CISCO SYSTEMS INC
For the period ended Apr 27, 2024. Filed May 21, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Apr 27, 2024 · Filed May 21, 2024
CSCO$93.85-2.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-01-27; filed 2024-02-20.
0000858877-24-000003
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-04-27; filed 2024-05-21.
0000858877-24-000007
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 185 previous paragraphs and 187 current paragraphs.
116 unchanged; 59 reworded; 11 added; 10 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 27 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
In the third quarter of fiscal 2024, we continued to see customers scrutinizing spend. We saw a decline in product demand in the first half of fiscal 2024, which was primarily due to customers needing additional time to implement elevated levels of product shipments received in prior quarters. Even though we saw improved product deployments by customers in the third quarter of fiscal 2024, we believe that some impacts on overall product demand may continue through at least the end of fiscal 2024 as customers complete the installation of the majority of their product deployments.
Current report
The accounting for acquisitions requires significant estimates and judgments when allocating the purchase price to the estimated fair values of assets acquired and liabilities assumed at the acquisition date. Critical estimates used in the valuation of intangible assets include, but are not limited to, the amount and timing of expected future cash flows, useful lives and discount rates. While our estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain and unpredictable and would not reflect unanticipated events and circumstances that may occur.
Current report
Total revenue for the third quarter and first nine months of fiscal 2024 includes $413 million relating to the acquisition of Splunk, which consisted of $338 million in product revenue and $75 million in service revenue.
Current report
Total revenue decreased by 4%. Product revenue decreased by 7% and service revenue increased by 5%. Our total revenue reflected declines across each of our geographic segments.
Current report
Product revenue in the Americas segment decreased by 21%, with declines across each of our customer markets. The acquisition of Splunk contributed $221 million of product revenue to the Americas segment for the third quarter and first nine months of fiscal 2024. From a country perspective, product revenue decreased in the United States, Canada, Mexico and Brazil by 21%, 6%, 27% and 18%, respectively.
Current report
Revenue from the Security product category increased by 14%, or $416 million, primarily driven by the contribution of Splunk offerings and the growth in our Zero Trust offerings. The Security product category grew 3%, not including the contribution from Splunk offerings.
Current report
Revenue from the Observability product category increased by 21%, or $103 million, primarily driven by growth in our ThousandEyes network services offerings and the contribution from Splunk. Product revenue in the Observability product category increased 17%, not including the contribution from Splunk.
Current report
Supply Chain Impacts and Risks
Current report
R&D expenses decreased due to lower headcount-related expenses and lower contracted services spending, partially offset by higher share-based compensation expense, higher cash compensation from acquisitions and higher discretionary spending.
Current report
G&A expenses increased due to higher acquisition-related costs and higher share-based compensation expense, partially offset by lower headcount-related expenses and lower contracted services spending.
Current report
In February 2024, we issued senior notes for an aggregate principal amount of $13.5 billion.
Removed paragraphs (10)
Previous report
In the second quarter of fiscal 2024, we saw customers more closely scrutinizing spend given the high level of uncertainty in the macroeconomic environment. Additionally, our customers and third-party resellers are continuing to implement elevated levels of product shipments from recent quarters, which we believe contributed to the decline in product demand. For the product categories in which we can measure customer inventory absorption, we are seeing steady progress. However, we believe we are an additional one to two quarters away from full implementation of product shipments, which is longer than we initially expected. We saw this dynamic primarily with our service provider and cloud customers and enterprise customers. We believe these impacts on product demand may continue through at least the end of fiscal 2024.
Previous report
The fair value of acquired technology and patents, as well as acquired technology under development, is determined at acquisition date primarily using the income approach, which discounts expected future cash flows to present value. The discount rates used in the present value calculations are typically derived from a weighted-average cost of capital analysis and then adjusted to reflect risks inherent in the development lifecycle as appropriate. We consider the pricing model for products related to these acquisitions to be standard within the high-technology communications industry, and the applicable discount rates represent the rates that market participants would use for valuation of such intangible assets.
Previous report
Total revenue increased by 1%. Product revenue was flat and service revenue increased by 4%. Our total revenue reflected growth in the Americas segment, partially offset by declines in the EMEA and APJC segments.
