Blair Christie - VP of Corporate Communications John Chambers - Chairman and CEO Dennis Powell - CFO Jim McDonald - CEO of Scientific-Atlanta Rick Justice - SVP of Worldwide Operations and Business Development Charlie Giancarlo - Chief Development Officer

Tim Luke - Lehman Brothers John Marchetti - Morgan Stanley Ehud Gelblum - JP Morgan Inder Singh - Prudential Brant Thompson - Goldman Sachs Paul Silverstein - Credit Suisse Mark Sue - RBC Capital Markets Nikos Theodosopoulos - UBS Tal Liani - Merrill Lynch Subu Subrahmanyan - Sanders Morris Jeff Evanson - Sanford Bernstein Tim Long - Banc of America Paul Mansky- Citigroup Jason Ader - Thomas Weisel Partners

Hello, participants. Welcome to Cisco Systems' Third Quarter Fiscal Year 2007 Financial Results Conference Call. At the request of Cisco Systems, today's conference is being recorded. If you have any objection, you must disconnect at this time. Now I would like to introduce, Ms. Blair Christie, Vice President of Corporate Communications for Cisco Systems. Ma'am, you may begin.

Thank you, Marty. Good afternoon, everyone, and welcome to our 69th quarterly conference call. This is Blair Christie and I'm joined by John Chambers, our Chairman and CEO; Dennis Powell, Chief Financial Officer; Rick Justice, Senior Vice President of Worldwide Operations and Business Development; Charlie Giancarlo, Chief Development Officer; and Jim McDonald, Chief Executive Officer of Scientific-Atlanta. The Q3 fiscal year 2007 press release is on the First Call, Full National Market Wire and European Financial and Technology Wire as well as on the Cisco website at www.cisco.com. If you'd like a fax of the press release, please call 408-526-8890 and follow the instructions. A corresponding webcast with slides and downloadable information regarding Cisco's financial statements can be found on our website in the Investor Relations section. Additionally, a replay of this call will be available via telephone at 866-357-4205 or 203-369-0122 for international callers. Throughout this conference call, we will be referencing both GAAP and non-GAAP financial results. Please note, we have provided a reconciliation table of GAAP to non-GAAP information in the slides accompanying this webcast. We have also posted full reconciliation information along with all of our financial statements to our website. Please go to the financial section in the Investor Relations website for further details. Throughout our call today, we will provide both Cisco and Scientific-Atlanta financial information in order to illustrate the impact of this acquisition on our overall Q3 fiscal year 2007 results. Where we referred to Cisco standalone, the financial information represents Cisco's performance excluding the results of this acquisition. The financial results in the press release are unaudited. And of course, the matters we will be discussing today include forward-looking statements and as such, are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically the most recent report on Forms 10-K and 10-Q and any applicable amendments which identify important risk factors that could cause the actual results to differ materially from those contained in the forward-looking statements. Unauthorized recording of this conference call is not permitted. And I will now turn it over to John for his commentary on the quarter. John.

