Blair Christie - VP of Corporate Communications John Chambers - Chairman and CEO Dennis Powell - CFO Charlie Giancarlo - Chief Development Officer Jim McDonald - CEO, Scientific-Atlanta Rick Justice - SVP of Worldwide Operations and Business Development Ned Hooper - Senior Vice President of Corporate Development Frank Calderoni - Senior Vice President of Customer Solutions Finance

Nikos Theodosopoulos - UBS Brant Thompson - Goldman Sachs Inder Singh - Lehman Brothers Ehud Gelblum - JP Morgan Tal Liani - Merrill Lynch Jason Ader - Thomas Weisel Partners Paul Silverstein - Credit Suisse Tim Daubenspeck - Pacific Crest Securities Jeff Evenson - Sanford Bernstein Bill Choi - Jefferies Tim Long - Banc of America Mark Sue - RBC Capital Markets Ittai Kidron - CIBC World Markets Aaron Rakers - AG Edwards

Welcome to Cisco Systems' fourth 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 when ready.

Thank you and good afternoon, everyone. Welcome to our 70th quarterly conference call. I am Blair Christie and I am 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; Ned Hooper, Senior Vice President of Corporate Development; Frank Calderoni, Senior Vice President of Customer Solutions Finance; and Jim McDonald, Chief Executive Officer of Scientific-Atlanta. The Q4 fiscal year 2007 press release is on Full National Market Wire and the European Financial and Technology Wire, as well as on the Cisco website at www.cisco.com. 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, and is also available from August 7 through October 19 on Cisco's investor relations website. Throughout this conference call, we will be referencing both GAAP and non-GAAP financial results. Please note we have provided a reconciliation 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 again to the financial sections in the investor relations website for further details. The financial results in this press release are unaudited. As in previous quarters, we will provide both Cisco and Scientific-Atlanta financial information in order to illustrate the impact of this acquisition. We will also provide additional detail regarding the impact of significant acquisitions closed during our Q4 '07. Please note that beginning in Q1 of fiscal 2008, we will resume reporting only total Cisco financials and will continue to do so until a point in time where our business is impacted by a material event or an acquisition. Our commentary today will be slightly longer than normal due to the fact that we are providing information on three major topics: our Q4 '07 financial results, our full FY '07 financial results, and a discussion on the next major market transition we see for Cisco. As a result, if we cannot get to the majority of questions by 3PM Pacific time, we will extend this call for 15 minutes. 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 actual results to differ materially from those contained in the forward-looking statements. Unauthorized recording of this conference call is not permitted. I will now turn it over to John for his commentary on the quarter.

Thank you, Blair. During the opening comments of the conference call, I will focus on what I view to be the key takeaways for Q4, as well as the revenue guidance for the next quarter, for the fiscal year 2008, and an update on what we think our long-term growth projections could be if we execute well, with the appropriate caveats. The opening comments will also include discussions on what we believe has been driving our current growth to these record levels, as well as what we think will be the key factors that we expect will allow us to maintain a strong growth rate. Dennis will follow with additional detail on Q4 and a summary of Cisco's fiscal 2007 performance. The third section of the call will focus on a more detailed discussion of business momentum and strategy on a geographic, product and customer segment basis. Dennis will then provide additional financial parameters around our guidance for Q1 and for the fiscal year 2008. I will then wrap it up with some comments in terms of Cisco's momentum going forward into fiscal 2008, and finally, our Q&A session. Now onto the discussion of Q4 and fiscal year 2007. This quarter was the strongest quarter we have seen from a balanced product, geographic and customer segment perspective in many years. It was another record quarter from a revenue, GAAP and non-GAAP net income and earnings per share perspective. To put these record results in perspective, I will summarize the quarterly highlights, first from a key financial; secondly from a product and services perspective; third from a geographic point of view; and fourth by customer segment. We will discuss product growth and other financials primarily from a revenue perspective and use orders to add color and momentum to the discussion. The customer segment and geographic discussion will be primarily on orders, as this is how we run our business. The key financial highlights for Q4 include the following: total record revenue of approximately $9.4 billion, an 18% year-over-year increase, which was comfortably above our guidance of 15% to 16% provided in the Q3 conference call. If you took Cisco on a standalone basis, this was once again one of the fastest year-over-year revenue growth rates we have seen in several years. We are obviously pleased with both the growth on the top line and bottom line, as well as the market share gains. Order growth was even stronger than revenue growth, and product book-to-build was comfortably above 1. Product orders grew in the 19% to 20% range. Non-GAAP net income was a record $2.3 billion, an increase year over year of approximately 21%. GAAP net income was $1.9 billion, representing a 25% increase year over year. Non-GAAP earnings per share were a record $0.36 and GAAP earnings per share were $0.31, which were increases of 20% and 24% respectively, year over year. Cash generated from operations was $2.7 billion. We repurchased 1.5 billion of common stock and we exited the quarter with $22.3 billion in cash, cash equivalents and investments. Revenue and order growth from