Previous report
Product revenue in the Americas segment increased by 5%, with growth in the public sector market, partially offset by a decline in the service provider and cloud market. Product revenue in the enterprise market was flat. From a country perspective, product revenue increased in the United States and Mexico by 6% and 5%, respectively, partially offset by declines in product revenue in Canada and Brazil of 7% and 3%, respectively.
Previous report
Revenue from the Security product category increased by 4%, or $70 million, primarily driven by growth in our Zero Trust and Threat Intelligence, Detection and Response offerings.
Previous report
Revenue from the Observability product category increased by 18%, or $59 million, driven by primarily driven by growth in our ThousandEyes offerings.
Previous report
Supply Constraints Impacts and Risks
Previous report
R&D expenses increased due to higher share-based compensation expense, higher discretionary spending and higher headcount-related expenses, partially offset by lower contracted services spending.
Previous report
G&A expenses increased due to higher share-based compensation expense, higher discretionary spending, higher acquisition and divestitures related costs, higher headcount-related expenses, and higher contracted services spending.
Previous report
In addition to cash requirements in the normal course of business, on September 21, 2023, we announced our intent to acquire Splunk. Under the terms of the agreement, we have agreed to pay $157 per share in cash, representing approximately $28 billion in equity value. See further discussion of liquidity and future payments under “Liquidity and Capital Resource Requirements” below.
Reworded paragraphs (59)
Previous wording
Total revenue decreased by 6% compared with the second quarter of fiscal 2023. Within total revenue, product revenue decreased by 9% and service revenue increased by 4%. In the second quarter of fiscal 2024, total software revenue was flat at $4.2 billion across all product areas and service. Within total software revenue, subscription revenue increased 5%.
Current wording
Total revenue decreased by 13% compared with the third quarter of fiscal 2023. In March 2024, we completed the acquisition of Splunk, which contributed $413 million in total revenue for the third quarter of fiscal 2024. Within total revenue, product revenue decreased by 19% and service revenue increased by 6%. In the third quarter of fiscal 2024, total software revenue was $4.5 billion across all product areas and service, an increase of 5%, driven by the contribution of Splunk. Within total software revenue, subscription revenue increased 17%, driven in large part by the contribution of Splunk.
Previous wording
Total gross margin increased by 2.2 percentage points. Product gross margin increased by 2.5 percentage points, largely driven by productivity improvements and favorable product mix, partially offset by pricing erosion. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, increased by 3.9 percentage points. Operating income as a percentage of revenue was flat driven by higher product gross margin offset by higher operating expenses in the second quarter of fiscal 2024. Diluted earnings per share decreased 3%, driven by a decrease of 5% in net income, partially offset by a decrease in diluted share count of 43 million shares.
Current wording
Total gross margin increased by 1.7 percentage points. Product gross margin increased by 0.8 percentage points, largely driven by favorable product mix and productivity improvements, partially offset by pricing erosion. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, increased by 6.1 percentage points. Operating income as a percentage of revenue decreased by 9.9 percentage points primarily driven by restructuring and other charges of $542 million and higher amortization of purchased intangible assets in the third quarter of fiscal 2024. Diluted earnings per share decreased 41%, driven by a decrease of 41% in net income, partially offset by a decrease in diluted share count of 50 million shares.
Previous wording
In terms of our geographic segments, revenue from the Americas decreased by $315 million, EMEA revenue decreased by $244 million and APJC revenue decreased by $241 million. From a customer market standpoint, we experienced product revenue declines in the enterprise and service provider and cloud markets, partially offset by growth in the public sector market. From a product category perspective, the product revenue decrease of 9% was driven by a decline in revenue in Networking of 12%. This decline was partially offset by product revenue growth in Security of 3%, Collaboration of 3% and Observability of 16%.
Current wording
In terms of our geographic segments, revenue from the Americas decreased by $1.3 billion, EMEA revenue decreased by $348 million and APJC revenue decreased by $258 million. From a customer market standpoint, we experienced product revenue declines across all of our customer markets. From a product category perspective, the product revenue decrease of 19% was driven by a decline in revenue in Networking of 27%. This decline was partially offset by product revenue growth in Security of 36% and Observability of 27%, each driven in large part by the contribution of Splunk. Product revenue in Collaboration was flat.