Blair, thank you very much. Based on your constructive feedback, we will continue to reduce the time for the narrative part of this call and to increase the time for Q&A, as we have done in each of the last several conference calls. The opening comments of the conference call will focus on what I view to be the key takeaways for the quarter, as well as the revenue guidance for the next quarter. The opening comments will also include a brief discussion about what I believe will be the next way driving growth, both the Internet and IT sales. It will be built around collaboration in Web 2.0 capabilities. This discussion will be followed by a detailed discussion of the financials by Dennis. The third section of the call we will focus on general business momentum and strategy on a geographic, product, and customer segment basis. Dennis, will then provide additional financial parameters around our guidance for Q4. And then, I will wrap it up with some comments in terms of Cisco's momentum going into Q4 of fiscal 2007 and finally, our Q&A session. Again, this briefer format will be supplemented with more detailed information in slides accompanying the webcast. Now, on to the discussion of Q3, this quarter was once again another very strong record quarter from a revenue, non-GAAP, net income, and non-GAAP earnings per share perspective. To put these record results in perspective, I will summarize the quarterly highlights. First, from a key financial perspective; second, from a product and services perspective; third, by customer segment; and fourth, from a geographic point of view. As per many of your requests in this discussion and in future quarterly conference calls, we will discuss product growth and other financials primarily from a revenue perspective and use order growth rates to add color and momentum to the discussion. The customer segment and geographic discussion will be primarily in order of growth numbers, as this is how we run our business. The key financial highlights for Q3 include the following: Record revenue of approximately $8.9 billion, a 21% year-over-year increase, which was slightly above our guidance of 19% to 20% provided in the Q2 conference call. The Cisco standalone revenue increase was approximately 17%, which was at the high end of our standalone guidance of 15% to 17% provided in the 2Q conference call. This continues to be one of the fastest standalone year-over-year revenue growth rates we have seen in several years. As a reminder, our long-term revenue guidance is for growth in the top -- in the 10% to 15% range. We are obviously pleased with both the growth on the top and bottom line, as well as the market share of gains. Order growth continued to be very solid with product book-to-build greater than one. Product order growth from a Cisco standalone perspective, that is not including Scientific-Atlanta, grew in the mid-teens. Revenue growth from Scientific-Atlanta was approximately 30% year-over-year, aligned to conform to Cisco's fiscal quarters. Non-GAAP net income was $2.1 billion, an increase year-over-year of approximately 16%. GAAP net income was $1.9 billion, representing a 34% increase year-over-year. Non-GAAP earnings per share were a record $0.34 and GAAP earnings per share was $0.30, which were increases of 17% and 36% respectively year-over-year. Cash generated from operations was $2.4 billion, we repurchased $1.5 billion of common stock, and we exited the quarter with $22.3 billion in cash, cash equivalents, and investments, which increased approximately $1.7 billion over Q2. Revenue growth from our key products and services was very strong across all categories. In terms of my view, of our momentum for product and services perspective this quarter, I will analyze the results in the following five categories, routing, switching, advanced technologies, Scientific-Atlanta, and customer advocacy services. Routing revenue grew year-over-year by 16%. Switching revenue grew year-over-year by 15%. And advanced technologies' revenue grew year-over-year by approximately 24%, not including Scientific-Atlanta. Scientific-Atlanta's revenue grew by approximately 30% year-over-year, as I said earlier. The advanced technology revenues are now becoming larger in terms of their total contribution to our top line than routing. This again speaks to Cisco's constant evolution moving into new markets and product adjacencies. All but one of the first wave of advanced technologies grew year-over-year in double-digits, led by storage, unified communication, security and wireless. Although competition remains robust, we believe we are gaining market share versus almost all of our major competitors. But we also believe we are getting a larger share of our customer's total spend on communications and IT. We had additional information regarding the balance of our orders across product lines and potential future momentum. We now have approximately 14 product families/technologies that have an annualized order run rate of approximately $1 billion to $4 billion, with a Catalyst 6K family being our largest contributor at approximately $4 billion. Our customer advocacy service revenue now represents approximately 16% of our total revenue. In Q3, our revenues for services grew year-over-year by approximately 19% and our non-GAAP gross margins remained extremely strong at approximately 63%. In future calls, we will be sharing more of our service and support strategy as well as the revenue and profitability models of our customer services group. With the expanding services model and our movement of our Chief Globalization Officer, Wim Elfrink to India, we fully intend to dramatically differentiate Cisco both in customer satisfaction as well as service revenues and profit growth. Our customer satisfaction as well as service and revenues and profit growth. Our customer satisfaction numbers remained very high in Q3, and continue to lead the industry in almost all major CIO categories. To the best of our knowledge, no other large high-tech company is achieving these types of both balance and growth results from such a broad product portfolio, as well as strong services portfolio. From a Cisco's standalone geographic perspective, momentum was strong from an orders perspective, and balance was good across our large theaters during Q3. Despite the slower growth from any of our technology peers in the most recent quarter, our business remains strong. As anticipated, we saw very strong order growth from the emerging markets theater of approximately 40% year-over-year. We continue to see solid order growth momentum in our European operations. The improvement we saw in the last three quarters continued in Q3 with very solid year-over-year order growth in the low teens. In the US, order growth grew year-over-year in the mid teens. Asia Pacific achieved solid order growth of approximately 20%. From a Cisco standalone customer segment perspective, we saw continued strength in the commercial market with orders growth continuing at approximately 20% year-over-year. The service provider business remained very strong in what has traditionally been our strongest service provider quarter. Standalone orders grew over a very strong Q3 of fiscal year '06 by approximately 17%. As we said earlier, Scientific-Atlanta was above the high-end of our expectations with year-over-year revenue growth of approximately 30%. Video continues to drive network demand and is the potential killer application for loading and bringing value to the network. We were very pleased with the accelerating momentum from video applications. Consumer video and broadband build-out are driving much of the service provider investment. From an enterprise and commercial perspective, video applications such as TelePresence and Unified Communications will continue to load networks and require upgrades to existing networks. Forecast for consumer IP traffic to surpass business IP traffic for the first time this calendar year. Our high-end CRS-1 routers remained on a tier, with orders of the almost 250 million in the quarter. That is an annualized run rate of approximately $1 billion. This is especially powerful, when you compare to prior quarters, which averaged a yearly run rate of approximately $400 million. The global enterprise business, including public sector, was solid with growth of approximately 14%, up from Q2's growth of approximately 12%. US enterprise orders remained at the same pace as Q2 with growth in the mid-single digits. From a commentary perspective, we executed as we outlined in our Q1 and Q2 calls, we will always try to share with our shareholders in a very transparent way both our reasons for optimism and occasional caution. Going into the Q4 of last fiscal year and Q2 of this fiscal year, we did share some caution. And these concerns turned out to be appropriate at least on a macro and general technology spending level in those quarters. In comparison going into Q1, we were a little more optimistic in some of our prevailing views in early August, and it appears that these balanced views in the last three quarters were accurate. Using this quarter's results as the proof-points, from a Cisco perspective the key takeaway for Q3 is that momentum remained very strong. These record results for Q3 continue to be due to the momentum being created by the successful implementation of our strategy. We laid the cornerstone of this strategy three, five and seven years ago. Many of the market transitions we anticipated are converging today, as more and more communications and IT capability are moving into the network. Our architectural approach based on our intelligence in the network and tightly coupled products, has been increasing the total available market to Cisco and our share of our total customer spend in our areas. You could characterize Cisco's position this way. We believe the network is becoming the platform for all forms of communication in IT. The expanding role of the network builds on the end-to-end and architectural-based differentiation that we have been investing in for more than a decade. In simple terms, our belief is that network will enable almost all forms of communication and IT appears to be occurring. As a result, our architectural approach based on intelligence into the network in tightly coupled product, is increasing the total available market to Cisco and our share of our customer spend as we said earlier. As the network becomes the platform, we believe that Cisco is uniquely positioned to lead and to grow with this unique market transition of the Internet. As this transition occurs, we believe there is one potentially huge inflection point that will define this opportunity for Cisco and for our customers. For end users, or customers alike, the network becomes the foundation both for application and/or services. It enables new business models or business process. This evolution is what we believe will be the second major phase of the internet, resulting from networking-enabled personnel and business process changes. Collaboration will be fueled by Web 2.0 technologies, which is why our customers are so interested in these network-enabled capabilities driving innovations into their company. As we did in the first phase of the internet growth over a decade ago, Cisco leads not just the high-tech peers but all businesses in both the internal applications and associated productivity tied to the effective implementation of network technologies, while at the same time leading our customers and the implementation innovation of this technology in their own environment. We have spent the last six years preparing for the next wave of collaboration, enable our Web 2.0. In our terms, Web 2.0 is simply the technologies that enable user collaboration. These technologies include web services, Unified Communications, TelePresence, blogs, Wiki's, pier-to-pier networks, podcast, Myshelf, etcetera. I do not think we are being overly optimistic when we say that the second phase of the internet that is collaboration enabled by Web 2.0 will drive the industry for the next decade from an innovation, productivity, personalization and process change perspective. As most of you know, Q3 marks the one-year anniversary of our acquisition of Scientific-Atlanta. And well, for the last year, we have been talking about Cisco standalone growth rates and adjusting to draw comparisons for the effect of Scientific-Atlanta's contribution. It is now with a great deal of pleasure that going forward, we can now provide guidance in comparison simply to a year-over-year basis on the combined numbers beginning in Q4. Therefore, our revenue guidance for Q4 fiscal 2007, including our usual caveats as discussed in prior calls and financial reports is for year-over-year revenue growth of 15% to 16%. This guidance is obviously above the high end of our guidance that we had predicted in terms of the long term, and its very high end of guidance we predicted over the last several years. Given that our long-term revenue guidance remains in the 10% to 15% range for growth, we are obviously very pleased with our expectations of standalone growth to again be in the mid-teens, as we outlined in the last quarter's conference call. At this time, I would like to turn it over to Dennis for further discussion of the financial highlights. Dennis, to you.

