margin, and unfavorable mix impacts. These decreases were partially offset by increased volume and lower
overall manufacturing and delivery costs.
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