Previous wording
We remain focused on delivering innovation across our technologies to assist our customers in executing on their digital transformations. Further, we continued to make progress in the transition of our business model by delivering increased software subscription revenue. We remain focused on accelerating innovation across our portfolio, and we believe that we are making progress on our strategic priorities. We continue to operate in a challenging macroeconomic and highly competitive environment. While the overall environment remains uncertain, we continue to invest in priority areas with the objective of driving profitable growth over the long term.
Current wording
We remain focused on delivering innovation across our technologies to assist our customers in executing on their digital transformations and on accelerating innovation across our portfolio. We believe that we are making progress on our strategic priorities. We continue to operate in a challenging macroeconomic and highly competitive environment and while the overall environment remains uncertain, we continue to invest in priority areas with the objective of driving profitable growth over the long term.
Previous wording
Total revenue increased 1%, with product revenue flat and service revenue increasing 4%. Total gross margin increased 3.1 percentage points due to productivity improvements, favorable product mix and favorable pricing. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, increased by 1.8 percentage points. Operating income as a percentage of revenue increased by 1.7 percentage points. We incurred restructuring and other charges of $135 million in the first six months of fiscal 2024. Diluted earnings per share increased 17%, driven by an increase of 15% in net income, partially offset by a decrease in diluted share count of 36 million shares.
Current wording
Total revenue decreased 4%, with product revenue decreasing 7% and service revenue increasing 5%. Total gross margin increased 2.7 percentage points due to productivity improvements and favorable product mix, partially offset by pricing erosion. As a percentage of revenue, research and development, sales and marketing, and general and administrative expenses, collectively, increased by 3.2 percentage points. Operating income as a percentage of revenue decreased by 2.0 percentage points. We incurred restructuring and other charges of $677 million in the first nine months of fiscal 2024. Diluted earnings per share decreased 5%, driven by a decrease of 6% in net income, partially offset by a decrease in diluted share count of 40 million shares.
Previous wording
The following is a summary of our other key financial measures for the second quarter of fiscal 2024 (in millions):
Current wording
The following is a summary of our other key financial measures for the third quarter of fiscal 2024 (in millions):
Previous wording
Our provision for inventory was $258 million and $92 million for the first six months of fiscal 2024 and 2023, respectively. The provision for the liability related to purchase commitments with contract manufacturers and suppliers was $128 million and $199 million for the first six months of fiscal 2024 and 2023, respectively. If there were to be a sudden and significant decrease in demand for our products, if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements, or if supply constraints were to continue, we could be required to increase our inventory write-downs, and our liability for purchase commitments with contract manufacturers and suppliers, and accordingly our profitability, could be adversely affected. We regularly evaluate our exposure for inventory write-downs and the adequacy of our liability for purchase commitments. For further discussion around the Supply Constraints Impacts and Risks, see “—Results of Operations—Gross Margin—Supply Constraints Impacts and Risks” and “—Liquidity and Capital Resources—Inventory Supply Chain.”
Current wording
Our provision for inventory was $90 million and $82 million for the third quarter of fiscal 2024 and 2023, respectively, and $348 million and $174 million for the first nine months of fiscal 2024 and 2023, respectively. The provision for the liability related to purchase commitments with contract manufacturers and suppliers was $85 million and $134 million for the third quarter of fiscal 2024 and 2023, respectively, and $213 million and $333 million for the first nine months of fiscal 2024 and 2023, respectively. If there were to be a sudden and significant decrease in demand for our products, if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements, or if supply constraints were to continue, we could be required to increase our inventory write-downs, and our liability for purchase commitments with contract manufacturers and suppliers, and accordingly our profitability, could be adversely affected. We regularly evaluate our exposure for inventory write-downs and the adequacy of our liability for purchase commitments. For further discussion around the Supply Constraints Impacts and Risks, see “—Results of Operations—Gross Margin—Supply Constraints Impacts and Risks” and “—Liquidity and Capital Resources—Inventory Supply Chain.”
Previous wording
In response to changes in industry and market conditions, we could be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of goodwill. There was no impairment of goodwill in each of the first six months of fiscal 2024 and 2023.
Current wording
In response to changes in industry and market conditions, we could be required to strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses, which could result in an impairment of goodwill. There was no impairment of goodwill in each of the first nine months of fiscal 2024 and 2023.