Thanks, John. We are very pleased with the financial results for both Cisco standalone and Scientific-Atlanta exceeded our expectations this quarter for revenue, operating income, and earnings per share. Total revenue for the third quarter was $8.9 billion, an increase of 21% year-over-year. Cisco Q3 standalone revenue was $8.1 billion, or 17% growth year-over-year. And Scientific-Atlanta Q3 revenue was $752 million, or 32% growth year-over-year for the comparable period, aligned to conform to Cisco's fiscal quarters. As a reminder, Q3 fiscal year '06 reflected only two months of Scientific-Atlanta financial results versus the three months for Q3 FY '07. Record revenue for Scientific-Atlanta was driven by several factors, including the impact of regulation 707, a shift in the installed base to HD set-top boxes, network upgrades, and international expansion. Routing revenue totaled $1.8 billion, up 16% year-over-year, due to continued growth in our high-end router portfolio, particularly the GSR, the 7600, and the CRS-1. Switching revenue was $3.1 billion, an increase of 15% year-over-year, due to strength across our fixed and modular switching portfolio. Advanced technologies revenue totaled $2.1 billion, including $589 million of Scientific-Atlanta sales, representing an increase of 36% year-over-year on a combined basis. Advanced technologies revenue, not including Scientific-Atlanta, grew 24% year-over-year. Other product revenue totaled $554 million, an increase of 33% year-over-year on a combined basis and an increase of 16% year-over-year, not including Scientific-Atlanta. Total service revenue was $1.4 billion, up approximately 19% year-over-year on a combined basis. Q3 total non-GAAP gross margin was 64.5%, down from 64.8% last quarter. For product only, non-GAAP gross margin for the third quarter was 64.7%, down slightly from 64.8% last quarter, primarily due to the increased discounts and the as expected impact of higher Scientific-Atlanta revenue offset by volume and cost savings. Our non-GAAP service margins on a combined basis for the third quarter were 63.2%, down from 64.4% last quarter, due primarily to investments in headcount and advanced services making up a higher proportion of our service revenue. Continued growth in advance services has been driven by a momentum this year in service provider and emerging markets, as well as in advanced technologies. Non-GAAP operating expenses as a percentage of revenue were approximately 35% in Q3 FY '07, down from approximately 36% in Q3 FY '06. Our Q3 FY '07 non-GAAP tax provision was 25%. Non-GAAP net income for the third quarter of fiscal 2007 was $2.1 billion compared to $1.8 billion in the third quarter of fiscal year 2006, representing a 16% increase year-over-year. Non-GAAP earnings per share on a fully diluted basis for the third quarter were $0.34, up from $0.29 in the third quarter of fiscal year 2006, representing a 17% increase year-over-year. GAAP net income for the third quarter was $1.9 billion as compared to $1.4 billion in the third quarter of fiscal year 2006, representing a 34% increase year-over-year. GAAP earnings per share on a fully diluted basis for the third quarter were $0.30, up from $0.22 in the same quarter of fiscal year 2006, representing a 36% increase year-over-year. Now, moving on to the balance sheet, the total of cash and cash equivalents and investments at the end of Q3 was $22.3 billion, up from $20.7 billion last quarter. During Q3, we generated $2.4 billion in cash from operations and $940 million in proceeds from stock option exercises. We used $1.5 billion to repurchase 56 million shares of our stock at an average price of $26.85. Our cash and cash equivalents and investments balance has increased in anticipation of the acquisitions of WebEx and IronPort, both expected to close in Q4. Now moving on to accounts receivable. We ended the quarter at $3.2 billion, up from $2.9 billion at the end of Q2. At the end of Q3 FY '07, DSO or Day Sales Outstanding, was 33 days up from 31 days in Q2. Total inventory for Q3 was $1.3 billion down from $1.6 billion last quarter. Non-GAAP inventory turns were 8.6 times up from 7.6 times last quarter. The increase in inventory turns and reduction in inventory in Q3 was driven by our lean implementation. Our inventory purchase commitments at the end of Q3 were $2.6 billion as compared with $2.5 billion at the end of Q2, reflecting increased sales volume. Deferred revenue increased from $6.1 billion in Q2 FY '07 to $6.3 billion in Q3, an increase of $278 million. Deferred product revenue increased by a $115 million and deferred service revenue increased by $163 million from the previous quarter. At the end of Q3, our headcount totaled 56,790, an increase of 2,227 from Q2. The new headcount was concentrated in sales, engineering, services and our Scientific-Atlanta, Juarez manufacturing facility. In conclusion, we are very pleased with our performance for the third quarter of the fiscal year. The consistency of Cisco's performance can be attributed to our balanced approach across geographies, products and customer segments. We believe our strategy is working as we continue to effectively balance, investing for the future while executing in the present. I'll now turn it over to John.

Dennis, nice job and thank you. In this section of the call, we will cover our geographies, customer segments and product review for Q3 in more detail. Unless specifically indicated, all comments in this section are for Cisco standalone only. From a geographic point of view, there were a number of positives from our four largest theaters. First, discussing the emerging markets. With growth year-over-year of approximately 40%, our business and technology architectural strategy for the emerging markets is obviously working extremely well. While this business by definition will be lumpy, and based in part upon large orders, we have been pleased with the consistent performance. This model appears to have legs for the next decade. Balance is very good across the four emerging market operations. Eastern Europe, for example, led the way with growth about 50% followed by the Middle East and Africa operations with growth in the mid 40s. Russia and CIS achieved growth in the mid 30s, and Latin America achieved growth in the mid 20s. While there are many caveats and is obviously too early to say for sure in this process, it is very possible that we can maintain the growth in these markets in the 35% to 45% range for the foreseeable future. It also maybe of interest to some of you that the emerging market have now become our third largest theater behind the US and Europe in terms of orders. Europe, after a slow last fiscal year, the momentum that we saw in Q1 and Q2 continued to be very solid in Q3 in Europe. Year-over-year order growth continued in the low teens. Balance was very good across all regions with seven of the non-European operations achieving growth in double digits. From a US perspective, the service provider market segment continued to lead the way with growth in the high 20s year-over-year. Balance was again very good across all four US service provider areas, just a real nice job by Rob's team, Rick's team. Rick congratulations on that. The commercial market continues to be very -- its very strong pace with growth of approximately 20% in the US. Again, there was very good balance across four of our commercial areas. The enterprise business after a very strong Q1 with growth about 20% grew a mid-single digit in Q3, which was approximately the same growth rate as the US enterprise grew in Q2. Asia Pacific, the Asia Pacific theater continued its solid momentum with growth accelerating from the low double-digits in Q2 to approximately 20% in Q3. Balance was unusually good with all five major areas achieving growth in double-digits. This quarter, India led the way with growth of approximately 50% followed by Korea with growth in the mid 40s, China's growth was in the low-teens. Overall momentum in Asia Pacific feels pretty good. In addition, we are starting to see some very positive early results of our new globalization strategy with Wim Elfrink, again, our Chief Globalization Officer moving to Bangalore with a number of other key executives. We believe this should continue to have a very positive benefit throughout the region. Japan was down slightly in terms of year-over-year growth and, Rick, that's not a surprise to us until we see the next-generation build-out at the IP network and service provider marketplace, so pretty much what we expected. Now, moving on to the customer segment discussion. As we said earlier, the commercial market segment continued its solid momentum with year-over-year order growth on a global basis of approximately 20%. The commercial customer segment also achieved the best balance across our four largest theaters with order growth again as we experience in Q2, with each of the large theaters growing comfortably in double-digits. Growth in the service provider market segment continue to be very solid with Cisco standalone growth of approximately 17% and revenue growth from Scientific-Atlanta, as we said earlier, of approximately 30%. To put this in perspective, Scientific-Atlanta now represents approximately 10% of our total product revenue. We again continue to gain market share versus almost all of our peers in this service provider market. Jim, once again, thanks to your team. Well done. Growth in the enterprise, which includes the public sector, was mixed. We continue to see strong enterprise and public sector growth in Europe and the emerging markets. The US, however, remained relatively stable and steady compared to Q2 with growth in mid-single digits. We now had 13 quarters in a row of ordered growth in the 12% to 19% growth range as a total company year-over-year on a standalone basis. It is this balance across products, services, geographies and customer segment in our business that has been resorting into consistent results. For example, this quarter, very similar to Q2 quarter, the product balance was very strong across all our areas. Our customer segments were solid with commercial again leading the way. One of the key takeaways of this quarter is clearly the expanding role in our service provider customers. Our technology and business architecture strategy is moving Cisco from a tactical or a strategic technology partner for our service providers to a strategic business partner relationship with many of our accounts. And as we discussed in prior conference calls, while it is too early to say for sure, I would parallel this progress to a very similar evolution that Cisco achieved in the enterprise market in the mid 1990's. All of us understand that business results and strategic positioning in the enterprise customers and what that has enabled us in terms of business results since that time. Moving next to the product discussion. As a reminder, in this discussion and in future quarterly conference calls, product discussions will cover the product families, primarily from a revenue perspective and use orders to add color or illustrate momentum trends. Revenue balance was once again very good across our core routing, switching, and advanced technologies. Again, the most effective way to understand this graph relates to the comments that we made at the opening of the call. In Q3, we had 14 product families technologies that had a product annualized order run rate of approximately $1 billion or above. Revenues for routing grew 16% and switching grew 15% year-over-year. Advanced technologies in total, from a revenue perspective, grew approximately 24%. From a standalone advanced technology perspective, storage led the way with approximately 50% growth, Unified Communication was second with growth in the high 30s, followed by security with growth in the mid 20s, wireless growth in the mid 10s, and the network home relatively flat. In terms of our second wave of advanced technologies, video was extremely strong, but we also saw a growth in our application networking services in the mid 40s year-over-year. And optical, even though we did not count it as a part of our advanced technologies, continued to grow very well with growth in the mid 20s. About three of our current emerging technologies, which includes TelePresence, business security and the third being digital media and signage are still in their early development stages. Charlie, I was amazed to see a bigger quarter-over-quarter in Q3 by approximately a 100% growth rate. This indicates a very positive momentum that even the fastest growing startups would like to have. Well, we are still at a relatively small quarterly run rate, our ability to move into new market adjacencies in the networking industry is continuing to achieve the desired results. It is very difficult to single out unique products in Q3, because candidly almost all of our top products did very well. Our top-20 products account for approximately 80% of our standalone product revenue. And 19 of these 20 products grew in terms of year-over-year growth in revenue at least in double digits. The purchase is in the proper position in terms of a unique balance. Q2, as we all know, was a very strong quarter for us and in that quarter, 16 of the top-20 products achieved its double-digit growth from the revenue perspective year-over-year. We are not aware of any other company in the IT and communications' industry that is even close to these types of growth numbers and market share gains across such a broad array of products. Our technology architectural play with the convergence of layers 1 through 7 of the OSI stack continues to gain traction and mindshare. For example, customers understand the leadership, total cost of ownership, flexibility and investment with protection advantages they receive when they install a Cisco switch, which allows them easily and cost effectively to add market-leading routing, voice, data, security, wireless, video and other capabilities to the existing Cisco products with the confidence that were committed to industry-wide interoperability. This is a very powerful differentiator compared to our competitors who are usually present in only one or two product categories and often do not loosely, much less tightly, integrate their products from an architectural perspective. In summary, our vision of how this industry is going to evolve appears to be playing out very much as we expected. We believe our differentiated strategy is also achieving the benefit to both Cisco and to our customers that we thought were possible. And finally, our execution is on target in terms of results as measured by our customer partnership perspective, market share and share of our total customers spend on communications and IT, as the network truly becomes the platform for delivering these capabilities. It is now my pleasure to turn the call back over to Dennis for a detailed discussion of the financials regarding guidance. Dennis, back to you.