our key products and services were very strong across almost all categories. To put this into perspective, in terms of my view of our momentum from a product and services perspective this quarter, I will analyze the results in the following four categories: routing, switching, advanced technology, and services. First, on products, routing revenue grew year over year by 14%; switching revenue grew year over year by 18%; and total of all of our advanced technology revenues grew year over year by approximately 24%. The advanced technology revenues are larger in terms of their total contribution to our top line than routing is, and this speaks to our market transitions that we're focused on and moving to market adjacencies. This again speaks to Cisco's balanced product portfolio and our constant evolution of moving into these new market and product adjacencies. At Cisco, we have been very focused on creating the next generation of products or what we call advanced technologies. We have attempted to develop what we refer to as waves of these technologies that will come to market three to five years after their inception if we execute well. At this time, we have the first wave of advanced technologies which includes security, wireless, storage, networked home and unified communications. The second wave includes video systems, hosted small businesses, application, networking systems, et cetera. The third wave, which we are calling at this time emerging technologies, and Charlie, we hope they are going to evolve into advanced technologies, these include digital media systems, telepresence, IPeX, physical security, et cetera. We were very pleased with the total advanced technology revenue growth for the year. We were particularly pleased with four of the five categories in the first wave having revenue growth of over 20% year over year. Although competition remains robust, we believe we are gaining market share versus almost all of our major competitors in most product categories. But we also believe we are getting a larger share of our customers' total spend on communications and IT. To add additional information regarding the balance of our orders across our product lines and potential future momentum, 17 of our top 20 product families had year-over-year order growth rates for Q4 of 15% or better. Our services revenue now represents approximately 16% of our total revenue, and in Q4 our revenues for services grew year over year by approximately 19%. From a geographic perspective, order momentum was very strong and balance was good across our large theaters during Q4. Despite the slower growth for a number of our technology peers in the most recent quarter, our business actually accelerated in many areas in Q4. I know there have been a number of mixed views about the strength of the U.S. IT spending, especially in large accounts. I am very pleased to share with you not only that our U.S. business was very strong, but the balance was very good across all customer segments, with average growth rates in the upper teens. In fact, growth and balance across our customer segments in the U.S. was the best we have seen in a number of quarters. We had very strong growth in other large theaters, led by emerging markets, and I will cover the other major markets in more detail later in the call. From a customer segment perspective, we again saw very good and strong balance across our commercial markets, service provider and enterprise segments. The global service provider business remained very strong. Orders from a service provider perspective, not including Scientific-Atlanta, grew in the low 20s year over year. Video continues to drive network demand and is potentially the killer application for loading and bringing value to the network. We were very pleased with the accelerating momentum from video applications such as consumer video and broadband buildouts driving much of this service provider investment. From an enterprise and commercial perspective, we expect that video applications such as TelePresence and Unified Communications will continue to load networks and require upgrades to existing networks. Using Cisco -- granted as an aggressive example -- as we begin to implement Unified Communications, TelePresence and other video applications across our entire company, our expectation of our network load is to grow at least 200% to 300% per year over the next several years. It is our goal to be the leaders in implementation of collaborative business process change and the associated productivity enabled by Web 2.0 technologies and then take the Cisco experience and benefits and our products to our customers. Having said that, we are also seeing many of our customers in the service provider and enterprise area that are beginning to anticipate much larger growth in network loads. Scientific-Atlanta grew above 30%, and orders grew approximately 12% in Q4. Jim, congratulations; a great job by the team. One of the best indications of our industry's anticipated loads on networks is our order growth in high-end routers. While we have had very strong order growth in high-end routers during the first three quarters of fiscal year 2007, averaging approximately 20% year over year, growth actually accelerated in Q4 to approximately 30% year over year for our high-end routers. The global enterprise business was very solid, including the public sector. Our enterprise customer segment on a global basis grew in the mid-teens. The commercial market segment remained our most steady and predictable segment, again growing in the low 20s from an order perspective. Anticipating the major question that many of you will ask following these very strong and record results for Q4, why are we experiencing such strong growth while many of our peers have been a little more challenged? While there is always a chance that this growth may be temporary, however, with the appropriate caveats, we believe that growth may continue well into the future. We believe that there are a number of factors that are unique to Cisco's ability to grow. First is our unique balance across over two