Previous wording
We make judgments about the recoverability of purchased intangible assets with finite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with finite lives is measured by comparing the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. We review indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Assumptions and estimates about future values and remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Our ongoing consideration of all the factors described previously could result in impairment charges in the future, which could adversely affect our net income.
Current wording
We make judgments about the recoverability of purchased intangible assets with finite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with finite lives is measured by comparing the carrying amount of the asset group to the future undiscounted cash flows the asset group is expected to generate. We review indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Assumptions and estimates about future values and remaining useful lives of our purchased intangible assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Our ongoing consideration of all the factors described previously could result in impairment charges in the future, which could adversely affect our net income.
Previous wording
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective tax rates differ from the statutory rate, primarily due to the tax impact of state taxes, foreign operations, R&D tax credits, foreign-derived intangible income deductions, global intangible low-taxed income, tax audit settlements, nondeductible compensation, and international realignments. Our effective tax rate was 16.7% and 18.8% in the second quarter of fiscal 2024 and 2023, respectively, and 17.5% and 21.0% in the first six months of fiscal 2024 and 2023, respectively.
Current wording
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective tax rates differ from the statutory rate, primarily due to the tax impact of state taxes, foreign operations, R&D tax credits, foreign-derived intangible income deductions, global intangible low-taxed income, tax audit settlements, nondeductible compensation, and international realignments. Our effective tax rate was 15.6% and 18.8% in the third quarter of fiscal 2024 and 2023, respectively, and 17.1% and 20.2% in the first nine months of fiscal 2024 and 2023, respectively.
Previous wording
Total revenue decreased by 6%. Product revenue decreased by 9% and service revenue increased by 4%. Our total revenue reflected declines across each of our geographic segments.
Current wording
Total revenue decreased by 13%. Product revenue decreased by 19% and service revenue increased by 6%. Our total revenue reflected declines across each of our geographic segments.
Previous wording
Product revenue in the Americas segment decreased by 7%, with declines in the service provider and cloud and enterprise markets, partially offset by growth in the public sector market. From a country perspective, product revenue decreased in the United States, Canada and Brazil by 6%, 14% and 14%, respectively, partially offset by growth in product revenue in Mexico of 6%.
Current wording
Product revenue in the Americas segment decreased by 4%, with declines in the enterprise and service provider and cloud markets, partially offset by growth in the public sector market. From a country perspective, product revenue decreased in the United States, Canada, Mexico and Brazil by 4%, 7%, 7% and 8%, respectively.
Previous wording
Product revenue in the EMEA segment decreased by 6%, driven by declines in the enterprise and service provider and cloud markets, partially offset by growth in the public sector market. From a country perspective, product revenue decreased in Germany, the United Kingdom and France by 10%, 9% and 14%, respectively.
Current wording
Product revenue in the EMEA segment decreased by 14%, driven by declines across each of the customer markets. The acquisition of Splunk contributed $76 million of product revenue to the EMEA segment for the third quarter and first nine months of fiscal 2024. From a country perspective, product revenue decreased in the United Kingdom, Germany and France by 9%, 18% and 8%, respectively.
Previous wording
Product revenue in the EMEA segment decreased by 10%, driven by declines in the enterprise and service provider and cloud markets, partially offset by growth in the public sector market. From a country perspective, product revenue decreased in Germany, the United Kingdom and France by 20%, 13% and 8%, respectively.
Current wording
Product revenue in the EMEA segment decreased by 8%, driven by declines in the enterprise and service provider and cloud markets, partially offset by growth in the public sector market. From a country perspective, product revenue decreased in the United Kingdom, Germany, and France by 9%, 12% and 12%, respectively.
Previous wording
Product revenue in the APJC segment decreased by 17%, with declines across each of the customer markets. From a country perspective, product revenue decreased in Japan, Australia, India and China by 19%, 7%, 27% and 39%, respectively.
Current wording
Product revenue in the APJC segment decreased by 19%, with declines across each of the customer markets. The acquisition of Splunk contributed $41 million of product revenue to the APJC segment for the third quarter and first nine months of fiscal 2024. From a country perspective, product revenue decreased in Japan, India, Australia, and China by 11%, 17%, 22% and 32%, respectively.
Previous wording
Product revenue in the APJC segment decreased by 11%, with declines across each of the customer markets. From a country perspective, product revenue decreased in Japan, Australia, India and China by 16%, 6%, 7% and 39%, respectively.