Thanks, John. Let me remind you again that our comments include forward-looking statements. You should review our recent SEC filings that identify important risk factors and understand that actual results could materially differ from those contained in the forward-looking statement. The guidance we are providing is on a non-GAAP basis with reconciliation to GAAP and also includes the effect of Scientific-Atlanta. We anticipate total revenue for the fourth quarter to be in the range of $9.2 billion to $9.3 billion, representing a 15% to 16% growth year-over-year. As we have said in the past, forecasting gross margins has always been challenging due to various factors such as volume, product mix, variable component costs, customer and channel mix, and competitive pricing pressures. That being said, we believe total gross margin will remain at approximately 64.5% due to the continuing strength in Scientific-Atlanta's business which has a lower gross margin than Cisco's standalone portfolio product. We believe Q4 operating expenses will be slightly below or above 35.5% of revenue. And we expect interest and another income to be approximately $200 million in the fourth quarter. Our tax rate provision is expected to be approximately 25%. Please note that the above guidance does not include the acquisitions of WebEx or IronPort. Assuming that these acquisitions closed halfway through the quarter, the incremental revenue would be approximately $50 million, that's $50 million, with no impact to non-GAAP earnings per share. While we expect to continue our share repurchased program, it is difficult to predict the exact weighted average shares outstanding. We are modeling the share count to be flat to up approximately 40 million shares in weighted average shares outstanding for EPS purposes. In this estimate of share count, we are not taking into consideration any further change in our stock price that could occur in the fourth quarter of FY '07. And as a point of reference, $1 increase in our average stock price would increase the calculated shares outstanding for purposes of determining earnings per share by 20 million to 25 million shares. Regarding cash flow from operations, we would expect to generate $500 million to $700 million per month at these revenue levels. For our Q4 FY '07 GAAP earnings, we anticipate that Q4 GAAP EPS will be $0.03 to $0.05 per share lower than the non-GAAP EPS, primarily due to acquisition-related charges and stock option expense. Please see the slides that accompany this webcast for more detail. Other than those items noted above, there are no other significant differences between GAAP and our non-GAAP guidance. This guidance assumes no additional acquisitions, asset impairments, restructuring, or other events, which may or may not be significant. Now, I'll turn the call back to John. John?

Dennis, thank you very much, well done. The following is a summary of my view of Cisco's momentum and opportunities entering the fourth quarter of fiscal 2007. In areas that Cisco can control or influence, our momentum continues to be even stronger than it was a year ago. Balance continues to be very good across our geographies, products, services, and customer segments. In the US, our strategic value to our service providers is increasing both from a technology and business architecture perspective, and as we said last quarter, has the potential to continue to expand Cisco's added value to our service provider customers as we move forward. As we said last quarter, the progress of Scientific-Atlanta is actually ahead of where we would have anticipated to be at this point in time. While success is still dependent upon solid execution, our role with Scientific-Atlanta and service providers has the unique potential to continue to expand throughout fiscal 2007 and into 2008. We will have a unique revenue benefit from the 707 security requirements that we talked about in the last conference call, both in the current quarter we just finished as well as in Q4. The commercial market remains very solid and very well balanced on a global basis. Our European results continue to show solid improvements with good balance across almost all countries. Asia Pacific continues to remain very solid, again with good balance across all five of the major operations. Our architectural strategy in the emerging markets is working extremely well, barring some major economic or political surprises across many of these emerging countries. I would expect this theater to have the potential to grow over twice the average growth rate of the other four theaters, if we continue to execute effectively. While the US remains very solid, both in order momentum in total and strength in both the service provider in commercial markets, the US enterprise remains relatively sluggish with growth in the mid-single digits. To put this balance in proper prospective, as we summarized in the Q2 conference call, and are repeating at this time with almost identical commentary in this call from our customer segments to geographic theaters and products and technology markets, we are focusing on approximately 20 different areas. It is extremely unusual to overachieve on almost all of our focused areas, as we did in Q1 and Q2, even in very strong quarters such as this one. We would expect to have at least one or two of our focused areas to be in the low to mid-single digits or even negative. Q3 was indeed a very strong quarter. The vast majority of our advanced technologies, emerging markets, European operations, Asia Pacific operations, US service provider group, commercial operations, global service provider, customer segment, global enterprises and public sectors, and Scientific-Atlanta all achieved growth in the double digits, with only the US enterprise and Japan being below this level. Our balance product momentum across our core technologies and advanced technologies continues to be the best that I've seen in many years. But again it's loosely and tightly coupled product strategy for these technologies that dramatically differentiate Cisco from our peers, as it regards our customers both in flexibility and ability to add new market adjacency products. Our pipeline of potential new core routing and switching products looks to be very good. Our continued evolution of our first wave of advanced technologies and the emergence of a second wave of advanced technologies is on schedule and evolving as we expected. At the same time, we're beginning to plant a potential third wave with our early stage emerging technologies. And Charlie, I think you have done just an amazing job. Congratulations to you Marthin and the entire group. In summary, our product pipeline is in excellent shape and looks really exciting. Having said that, obviously, the proof is in the results. I was especially pleased with our balance product growth across all of our product areas, given the challenges that many of our peers continue to experience. We see the same challenges and uncertainties from an economic and capital spending concern that many of you continue to witness. At the risk of stating the obvious, Cisco will always be effected by major economic changes, capital spending patterns, new and existing competitors, and our ability to execute or not on our strategy. Having said that, Q1, Q2 and Q3 were unusually strong quarters. With the usual caveat, our Q4 guidance of 15% to 16% year-over-year, what is traditionally our strongest quarter growth, is obviously above our traditional guidance of 10% to 15% and continues to be at the very high-end of our guidance that we have provided in number of years. This aggressive guidance, obviously, indicates a high degree of confidence in our strategy and business momentum, once again with the usual caveats. In addition, I would not underestimate the potential that collaboration enabled by Web 2.0 technologies could have on Cisco's and the entire IT and communications industries growth over the next five to ten years. We would discuss these topics in more details in future conference calls. We will focus on what we can control and influence and attempt then to position Cisco to gain momentum in market transitions, whether they are industry consolidation, product transitions or economic. In summary, for those areas that we can control or influence we believe that our vision, strategy, and execution are in great shape in producing the desired results. As always, I want to thank our shareholders, customers, employees, and partners for their support and continued confidence in our ability to execute during rapid industry consolidation, market transitions and change in economic times. Blair, let me turn it back over to you.