dozen product areas, four customer segments and across major developed and emerging countries. Second is our vision that the network is becoming the platform for all forms of communications and IT. Third is the convergence of all data, voice, video and mobility into IP networks, which is clearly our core competency, and we have industry-leading IP expertise in all functions of Cisco. Fourth, different than almost all of our counterparts, we approach this from both a business architecture and a technology architecture perspective across what we define as a combination of network in networks in each of these four customer segments. Fifth, from a product perspective, we approach the market with an end-to-end architecture, where the products are first loosely, then tightly integrated together rather than focusing on individual routers, switches, security, wireless, storage, unified communication or other stand-alone products. We also continue to be reasonably good at internal innovation, acquisitions and partnerships. Sixth, it is our view that to be efficient on the above market transitions, you have to have a combined vision of where the industry is going to go, identify what are your sustainable, differentiated strategies given that vision, and a discipline to execute in a 12 to 18-month implementation against this long-term three to five-year strategy, while not getting distracted in terms of short-term focus on decisions that may make next quarter or next year's results look good as opposed to preparing for the long run. Seventh is our global balance of our business, combined with our tremendous cash generation engine. Dennis, I think it is almost $10 billion run rate that we were at this last year, and a very strong, pristine balance sheet. Finally, and potentially the most important in what we believe will drive Cisco's growth for the next decade is what we are calling the second major phase of the Internet effect on business and communications. We believe this Phase II of the Internet will result in dramatic innovation and productivity increases, enabled by collaboration of Web 2.0 technologies such as unified communications and TelePresence. While it is too early to say for sure, we strongly believe that this is evolving from a market transition perspective as we anticipated. This market transition has the opportunity to be an instant replay of what occurred for Cisco in the very early '90s and powered Cisco's growth and the growth of the industry for the next decade that followed. Anticipating your second question following our strong FY 2007 and Q4 results, and assuming our vision, strategy and our execution remains on track combined with the reasonable assumption that global economies remain solid, why aren't we increasing our expectations of growth for the long run next fiscal year and Q1? After careful consideration and watching these trends over three years, we have decided to increase our expectations. As a reminder, we make all of our decisions on what we believe to be the right decisions for the company for the long run and try not to focus on short-term issues for the next quarter or even the next year in implementing our vision and differentiated strategy. Over the last 16 quarters, our standalone growth in terms of orders at Cisco has averaged in the mid-teens or better. As Dennis will share with you later, our earnings in terms of year-over-year growth for each quarter has also been very strong. Therefore, we think it is only appropriate that we are raising our long-term guidance to 12% to 17% year-over-year range from its current 10% to 15% range. While at the risk of stating the obvious, there will be times that we may grow above this range, and there will definitely be times where we grow below the range. We are also assuming in this long-range guidance, as well as our quarterly and yearly guidance, that our vision of how this industry will evolve will be accurate and we will execute on that vision and with the appropriate assumptions of solid economies around the world. Cisco will always be affected by major economic changes, capital spending patterns, new and existing competitors and our ability to execute or not on our strategy. Our expectations for fiscal year 2008 in terms of year-over-year growth will be in the middle of this range, with expectations in the 13% to 16% year-over-year growth for fiscal year 2008. Finally, revenue guidance for Q1 fiscal 2008, including our usual caveats as discussed in prior calls and financial reports, is for revenues of $9.45 billion to $9.55 billion or approximately 16% year-over-year growth for Q1. We are going to provide this long-range yearly and quarterly guidance in our attempt to communicate even more transparently our expectations. We clearly realize and you should expect for results to periodically be outside these ranges, but on average, given the assumptions that we have covered in this call and our financial disclosures, these expectations look reasonable. In summary, we believe that we're very well positioned in the industry from a vision, differentiated strategy and execution perspective. As I stated earlier, we believe we are entering the next phase of the Internet, as growth and productivity will center on collaboration enabled by Web 2.0 technologies. We will do our best to provide both the product architectures and the expertise to help our customers in the implementation of these collaborative capabilities from both a technology and a business perspective, as well as to share how we have done this internally. In short, we are going to attempt to execute a very similar strategy over the next decade, similar to what we did in the early 1990s. As we said earlier, it powered our growth in the 1990s through today for literally over a decade, except with the obvious differences this time being that we are a $35 billion company with over 60,000 employees focused on this opportunity. At this time, I would like to turn it over to Dennis for a further discussion of the Q4 financial highlights and a quick summary of the entire fiscal 2007. Dennis, it is all yours.