Current wording
Product revenue in the APJC segment decreased by 14%, with declines across each of the customer markets. From a country perspective, product revenue decreased in Japan, India, Australia, and China by 14%, 11%, 12% and 37%, respectively.
Previous wording
The Networking product category represents our core networking technologies of switching, routing, wireless, 5G, silicon, optics solutions and compute products. Revenue from the Networking product category decreased by 12%, or $1.0 billion. Revenue declined in both campus switching and data center switching, as well as in wireless and routed optical networking. The revenue declines in the Networking product category were primarily in the enterprise and service provider and cloud markets.
Current wording
The Networking product category represents our core networking technologies of switching, routing, wireless, 5G, silicon, optics solutions and compute products. Revenue from the Networking product category decreased by 27%, or $2.5 billion. Revenue declined across most of the portfolio and across each of our geographic segments due to continued implementation of inventory by our customers.
Previous wording
Revenue from the Networking product category decreased by 1%, or $219 million. Revenue grew in both campus switching and data center switching, primarily driven by growth in our Catalyst 9000 series and Nexus 9000 series offerings. We experienced a revenue decline in enterprise routing, although we saw revenue growth in our SD-WAN offerings. The decrease in wireless was primarily driven by our WiFi-6 products and Meraki offerings. We also saw a revenue decline in routed optical networking, although we saw revenue growth in our Cisco 8000 series offerings.
Current wording
Revenue from the Networking product category decreased by 11%, or $2.7 billion. Revenue declined in both campus switching and data center switching, primarily driven by declines in our Catalyst 9000 series and Nexus 9000 series offerings. We experienced a revenue decline in enterprise routing, although we saw revenue growth in our SD-WAN offerings. The decrease in wireless was primarily driven by our WiFi-6 products and Meraki offerings. We also saw a revenue decline in routed optical networking.
Previous wording
The Security product category consists of our Cloud and Application Security, Industrial Security, Network Security, and User and Device Security offerings. Revenue in our Security product category increased by 3%, or $30 million, primarily driven by double-digit growth in our Zero Trust offerings.
Current wording
The Security product category consists of our Cloud and Application Security, Industrial Security, Network Security, and User and Device Security offerings. This product category includes the Splunk Platform and Splunk Security offerings after our acquisition of Splunk, although the Splunk Platform has use cases that can also be applicable for observability offerings. Revenue in our Security product category increased by 36%, or $346 million, primarily driven by the contribution of Splunk offerings and to a lesser extent, growth in our Secure Access Service Edge offerings and double-digit growth in our Zero Trust offerings. The Security product category grew 3%, not including the contribution from Splunk offerings.
Previous wording
The Collaboration product category consists of our Meetings, Collaboration Devices, Calling, Contact Center and CPaaS offerings. Revenue in our Collaboration product category increased by 3%, or $31 million, primarily driven by growth in our Collaboration Devices and Calling offerings, partially offset by a decline in Meetings.
Current wording
The Collaboration product category consists of our Meetings, Collaboration Devices, Calling, Contact Center and CPaaS offerings. Revenue in our Collaboration product category was flat, primarily driven by growth in our Calling and Contact Center offerings, offset by a decline in Meetings and Collaboration Devices.
Previous wording
Revenue from our Collaboration product category increased by 3%, or $62 million, primarily driven by growth in Calling and Collaboration Devices, partially offset by a decline in Meetings.
Current wording
Revenue from our Collaboration product category increased by 2%, or $64 million, primarily driven by growth in Calling, Collaboration Devices and Contact Center offerings, partially offset by a decline in Meetings.
Previous wording
The Observability product category consists of our full stack observability offerings. Revenue in our Observability product category increased 16%, or $26 million, driven by growth across the portfolio, including double-digit growth in our ThousandEyes offerings.
Current wording
The Observability product category consists of our full stack observability offerings. This product category includes the Splunk Observability Suite after our acquisition of Splunk. This product category excludes the Splunk Platform which includes use cases that can also be associated with observability offerings. Revenue in our Observability product category increased 27%, or $44 million, driven by growth in our ThousandEyes network services offerings and the contribution from Splunk. Product revenue in the Observability product category increased 14%, not including the contribution from Splunk.