Okay. Thank you, John. Now, we're going to open up the call to our Q&A session. As we have before and I will remind you, we do request that sell-side analysts please ask only one question. So, Marty lets go ahead and open up for the questions.

Thank you. Our first question comes from Tim Luke of Lehman Brothers. Tim Luke - Lehman Brothers: Thanks very much. Congratulations on the balance in your business. My question really relates to whether going forward we should continue to expect a fairly similar mix in terms of the emerging markets and international markets outpacing the US enterprise? Or, I guess the question would be, are there elements that make you think that make you think that after a couple of more subdued US enterprise bookings quarters there may be a reason to think that as you go into your fiscal year end quarter, you may see any improvement there to match what you've seen some of the strengthened service provider commercials elsewhere? Thank you.

Sure. Tim, I think you said it right. I think the balance is very good. The US business is very solid across to all segments, and Rick our forecasts are good. The only concern we had at the end of last quarter conference call was US enterprise. That turned out to be valid for this quarter. But, if you watch commercial, which is what you always worry about. If you see something slowing down, you worry about does it spillover to other markets. The commercial was actually stronger in the US this quarter than last quarter. Balance was really good, service providers are on fire. They're going about nine quarters in a row in the US, Rick at the 20% plus growth level?

Nine quarters in a row, verified it this morning.

We had a small disagreement on that talking about it the other day. But, to your point about outside the US, the economies are growing faster outside the US than they are inside the US. So, we are forecasting very solid growth across the US as a whole for this next quarter, Rick. We would not be surprised to see the international markets continue to grow at a faster pace. The emerging markets, Tim, look very solid and the balance is unusually good. Even if you take down in Eastern Europe and you break it down into countries like Turkey and Holland and Czechoslovakia. There is balance across five or six of those top countries even in one segment of emerging markets. That's a very nice way of saying that we feel good about our momentum across the board. The one thing we will continue to watch as we said last quarter is US enterprise. But, we are actually pretty comfortable either to stabilize and Q4 is traditionally a solid quarter for us from a US enterprise perspective. Next question please and thank you Tim.

Next question, please.

Thank you. Our next question comes from John Marchetti, Morgan Stanley. John Marchetti - Morgan Stanley: Hi. Thank you very much guys. A quick question for you on the Scientific-Atlanta business, I was hoping that you could help us understand maybe how much of this is 707 related? How much of it is growth in telco-type video and where you are seeing some synergies with the router products?

Jim, I am going to have you break that down a little bit and then I'll follow up.

There is no question, there is a 707 impact. It's kind of hard to quantify was at the Cable Show yesterday with a number of customers and I think they would tell you that they can't quantify it either. But let me tell you some of the other things that are kind of clicking along for us, this is the highest revenue quarter we have ever had. If you look at it, a lot of is a shift in the number of markets. Our HD shipments in this quarter were 67% of all our units shipped were HD and that's moved up consistently over the last quarters significantly. If you look at our installed base today, we shipped about 32 million set-tops of which basically 70% to 80% of them were HD. So, if you look at our current shipments, they are going out at 68%. If you look at what we have shipped program to date, it's only been 22% of it. So, we clearly see a lot of momentum going into HD. If you look at DVR shipments in the quarter, they were basically 50% of our shipments. So, you start to move and HD-DVRs, it represented about 75% of our shipments this quarter. If you look at that over a historical timeframe of installed base, it's only about 25%. So, there's no question at the subscriber, we've got in HD-DVR movement. Our transmission business had a very good quarter up significantly almost 60% year-over-year and of course that's driven by our customers seeking ways to get more bandwidth. And rather it's in 1 gigahertz, switch digital video, advanced compression, content management or higher digital penetrations, it's an effort by our customers to really move their business to get more bandwidth as you get the movement in the subscriber to HD. And I think lastly, you can look at our international business. It was 29% of the total. So, if you see growth rates, the growth rates in our international business this quarter were over 60% year-over-year growth. So, HD-DVR transmission international and IP set-tops for all areas that contributed to the year-over-year growth in addition to the 707. So, its one of a lot of factors, but there is a lot of things going right now.

Yeah. I think I would expand on it, John. The momentum in service providers in the US is in the high 20's and Scientific-Atlanta's growth is approximately 30%. They clearly are becoming intertwined in our sales cycles and progressing very well. Video is taking off both for business and for the home use and the video is the killer application.

Great. Thank you, John. Next question please.

Thank you. And our next question comes from Ehud Gelblum, JP Morgan. Ehud Gelblum - JP Morgan: Hi. Thank you very much. First, clarification of how it is doing. A quick question. The clarification just has to do with the impact of the weak dollar, does that impact your revenue at all and whether your guidance has anything to do with an expectation of currency? But I'll put that aside. And then the main question has more to do with, John you talked last quarter about your 10% to 15% range you are seeing right now. And you hinted flash implied last quarter that you may actually go into 15% to 20% sometime in the future depending on what you see going forward. From what Jim just talked about, Scientific-Atlanta sounds like trends seem to be continually very strong perhaps not 30% forever, but certainly it sounds as though, there is a secular trend there, that's a lot stronger than just a '07 lump, as well as you spoke about emerging markets being strong for the foreseeable future and the number of other things that all sounds like they are on secular runs more so than kind of just like one-time things, sort of anniversary. What do you have to see to get you to start thinking may be 15% to 20% on (inaudible) side versus the 10% to 15%?

First Ehud, you work me better than I work my team when I try to get them to raise the forecast and I will use that technique as we go forward. You are right when I look across the board in many ways I was just looking to the number prior to the call. It's amazing how many things are in the 14% to 17% or 18% growth range and how we have a couple above that. I believe it's pretty aggressive for us to say that growth in the mid-teens which is the most aggressive Dennis we have been in a very long while, and we set for two quarters in a row. It's a very positive note. I don't want expectations to get ahead of our ability to deliver. But I do think you are seeing, and especially if collaboration in Web 2.0 takes off over the next couple of years, the network will be the platform. So, growth in the mid-teens for a company of this size is extremely good. I don't mind the nudges, but I am going to probably resist some temptation to move above that at this time. To answer your question, I probably have to see it higher than that for several quarters in a row and Rick your forecast will be higher than you're currently giving me for me to feel comfortable with that. Dennis, a quick commentary on the effect of the dollar?