Thank you, John. We are very pleased that Cisco's financial results exceeded expectations this quarter for revenue, operating income, net income and earnings per share. First starting with our Q4 results, total revenue for the fourth quarter was $9.4 billion, an increase of 18% year over year. Scientific-Atlanta contributed $791 million and WebEx and IronPort together contributed $76 million in Q4. Routing revenue totaled $1.9 billion, up 14% year over year, due primarily to continued growth in our high-end router portfolio, particularly the CRS, the 7600 and GSR. Switching revenue was $3.3 billion, an increase of 18% year over year, due to strength across our fixed and modular switching portfolio. Advanced Technologies revenue totaled $2.2 billion, representing an increase of 24% year over year. Other product revenue totaled $503 million, an increase of 8% year over year, and total service revenue was $1.5 billion, up approximately 19% year over year. Q4 total non-GAAP gross margin was 65.2%, up from 64.5% last quarter. For product only, non-GAAP gross margin for the fourth quarter was 65.2%, up from 64.7% last quarter, primarily due to higher shipment volume, a more favorable mix, and cost savings, and then partially offset by modest price reductions. Our non-GAAP service margins for the fourth quarter were 65.1%, up from 63.2% last quarter. We saw improvements in both technical support and advanced services gross margins. There is always some level of volatility in service margins based on revenue levels and mix between technical support and advanced services. Therefore, this fluctuation is not surprising and has limited impact on Cisco's total gross margin. As expected, non-GAAP operating expenses as a percentage of revenue were 35.5% in Q4, up slightly from 34.7% in Q4 of '06. Our Q4 FY '07 non-GAAP tax provision was 25%. Non-GAAP net income for the fourth quarter of fiscal '07 was $2.3 billion compared to $1.9 billion in the fourth quarter of fiscal year 2006, representing a 21% increase year over year. Non-GAAP earnings per share on a fully diluted basis for the fourth quarter were $0.36, up from $0.30 in the fourth quarter of fiscal year 2006, representing a 20% increase year over year. GAAP net income for the fourth quarter was $1.9 billion as compared to $1.5 billion in the fourth quarter of fiscal year 2006, representing a 25% increase year over year. GAAP earnings per share on a fully diluted basis for the fourth quarter were $0.31, up from $0.25 in the same quarter of fiscal year 2006, representing a 24% increase year over year. Now switching to our full fiscal year performance, total revenue for fiscal year 2007 was $34.9 billion, an increase of approximately 23% over fiscal year 2006 revenue of $28.5 billion and representing an 18% increase on a combined organic basis, which assumes that Scientific-Atlanta had been acquired and reported on for all of fiscal year 2006. Non-GAAP net income for fiscal year 2007 was $8.4 billion, up approximately 22% from fiscal year 2006 non-GAAP net income of $6.9 billion. Non-GAAP earnings per share on a fully diluted basis for fiscal year 2007 were $1.34, up from $1.10 in fiscal year 2006, representing a 22% increase year over year. GAAP net income for fiscal year 2007 was $7.3 billion or $1.17 per share compared to $5.6 billion or $0.89 per share for fiscal year 2006, both representing a 31% increase year over year. Product backlog at the end of fiscal year 2007 was $3.9 billion compared to $3 billion at the end of fiscal year 2006, an increase for the year of approximately $900 million or 29%. Now moving on to the balance sheet, the total of cash, cash equivalents and investments at the end of Q4 was approximately $22.3 billion, flat quarter over quarter. During Q4, we generated a record $2.7 billion in cash from operations, as well as $1.6 billion in proceeds from stock option exercises and employee stock purchases. We used $3.3 billion of cash for acquisitions this quarter, net of cash acquired and we repurchased $1.5 billion of common stock or 50 million shares of our stock at and averaged price of $27.33. For the full fiscal year 2007, we generated $10.1 billion of cash from operations. We repurchased $7.8 billion of stock or 297 million shares of stock at an averaged price of $26.12. The remaining approved amount at the end of FY '07 for stock repurchases is approximately $8.8 billion. Now moving on to accounts receivable, we ended the quarter at $4 billion, up from $3.2 billion at the end of Q3. At the end of Q4 '07, DSO, or days sales outstanding, was 38 days, up from 33 days in Q3 and flat compared to Q4 of '06. The increase from the third quarter was due to the normal seasonal linearity of shipments that we always see this time of the year. Total inventory for Q4 was $1.3 billion, relatively flat quarter over quarter. Non-GAAP inventory turns were 10.1, up from 8.6 times last quarter. The increase in inventory turns was driven by the successful completion of our lean