Previous wording
Service revenue increased 4% in the second quarter of fiscal 2024 compared with the second quarter of fiscal 2023, primarily driven by revenue growth in our solution support and advisory services, partially offset by declines in our software support offerings. Service revenue increased across each of our geographic segments for the second quarter of fiscal 2024.
Current wording
Service revenue increased 6% in the third quarter of fiscal 2024 compared with the third quarter of fiscal 2023, primarily driven by revenue growth in our solution support offerings, software support offerings, maintenance business and advisory services. The acquisition of Splunk also contributed to the growth in service revenue in the third quarter of fiscal 2024. Service revenue increased across each of our geographic segments for the third quarter of fiscal 2024. Service revenue grew 4%, not including the contribution from Splunk.
Previous wording
Service revenue increased 4% in the first six months of fiscal 2024 compared to the first six months of fiscal 2023, primarily driven by revenue growth in our solution support offerings, advisory services and maintenance business, partially offset by declines in our software support offerings. Service revenue increased across each of our geographic segments.
Current wording
Service revenue increased 5% in the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023, primarily driven by revenue growth in our solution support offerings, advisory services and maintenance business. The acquisition of Splunk also contributed to the growth in service revenue in the first nine months of fiscal 2024. Service revenue increased across each of our geographic segments. Service revenue grew 4%, not including the contribution from Splunk.
Previous wording
The following table summarizes the key factors that contributed to the change in product gross margin percentage for the second quarter and first six months of fiscal 2024, as compared with the corresponding prior year periods:
Current wording
The following table summarizes the key factors that contributed to the change in product gross margin percentage for the third quarter and first nine months of fiscal 2024, as compared with the corresponding prior year periods:
Previous wording
Product gross margin increased by 2.5 percentage points primarily driven by productivity improvements, largely driven by lower freight, logistics and components costs, and favorable product mix. These impacts were partially offset by pricing erosion.
Current wording
Product gross margin increased by 0.8 percentage points primarily driven by favorable product mix, productivity improvements, largely driven by lower freight and other costs, and benefits from the acquisition of Splunk. These impacts were partially offset by pricing erosion and the amortization of purchased intangible assets.
Previous wording
Product gross margin increased by 4.0 percentage points primarily driven by productivity improvements, largely driven by lower freight, logistics and components costs, favorable product mix and favorable pricing.
Current wording
Product gross margin increased by 2.8 percentage points primarily driven by productivity improvements, largely driven by lower freight and other costs, favorable product mix, and to a lesser extent, benefits from the acquisition of Splunk. These impacts were partially offset by the amortization of purchased intangible assets and pricing erosion.
Previous wording
Our service gross margin percentage increased by 1.0 percentage points primarily due to higher sales volume and lower delivery costs, partially offset by higher headcount-related costs and unfavorable mix of service offerings.
Current wording
Our service gross margin percentage increased by 3.8 percentage points primarily due to lower headcount-related costs and higher sales volume, partially offset by unfavorable mix of service offerings and to a lesser extent, higher delivery costs.
Previous wording
Service gross margin increased by 0.5 percentage points primarily due to higher sales volume and lower delivery costs, partially offset by higher headcount-related costs and unfavorable mix of service offerings.
Current wording
Service gross margin increased by 1.6 percentage points primarily due to higher sales volume and lower headcount-related costs, partially offset by unfavorable mix of service offerings.
Previous wording
We experienced a gross margin percentage increase in our Americas segment due to positive impacts from productivity improvements, favorable product mix and higher service gross margin, slightly offset by pricing erosion.
Current wording
We experienced a gross margin percentage increase in our Americas segment due to favorable product mix, higher service gross margin and positive impacts from productivity improvements, partially offset by pricing erosion.
Previous wording
Gross margin percentage in our EMEA segment increased primarily due to positive impacts from productivity improvements, and, to a lesser extent, favorable product mix, partially offset by pricing erosion.
Current wording
Gross margin percentage in our EMEA segment increased primarily due to favorable product mix, higher service gross margin and positive impacts from productivity improvements, partially offset by pricing erosion.
Previous wording
The APJC segment gross margin percentage increase was primarily due to positive impacts from productivity improvements and favorable product mix, partially offset by pricing erosion and lower service gross margin.