On the dollar, we have very little impact of that because we bill in US dollars and we also for our manufacturing also pay in US dollars. So, our exposure is primarily for our people that are outside the US for payroll, and we've done a pretty effective job of hedging that, so, the impact date has been pretty small.

Great, thank you Dennis, and thank you Ehud. Next question please.

Thank your. Our next question comes from Inder Singh, Prudential. Inder Singh - Prudential: Yes, thanks very much. Congrats on a good quarter.

Thank you, Inder. Inder Singh - Prudential: John you said that one of the reasons you were excited about the market and the opportunity was that the total available market to you is increasing as network architectures include more intelligence in the network. I guess, what that means is there is a lot more software in the network as well. Yet, when I look at your businesses, you are still quite focused on switching and routing in some of your traditional areas. Do you plan to take direct advantage of the bigger software opportunity and will that mean more acquisitions for you?

I like this Charlie, because I am going to answer the easy part and then give it to you to fill in the details with it. We are going to put in perspective Inder, this next year using collaboration Web 2.0 type of capabilities. We revolt our organization structure and what we call counsels and boards offers a traditional functional alignment. In my simple terms what that means is we were able to instead of trying to do one major project a year, last year we did two, which were emerging markets and the services change, this next year we are going to attempt to do a dozen. And one of those will be an expansion of the software area. But it does give you an idea of the type of productivity that we think we can get with the different business models just like we did in the early 90s with our way we supported our customers, orders, win it online, outsource the manufacturing. So, Charlie, may be if you take the software piece and I know we are going to discuss it further with our leadership group coming up here in a week and a half and talk a little bit about what you see, both in the collaboration area and business partnerships for a business side.

Sure. Well, thank you Inder. Inder, as you know, Cisco is really a software company wrapped up in steel clothing. About 65% of our engineers within the company are software engineers and we deliver products with a very high degree of software functionalities. As we go forward, that is going to increase in very significant way. Certainly in the area of unified communications and collaboration, it's already been increasing to a very great degree. And as we've indicated, we are the leader in both the unified communications as well as the collaboration space. And we believe that we are also the mindshare leader and the innovation leader in that space and we believe that we will continue to lead the market in that space. And it's going into some very interesting areas. WebEx was clearly a signal of our intention to continue to lead in that market and to take advantage of some new models. And that goes to the second part I think of the question, around software. When people talk of software, does that mean shrink-wrapped software or does it mean business process? And increasingly business process tools are been delivered in a very different way, obviously, not just the shrink-wrapped software methodology. And again, whether it's WebEx or whether what Cisco is doing in the collaboration space or integrating greater functionality for application acceleration in our products. We believe that we are forging a new ground in this area and we do believe that will be more of a force in the entire area of business processes, especially as it starts to migrate increasingly towards collaboration.

So in summary, Inder, I think you'll see us to be very active both internal development startups, partnerships like with IBM and SAP and you will see us active within the acquisition market as well. Inder Singh - Prudential: Thank you.

Thank you. Next question please.

Thank you. And our next question comes from Brant Thompson, Goldman Sachs. Brant Thompson - Goldman Sachs: Hey, John. Hey, Dennis.

Hey, Brant.

Hi. Brant Thompson - Goldman Sachs: With regards to the growth that you guys have been seeing across the business' carriers, small medium business and alike, how should we think about that mix relative to seasonality over the coming quarters, since you are going into your strongest quarter and then after that into one of your weaker ones? What kind of comments can you share with that given the levels of visibility you have now?

Sure. Maybe break it into two segments: We actually and Rick track these numbers all the time. The quarters based upon their normal seasonality trends are remarkably predictable in terms of nearly by the day. The other key thing here is you have to take one quarter compare the linearity and seasonality with the previous one. And within that framework, we find extraordinary consistency in that linearity. And so, this quarter was no exception. It was remarkably close June 25 - 30 and the delta for the year. So, as you look at Q1, we clearly look at Q1 over the prior Q1 as the prior years. And you are right, this is a traditionally strong quarter for enterprise and I'd be surprised if it isn't solid around the globe this next quarter, just like the last quarter was for service providers. But what you see is, it's really year-over-year. Commercial, Charlie has been plus or minus a couple points year-over-year growth just like clockwork. Service provider has a little bit bigger bumps and the team tends to be a little bit conservative in the forecast at times. The inter-process is remarkably solid globally. The only area that was much of a concern was always the US side. So, that's a nice way to stand. I look prior to year-over-year and that's how I look at the market. So, I look at our last year's Q1 and measure year-over-year growth to that Q2 the same way and that's probably the safest way to do it, Brant.

Thank you. Next question please.

Thank you. Our next question comes from Paul Silverstein. Paul Silverstein - Credit Suisse: John, if I missed you in the prepared remarks, I apologize. But can you give us some more insight in terms of what you are seeing in the US enterprise market? Whether there are any signs of a pick up in that market sector?

Sure, Paul. The market, it stayed pretty flat in terms of mid-single digits for the quarter. And that to me was actually good that it didn't spillover into commercial. In fact commercial went up. And I am seeing from the customers, most people feel that they are coming in for a soft landing. They are being conservative on their budgets, which is little bit of surprise. The quicker we can get justifications to areas of Unified Communications, TelePresence, the faster they move? But, maybe put in perspective, and I know Paul you probably know these numbers, so bare with me if you already do. US enterprise is only 13% of our total business around the world. I mean, if you look at the enterprise today, our commercial runs about 25% to 27% of US business, service provider 26% to 29%, federal between 8% and 10%, and enterprise the delta which by definition means below 40% of the US part of the house. I am actually more comfortable with US enterprise numbers, Rick we were talking about this forecasting for next quarter, and for this quarter because last quarter they were sliding, and they came off with a tremendous growth where 20% the first quarter. So, I think both of us Rick have better confidence this next quarter than we did this quarter.

No, I would agree with that John. And on top of that one other thing that's happening is, obviously the, world is flat. These large enterprises are making investments in other countries around the world, our emerging markets, other parts of Europe et cetera. And what happens as a consequence, in our metrics of course, we capture that information on a geography basis. And so, that shows up in our growth in other parts of the world which is why the enterprise business when we look at it globally is that they're in the mid-double digits and so that trend we expect to continue. And of course, John as you said we don't feel -- the key was Q2 to Q3, was that a downward trend and we said no, and so we feel more confident I would say at this point, John.

Hey, good as you are getting a feeling. I am working, Rick, higher on these numbers as we go, I am learning from you. Paul Silverstein - Credit Suisse: No, that's Paul. Rick, okay.

(inaudible). Go ahead Paul.

Okay, great. Next question please?

Thank you. Our next question comes from Mark Sue, RBC Capital Markets. Mark Sue - RBC Capital Markets: Thank you. Dennis as tech companies get larger generally they rely more on services. What should services grow as a percentage of revenues for Cisco? And what's the steady-state services gross margin for you? And how well Cisco managed the competition for services between yourself and your partners?

If you don't mind, Mark, I am going to take that one. It's something I am really closed to and I have been tremendously committed to services since they came to Cisco in 91. First answer to your question, our services gross margins are very predictable and very solid in terms of their traditional technical assistance group, the margins are very stable there. As we get aggressive in advance services, which make no mistake about it we are in partnership with our key player, a partner such as the IBMs of the world, the Capgeminis, the Accentures, the MphasiS, the Wipros of the world, the EDS' of the world et cetera. I think you are going to see us actually expand those. And if you look at the margins overall, the margin is more run in terms of we've invested the fair amount of headcount, which usually has one to two quarters before they get taken up in services. But, if we are really going to become the business partners of our enterprise customers and make no mistake about it, I intend to do that, we are well on our way there. And if we are going to take service providers to follow that enterprise model, perhaps lagging over the next two years to do that, it will take strong Advance Services Group. We are receiving very little pushback from either the large partners or our go-to-market channel partners in the marketplace, because we are articulating to them what we are doing. In terms of predictability of models, the major variable is just a mix, isn't it Dennis, and how much we add headcount in front of that.