implementation. Going forward, we expect to see inventory turns remain in the range of 9 to 10 times. Our inventory purchase commitments at the end of Q4 were $2.6 billion, the same as at the end of Q3. Deferred revenue was $7 billion in Q4 '07, an increase of $698 million from Q3 and an increase of $1.4 billion from Q4 of '06. Deferred product revenue increased 41% and deferred service revenues increased 18% on a year-over-year basis. At the end of Q4, our headcount totaled 61,535 an increase of approximately 4,750 from Q3. Our headcount increases were the result of acquisitions of approximately 2,950 and 1,800 Cisco hires in sales, engineering and services. In conclusion, we were very pleased with our performance both on a fiscal year and a Q4 basis. We have achieved six consecutive quarters of record revenue and non-GAAP net income. We have generated our highest level of cash from operations of $10.1 billion on $7.3 billion of GAAP net income in FY '07, which speaks to the quality of our earnings and an effective utilization of our balance sheet. Additionally, our GAAP and non-GAAP earnings per share have increased on average by over 22% year over year for the past 16 quarters. Finally, I'm most pleased with our ability to do what we say we are going to do: delivering consistent results that have met or exceeded our guidance for many years. These results can be attributed to our balanced approach across geographies, products and customer segments, and a leadership team dedicated to outstanding execution. Our strategy is clearly working, and I want to congratulate all of our employees on a very successful FY '07. I will now turn it over to John.

Thank you, Dennis, you did a really nice job. In this section of the call, we will cover our geographies, customer segments and product review for Q4 in more detail. The product review will be in revenue growth terms, while the geographic and customer segments will be discussed in bookings terms unless otherwise indicated. At this point, we will provide additional detail from a geographic and a customer segment point of view. There were a number of positives from our four largest theaters and customer segments. First, from a U.S. perspective, again, order growth rate was in the upper teens. The U.S. service provider market, not including Scientific-Atlanta, continued to lead the way, with order growth approaching 30% for Q4 and high 20s for the fiscal year. Balance was very good across our four categories of service provider in the U.S., which includes incumbent wireline, wireline emerging and cable operations, all of which averaged 25% or greater year-over-year growth during the fiscal year. Balance on the yearly numbers was again very good across all four of our U.S. service provider areas. The commercial market continued its strong and balanced growth in the high teens for both the quarter and for the fiscal year. Again, balance was unusually good in both time periods across all four commercial operations. The enterprise business, excluding federal, did see some major swings throughout the year. Q1 growth was in the low 20s, followed by Q2 and Q3 in mid single-digits, and Q4 with order growth rates year over year of approximately 12%. We expect the U.S. enterprise growth to be very lumpy, both by U.S. areas and industries moving forward. For example, in our six U.S. enterprise areas, not including federal, year-over-year growth was spread over a relatively large range, from 5 to the low 20s for the fiscal year. In Q4, year-over-year growth for the six enterprise areas had an even wider range. Our federal business grew for the first three quarters year over year approximately in the 7% to 10% range and then had a very solid Q4, with growth of approximately 40% year over year. Year-over-year order growth across our customer segments of service provider, commercial, enterprise not including federal, in Q4 was very solid, ranging from 12% to 30%. Perhaps our biggest geographic success of fiscal 2007 was the business process and collaborative approach to our emerging markets, which resulted in growth throughout the year of approximately 35% to 50% in each of the quarters, and very solid gross margin and profit contribution, which can often be challenging for high-tech companies in these markets. Growth for the fiscal year was approximately 40%. While the business by definition will be lumpy and based in part on large orders, we have been pleased with the consistent performance. This model for emerging markets appears to have legs for the next decade. Balance for fiscal 2007 was very good across our four emerging market operations. Middle East and Africa operations led the way with growth in the high 50s, followed by Russia and CIS with growth of approximately 40%, and Eastern Europe for the year had growth in the high 30s, followed by Latin America with growth in the high 20s. Again, it is this balance across all four of our emerging operations that is our greatest strength. While there are many