Current wording
The APJC segment gross margin percentage increase was primarily due to favorable product mix, higher service gross margin and positive impacts from productivity improvements, partially offset by pricing erosion.
Previous wording
The Americas segment had a gross margin percentage increase driven by positive impacts from productivity improvements, favorable pricing and, to a lesser extent, favorable product mix.
Current wording
The Americas segment had a gross margin percentage increase driven by positive impacts from productivity improvements and favorable product mix.
Previous wording
Sales and marketing expenses increased primarily due to higher share-based compensation expense, higher discretionary spending and higher headcount-related expenses, partially offset by lower contracted services spending.
Current wording
Sales and marketing expenses increased primarily due to higher share-based compensation expense and higher cash compensation from acquisitions, partially offset by lower contracted services spending and lower headcount-related expenses.
Previous wording
Sales and marketing expenses increased primarily due to higher share-based compensation expense, higher discretionary spending and higher headcount-related expenses, partially offset by lower contracted services spending.
Current wording
Sales and marketing expenses increased primarily due to higher share-based compensation expense, higher discretionary spending, higher cash compensation from acquisitions and higher headcount-related expenses, partially offset by lower contracted services spending.
Previous wording
G&A expenses increased due to higher share-based compensation expense, higher discretionary spending, higher acquisition and divestitures related costs, higher headcount-related expenses, and higher contracted services spending.
Current wording
G&A expenses increased due to higher acquisition-related costs, higher share-based compensation expense and higher discretionary spending.
Previous wording
In the second quarter of fiscal 2024, foreign currency fluctuations, net of hedging, increased the combined R&D, sales and marketing, and G&A expenses by approximately $23 million, or 0.5%, compared with the second quarter of fiscal 2023.
Current wording
In the third quarter of fiscal 2024, foreign currency fluctuations, net of hedging, decreased the combined R&D, sales and marketing, and G&A expenses by approximately $3 million, or 0.1%, compared with the third quarter of fiscal 2023.
Previous wording
In the first six months of fiscal 2024, foreign currency fluctuations, net of hedging, increased the combined R&D, sales and marketing, and G&A expenses by approximately $49 million, or 0.5%, compared with the first six months of fiscal 2023.
Current wording
In the first nine months of fiscal 2024, foreign currency fluctuations, net of hedging, increased the combined R&D, sales and marketing, and G&A expenses by approximately $46 million, or 0.3%, compared with the first nine months of fiscal 2023.
Previous wording
For each of the second quarter and first six months of fiscal 2024, the increase in amortization of purchased intangible assets was primarily due to amortization of purchased intangibles from our recent acquisitions, partially offset by certain purchased intangible assets that became fully amortized.
Current wording
For each of the third quarter and first nine months of fiscal 2024, the increase in amortization of purchased intangible assets was primarily due to amortization of purchased intangibles from our recent acquisitions, including $187 million for the third quarter and first nine months of fiscal 2024 due to the acquisition of Splunk, and impairment charges of $139 million and $145 million for the third quarter and first nine months of fiscal 2024, respectively. The increase was partially offset by certain purchased intangible assets that became fully amortized. The impairment charges were primarily due to declines in estimated fair value resulting from reductions in or the elimination of expected future cash flows associated with certain of our IPR&D intangible assets.
Previous wording
In the third quarter of fiscal 2024, we initiated a restructuring plan in order to realign the organization and enable further investment in key priority areas. This restructuring plan will impact approximately 5% of our global workforce. The total pretax charges are estimated to be approximately $800 million. We expect this plan to be substantially completed during the first half of fiscal 2025. We expect to reinvest substantially all of the cost savings from this restructuring plan in our key priority areas. As a result, the overall cost savings from this restructuring plan are not expected to be material for future periods.
Current wording
In the third quarter of fiscal 2024, we initiated a restructuring plan in order to realign the organization and enable further investment in key priority areas. This restructuring plan will impact approximately 5% of our global workforce, with estimated pretax charges of up to approximately $800 million. In connection with this restructuring plan, we incurred charges of $542 million in the third quarter and the first nine months of fiscal 2024. We expect this plan to be substantially completed during the first half of fiscal 2025.
Showing the first 40 of 59 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
We expect to reinvest substantially all of the cost savings from these restructuring plans in our key priority areas. As a result, the overall cost savings from these restructuring plans are not expected to be material for future periods.