It is John, and as far as the number is concerned, Mark, for Cisco, it's 63.9% gross margin on a combined basis, its 63.2%. We did say that it came down a little bit in terms of the services. But in terms of its impact on the overall gross margin, the impact on a net basis was only two-tenths of a percentage point. So relatively small, even though we are continuing to invest on the services side. Mark Sue - RBC Capital Markets: Got it.

The interesting thing Mark is the more services we sell to customers, the more they buy our traditional products. So, this is a principal model, but clearly the one that we are going to continue to invest in. But it will be a partnership-enabled investment not Cisco as a primary reaction to our core market slowing. Our core markets are actually accelerating. We feel pretty good about that.

Great, thank you. Next question please.

Thank you. Our next question comes from Nikos Theodosopoulos, UBS. Nikos Theodosopoulos - UBS: Yes. Thank you. I have a question on the IPTV market globally. We saw this week that AT&T had to increase the amount of capital spending. They needed to pass the home target. They had through '08, actually lower the target, and we heard from other equipment suppliers that the market is developing a little slowly. So, I wanted to get your perspective as to your view globally on this market. Is it developing as quickly as you thought? How do we view this increase in CapEx by AT&T? Is that something we would expect globally? Operators may just have to spend more on this technology and if so, will they still be committed to it? Thank you.

I'm going to pass it on to Jim with one front-end comment. Actually, this market evolving just as it has works in a big way for Cisco's advantage. A lot of the decisions that were made one, two or three years ago with that, because we did not have Scientific-Atlanta as part of our team, we did not get a shot at. We are now back into many of those accounts in partnership with a number of players. So, I think actually the market is evolving, Jim, our issue is, one on privatization and then executing pretty well. But, if you would, maybe answer Nikos' question a little bit more directly in your normal calendar frame.

Nikos, how are you. I saw you at the show yesterday. So, we talked a little about similar things. If you think about the triple-play, I think one of the messages that would come out of the Cable Show is that you really have to have the triple-play to complete. So, I think rather, here the cable people continue to move into high speed data deeper and deeper are now moved to voice. Or if you are in the telephone side and you coming out for voice, data, and then video in that order, I think everybody realizes that you have to have the triple-play. So, I think if you look at it in North American market, you really have two approaches. You have Verizon, which is to take the fiber all the way to side of the house. You have the IPTV AT&T approach, which is take the fiber to the node really to about 3000 feet. Now, if you look at the importance of it, the importance of the triple-play, I think is getting to be universal. In UK, we sell to Virgin and they are very deep into the triple-play. So, I think all of the telephone companies realize the importance of adding video in fact as we increase our dialogue and you see our business grow internationally. One of the factors that contribute towards growth this quarter was a fact we shipped over 150,000 IPTV set-tops. So, its moving, I think what it takes though, is it takes some time for each of these companies to get prepared to launch the service, to line-up all the content and to be able to go do that. I think also as you look internationally, what you find is most of the customers have a shorter loop links. So, as a result, they are going to get more bandwidth. They are going to get a very different kind of service, because they are going to be able get in the 50 or 60 or 70 megabits. So, obviously, I think it's very important, but it takes a little time to get there. Our business has been picking up as we go and shipments of IPTV set-tops every quarter.

Thank you. Next question please.

Thank you. Our next question comes from Tal Liani, Merrill Lynch Tal Liani - Merrill Lynch: Hi. I apologies, I can't pick up the phone because it's conference room here, so hopefully you can hear me properly?

Listen to in IP phone, there is a good discount, Tal. Tal Liani - Merrill Lynch: A question about operating margins. If you rewind about three years ago, year and half ago, we were expecting operating margins to remain relatively flat as gross margin is under pressure from new acquisition, lower margin acquisition. But then, due to your size and efficiencies and economies of scale, your operating margins were supposed to remain flat. Now, if I look at the last two years of operating margins, you do see volatility but sort of the general trend is down, operating margin is slightly going down. When you look at what if -- and this could be just the strength that Scientific-Atlanta that is pulling it down, I am trying to understand it. So, when you look at the next year, next two years, what's your outlook for operating margins and how will WebEx change the outlook? Thank you.

Tal, you'll recall that we have set us our goal, our operating margins to be within the 29% to 31% range. And we have two factors that we have us levers, one is our gross margin and the other is our operating expense. We have been successful in maintaining that over the past several years within that range. I think the factor that brought the operating margin down, if you are looking over the last couple of years is the acquisition of Scientific-Atlanta. You'll recall that previously our operating margin growth target was 30% to 32% and the Scientific-Atlanta brought us down one percentage point to 29% to 31%. So, if you were to exclude the Scientific-Atlanta acquisition, I think that you would see that our operating margins had remained very stable. And I think, we'll continue to see them stay within that range.

But Tal, let me also send a message and in terms of increases in our headcount, we see a lot of market adjacencies we are going to go into and as we go into adjacencies, you are going to see us both with engineering and with sales and best in that. Rick as an example added about 600 heads and 83% of those were sales reps and SE's. Please give me (inaudible) we've got number of questions. So, I'll move on to the next one.

Let me just add one thing to that John, the last point that how was the question about WebEx. WebEx actually has very solid gross margins and operating margins, and so, I would not expect to see a deterioration from that acquisition.

Great, thank you. Next question please.

Thank you. Our next comes from Subu Subrahmanyan, Sanders Morris. Subu Subrahmanyan - Sanders Morris: Thank you. My question is on seasonality, just try to take another shot at that. John, if you look at your year-over-year guidance for July, it's a very strong number as you mentioned above your longer-term guidance. But on a sequential basis, July quarters have usually been bigger sequential growth quarters and similarly October has been a little bit more challenging. Are the seasonal patterns are less meaningful in the current market environment, is that changed now for some reason? And similar to lower sequential growth in July, should we look for more of a flattish trend into October?

No, I would look at it Subu more on a year-over-year basis. I think that's the right way to do it. Q4, because we have such a strong direct sales force, we always closed hard the enterprise tends to be the easiest one to close on, that's true of any direct sales force in the hi-tech industry on their year end close. Q1 calendar wise, specifically the quarter we just came off, Q3 of our fiscal years is almost always the strongest service provider wise. The Q1, as we all know, is something for Federal government. You see, that's pretty solid. But that's a very nice way of saying. I think you would see similar seasonality in terms of year-over-year numbers that you have seen before. But I would watch prior to year-over-year growth. So, if you are modeling growth at 12% year-over-year, that's what I would do. If you are modeling at 15% or 16% that's what I'd do as well.

That's exactly how we run the business now, John. And when I look back over quarters and try to understand the momentum of my business, those year-over-year comparisons tell me how we are doing. If I look at sequentials, they have no meaning whatsoever in this state of our business, say, development of our company.

Great. Thank you for that question Subu. Next question please.

Thank you. Our next question comes from Jeff Evanson, Sanford Bernstein. Jeff Evanson - Sanford Bernstein: I wanted to pick up a bit more on the sales force ramp. How should we think about ramp times now relative to what they have been over the last few quarters? And could you give us any thoughts on additions to the sales force over the remainder in a calendar year?