caveats, and it 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. Europe, our European operation had very solid growth throughout the year, which averaged in the mid-teens for the fiscal year. Seven of the nine geographic operations achieved growth in the range of low teens to low 20s. Again, we were pleased with the balance. Balance across our four customer segments was good in Europe, exiting Q4 with all four major segments in double-digit growth, ranging from 10% to the low 20s year over year. I really want to congratulate Chris and our entire European team after a very tough year in fiscal year 2006 on their very strong and balanced performance in fiscal 2007. Moving on to Asia Pacific, the Asia Pacific theater continued its solid momentum, with growth accelerating throughout the year from the low teens to the low 20s in Q4 and averaging approximately 15% for the fiscal year. Balance was good, with all five major areas achieving solid growth for the year and ranging from high single-digits to high 20s for the fiscal year. In Q4, our China operation led the way, with growth in the mid-20s. Again, growth in Asia Pacific was very balanced across all customer segments, ranging from the mid-teens to the high 20s in Q4. In addition, we are continuing to see some very positive early results of our new globalization strategy, with Wim Elfrink, our Chief Globalization Officer, moving to Bangalore and taking now it is up to 20 executives with him to develop our new service and support model. We believe this should continue to have a very positive effect throughout the region and the rest of the world. Japan was flat for both the fiscal year and Q4. As we have mentioned before in prior conference calls, our Japanese operation is primarily focused on the service provider market, and we're seeing delays in the next-generation network build outs by the key carriers, which are currently targeted for late this calendar year. To put this in perspective, Japan now represents approximately 4% of our total business. Next to products. Moving next to the product discussion, which includes our total revenue numbers and by definition will include our acquisitions, as a reminder in this discussion and in future quarter conference calls, product discussions will cover products primarily from a revenue perspective and use orders to add color or illustrate momentum trends. Total revenue balance was once again very good across our core routing, switching and advanced technologies, both for fiscal year 2007 and for Q4. Routing and switching for the fiscal year both grew in the mid-teens. In Q4, revenue growth was approximately 14% for routing and 18% for switching. Total advanced technologies revenue grew approximately 45% in fiscal year 2007. Our first wave of five advanced technologies in fiscal year 2007 had revenue growth of approximately 25%, and in total are approaching almost $6 billion in revenue; and that is just the first wave. For the fiscal year 2007, unified communications led the way with revenue growth in the low 30s, storage with growth of approximately 30%, wireless growth in the mid-20s, networked home in the low 20s, followed by security growth of approximately 20%. For Q4, revenue growth for these five advanced technologies was 19%. From a revenue perspective, in Q4 security led the way with growth in the high 20s, followed by unified communications with growth in the mid-20s, wireless and storage in the low 20s, and the networked home was flat from a revenue perspective. I realize that this is a lot of detail, but let me just add a little bit more. To add additional color, these five first-wave advanced technologies had order growth rates of approximately 30%, reminding everyone this business is very lumpy, and Q4 orders obviously grew dramatically faster than revenues year over year for this first wave. It is very difficult to single out any product in Q4, because candidly, almost all of our top products did very well. However, if there is one product area that I would like to talk about to position the second phase of Internet innovation and productivity enabled by Web 2.0 technologies, it would be TelePresence. In Q3, TelePresence systems orders grew from the prior quarter by over 300%. In Q4, the number of TelePresence systems grew by over 400% from Q3. The customer excitement and understanding about both the process change and the collaboration that TelePresence enables has been dramatic. This is especially true at the CEO level, where CEOs not only grasp the effectiveness from a time and travel cost savings, but almost uniformly, they understand the value of the business transformation to their organizations. This is the first time in my career that I have seen this type of excitement and interest from CEOs for a technology. We now have TelePresence orders from approximately 50 customers. These customers are realizing that the lifelike experience unique to TelePresence is enabling business transformation that could drive both