Rick Justice, I will ask you talk about productivity and I think that the second part of the questions will continue to be aggressive in adding sales reps.

Okay, Jeff. We watch very closely the ramp rates and we look at one quarter out two, three, four, five, six, seven since we have been hiring for a number of quarters now. And we are still seeing a rapid improvement in productivity over our classical models of the past. Four or five or six quarters, we are finding people to be at full productivity. But we look at it by segment and then we decide how to allocate our resources based on the productivity we see. And so as John said, we added a number of people at this time. We are adding people at a slower percentage than we are going in the business overall clearly. And we will continue to do that particularly in coverage opportunities around the world. But we are very meticulous about understanding the cost associated with it and looking at those models quarter-after-quarter.

The bottom line is, they are ramping, well, on productivities very closely, and we've seen even a year ago, as we had it.

Exactly.

Thank you, Jeff. Jeff Evanson - Sanford Bernstein: Thank you.

Next question please.

Thank you. Our next question comes from Tim Long, Banc of America. Tim Long - Banc of America: Thank you. Just a question if I could on the routing business and another very strong performance from the CRS-1. Could you just talk to us a little bit about what the growth in that business would be X this CRS-1, so maybe for edge and enterprise? And then also for the service provider routing, do you think the mix at all will change or the growth profile will change when the Japan networks are starting to hit? Thank you.

Charlie, I know you are looking for the data. I'm doing the same quickly to get in line. Let me take crack at Japan first as Charlie looks for that. Our growth in Japan were so heavily depended upon service providers, will not occur again into the next generation though it occurs with NTT and others there. We think we are positioned well for that and when it occurs, you will not anticipate the numbers going up well. I think what's exciting about the CRS-1 is really the order run rate of a billion dollars up some $400 million before, which really means often search providers build up their core first, and then workout in terms of handling the volume on it. Charlie, did I give you enough time to look down your sheet. I guess out of our top-20 products, we only saw one product that wasn't in double-digit growth, in large numbers there's routers. I think the 7200 was the only one that was not in double-digit growth. It was actually slightly negative as we are evolving that product.

Yeah. I don't have the exact numbers, John. But I do know that, as you had already mentioned, we had very strong sales growth as well in our other two very major product categories in our high end, which is the 7600 and the GSR. And both of those saw a very significant growth. It's hard to comment on. We are going through a product transition in the mid-range and so we are going through the 7200, 7300, 7500 product family. We are going through a product transition there. So, we are seeing lesser growth in that segment, but that's something we are expecting to modify in the next several quarters. So, overall, I'd say the high-end is very strong across the board, and I think we are seeing increased momentum in that area.

Thank you, Tim.

Thank you. Next question please.

Thank you. And our next question comes from Paul Mansky, Citigroup. Paul Mansky- Citigroup: Great. Thanks for taking the question. I guess building on that last question. I know last quarter we talked about the potential for the service providers out of Japan to start ramping again towards the end of the calendar year. Can you update us on that timing expectation again? And then, can we talk a little bit more about what you are seeing out of China? Looks like relative to the AP region that's striking slightly below the balance of the group for I guess the second quarter in a row here. Is there change in the competitive landscape?

Rick, you were just over in Japan, may be an update. I will take the China one?

Yeah. I've just come back from Japan a couple of weeks ago. I had chance to meet with all the seniors executive of NTT, South Bank, KDDI and the commitment to IPNGN is very real. They want to get it right. There are huge opportunities for us and the guidance we have given in the past, as we thought by the end of this year we'd start to see some of that. I think that's in reasonable timeframe or the beginning of next year as well Q1, Q2. And we think once this build out begins it will spend a number of years, not just the number of quarters. So, we are still looking for the beginning of some momentum now. We have accepted all pick-up sequentially, as we go into FY '08.

And maybe to comment on China. China has been a hard market for us to predict our growth in. Part of that is because we have a number of very tough good local competitors and the playing field isn't always perfectly level there. India little bit more predictable. Our growth rate there while it will be lumpy from quarter-to-quarter, has been extremely solid and we are seeing the results quickly from our investments back there. So, I'd probably look the two combined to have growth rates above average of our company. But, if you will say, which one are you more challenged in? Candidly, we are more challenged in China than we are in India.

Great, thank you. We have time for one more question.

Thank you. Our final question comes from Jason Ader, Thomas Weisel Partners Jason Ader - Thomas Weisel Partners: Thank you. It's sort of question on the operating leverage for the company. If I look at the Q3 results, revenue was up 21% year-over-year, net income was up 16% year-over-year. So, obviously that positive operating leverage right now for the company, revenue growing faster than net income. Is there a point where we might see those two line items converge or even net income grow faster than revenue?

I think there are a couple of things to remember as you are comparing year-over-year bottom-line net income and earnings per share. And, so you need to backup and look at what the operating income is. The operating income on a combined basis is 19% year-over-year growth. We were at only 17% as it relates to earnings per share. But, remember a year ago we actually had a one-time charge that came through that increased that and the impact on that is about 2%-4% on earnings per share. So, if you would put that back in, you would have seen our earnings per share actually grow faster than our revenue for this quarter. So, I think that this would have a little bit of an abnormality, because of the benefit that we had in the quarter a year ago. Jason Ader - Thomas Weisel Partners: So, the right way to think about the business plan is that the operating income and the revenue should be growing at roughly equal rates, is that fair at this point?

In the short term, the answer is probably yes. And I hope that continues for well for the reason I am about to share with you. We see, unlike almost all of our peers, no lack of market opportunity and market adjacencies that we think with the appropriate caveats and understanding the risk that we can move into and become potentially the number one player in those markets. As I eluded to you earlier, we aren't just investing in fill the headcount, even Charlie is aligning the resources and investing in new internal startups and advanced technologies that take two, three, four years before you really get into be material for the company and our progress on that looks excellent. And I am moving Charlie there, he can be more aggressive there. But I would not underestimate my confidence in that when I said, at the beginning of the call, we are moving into 12 new investments for next year and last year we only did two. Now, part of that is how we will structure ourselves to really leverage collaboration, which is working well for us in this new evolving business models. Part of it will be because of various likes that we discussed earlier, such as software that I think we have to think architecturally about our mobility or virtualization architecturally about a little bit further. Which is a nice way of saying that unless something changes in the market, it's always possible we get surprised. We are very optimistic about the stage of the market and the next phase of this internet growth around Web 2.0. So, for the short term and whether the short term is one or two years or whether it's a couple of quarters, and I hope it last longer than that, as long as we see these opportunities, we are going to continue to invest. Better for a summary there.

Yes. It does.

Blair, with that, let me turn in over to you.

Okay, well great. As a reminder, our next quarterly conference call which will reflect our fourth quarter fiscal 2007 results will be on Tuesday, August, 7, 2007 at 1:30 pm Pacific Time which obviously is 4:30 pm Eastern Time. Again, I would like to remind you that in light of Regulation FD, Cisco plans to retain its longstanding policy to not comment on its financial guidance during the quarter, unless it is done through a public disclosure. Please feel free to call the Investor Relations' department with any follow-up questions from this call and thank you for your participation and continued support. This concludes our call.

Thank you for participating on today's conference call. If you would like to listen to the call in its entirety, you may call 866-357-4205. For participants dialing from outside the US, please dial 203-369-0122. Once again, if you would like to listen to call in its entirety, you may call 866-357-4205, and for participants dialing from outside the US please dial 203-369-0122. Thank you. Have a good day.