top and bottom line growth. Using TelePresence to create new products and services and enhancing their competitive positioning by leveraging expertise and speed execution and decision-making have become the key purchase drivers, even over the reduced travel cost that we know can be dramatic and often pay for the system in less than one year. As we have shared before, we fully intend to transform both our organization structure and the processes by which we deliver our products and services through the collaboration process and Web 2.0 across every function in Cisco. Just to give you some additional data, we now have 110 TelePresence systems deployed around the world. In the first half of this calendar year, we conducted over 17,000 TelePresence meetings. From a personal perspective, I have had key customer meetings in one 24-hour time period in India, followed by Japan, followed by London and Kiev in addition to working a 10-hour-plus day in San Jose. Earlier just last week, in a time period of just several hours, I was in key customer meetings in San Jose, Phoenix, Cleveland and Jordan. Unlike voice or old videoconferencing calls, which can often be challenging, TelePresence sessions are, in my opinion, becoming even more effective for me than face-to-face meetings. This is before you even consider the lost time in travel, costs and wear and tear on the body from traveling. Another key concept to understand is that the effectiveness of TelePresence, in my opinion, will follow Metcalfe's Law. Metcalfe's Law states that the value of a telecommunication network is proportionate to the square of the number of users of the system. That is absolutely what I believe we are experiencing at Cisco with TelePresence. Two, four or 10-user sites are nice, and you get a number of efficiencies. But when we begin to get 50 and then 100, there are tremendous efficiencies and value to our company as it relates to changing our organization structure and business processes. This is just one example of why I believe that the second phase of the Internet will enable not only innovation and major productivity improvement with Web 2.0 technologies, but it will enable major collaborative productivity and process changes for all organizations regardless of size. From a products perspective, we are not aware of any other company in IT and the communications industry that is even close to these types of growth numbers and market share gains across such a broad array of products. In summary, our vision of how the industry is going to evolve appears to be playing out very much as we expected. We believe that our differentiated strategy is also achieving the benefits to both Cisco and our customers that we thought was possible. Finally, our execution is on target in terms of the results as measured by customer partnership perspective, market share and share of our customers' total communications and IT expenditures 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 additional 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 statements. The guidance we're providing is on a non-GAAP basis with a reconciliation to GAAP. As John mentioned earlier, for the full fiscal year 2008 we anticipate that our annual revenue will increase between 13% to 16%. We anticipate total revenue for the first quarter to be in the range of $9.45 billion to $9.55 billion, representing around a 16% growth year over year. As we have said in the past, forecasting gross margin 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 margins in Q1 will remain at 65%. With the continued investment in our field and engineering organization that John discussed earlier, we believe Q1 operating expenses will be in the range of 36% of revenue. We expect interest and other income to be approximately $180 million in the first quarter. Our tax provision is expected to be approximately 24% in FY08 compared to 25% in FY07. While we expect to continue our share repurchase program, it is difficult to predict the exact weighted average shares outstanding. We are modeling share count to be flat to up 50 million shares in weighted average shares outstanding for EPS purposes. In this estimate of share count, we're not taking into consideration any further change in stock price that could occur in the first quarter of FY08. And just as a point of reference, a $1 increase in our average stock price could increase the calculated shares outstanding for purposes of determining earnings per share by approximately 15 million shares. Regarding cash flow from operations, we would expect to generate between $700 million to $900 million per month at these revenue levels. For our Q1 FY08 GAAP earnings, we anticipate that Q1 GAAP EPS will be $0.04 to $0.06 per share lower than non-GAAP EPS primarily due to acquisition-related charges and stock option expenses. Please see the slides that accompany this webcast for more detail. Other than these 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. John, back to you.

Thank you, Dennis. I would like to spend a couple minutes discussing our leadership team and the constant evolution of this team. I would like to discuss it as it relates to the evolution of our financial leadership team specifically. As we have discussed many times in the past, one of the core competencies of Cisco is our ability to evolve our organization and leadership teams while still maintaining focus on our execution and implementation of our strategies. As most of you know, Cisco has successfully transitioned through several generations of key leaders in every functional leadership role in the company. After a lot of discussion and some healthy give-and-take -- mainly me taking -- with Dennis' birthday in December of this year making him a young 60 years old, he has decided to retire following our second quarter of fiscal 2008. Dennis will join us for his last quarterly conference call in February 2008. Dennis, you have been a true partner and a great financial leader. If I were to list your accomplishments over the last five years as CFO, we would probably, Blair, add another two hours to this conference call, which you won't let me do. Your ability to not just be a great financial partner, but also to help lead the company through the most challenging economic times our industry has ever experienced, adjusting not just to increased government compliance that followed, but in leading how we continue to meet both the requirements and the intent of government regulations with classic Cisco integrity. Under Dennis' financial leadership, we have achieved almost unprecedented growth in profits, cash from operations, market capitalization and market share versus our peers. One of the most important things that leadership teams do at Cisco is smooth transitions. With this in mind, Dennis has developed an extremely strong financial team where we have multiple very qualified candidates to succeed you. After careful consideration, Frank Calderoni has been selected by our leadership team and with the advice of our board of directors to be Dennis, your successor. Frank brings a wealth of experience into this role both from his three years at Cisco and his prior experience as CFO in two companies in our industry. Frank and I both share a common background in development from our time at IBM, although I must point out that I have learned to wear colored shirts; and Frank, you are still wearing white shirts. But I guess that must be a CFO thing. Dennis, you can work on that. I'm very proud of the breadth and depth of our leadership team in all of our functions, as well as our ability to smoothly evolve through these transitions, which will occur regularly within all the functions at Cisco. So Frank, I'm going to give you the same advice that I once got when I became CEO: do a great job, have fun, and don't mess it up. We know you won't, and I look forward to working with you as a business partner and as a financial partner. Dennis, I will really miss working with you. We have had a great five years together, and look forward to the next couple quarters.

Thank you.

Moving on to the summary comments, the following is a summary of my views of Cisco's momentum and opportunities entering the first quarter of fiscal 2008. 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. It is the consistency of our results, both from an orders perspective and profits perspective over the last 16 quarters, with orders growing consistently from an internal perspective in the mid-teens or better on average, and profits on average, per-share growth of over 22% in terms of quarterly year over year averages; this is truly the scorecard for our ability to execute on our vision and differentiated strategy. From a geographic perspective, we continue to be optimistic about the economies in our key markets based upon what our customers are telling us and our balanced strength across customer segments, product families and value-added services. From a U.S. perspective, the service provider and commercial market segments continue to be very strong. While we did experience challenges in Q2 and Q3 in the enterprise market, Q4 was solid. We clearly see the same things that each of you see in terms of opportunities and concerns in the U.S. market. From a business spending point of view, relative to Cisco, it feels pretty good. Last conference call, we talked about the strategic relevance that Cisco has to our service provider customers, with the potential for this to evolve the same way as our enterprise leadership evolved over the last 15 years, with the associated business benefits to both Cisco and our service provider customers. We appear to be continuing to expand this unique business relationship with this customer segment. The exciting things about Phase II of the Internet, enabled by collaboration and Web 2.0, is how this will develop across all of our customer segments, with potentially major speed and effectiveness, if we are right in our assumptions. If we're right about the value it brings to both business and individuals, this is truly the top of the first inning of a nine-inning game in terms of its broad business acceptance and associated benefits. We clearly intend to lead all companies in our implementation, organizational evolution and associated productivity of how these new collaborative technologies with a competitive advantage of how we ourselves will become the best example for what this means to a company's future. It will allow us, instead of doing one or two major projects a year, which we have done for the last six or seven years, that the senior management team, namely the people in this room aggressively lead to target 20 for next fiscal year. We will continue to provide you updates on our programs in terms of the internal implementations and benefits. The commercial market remains very solid and very well balanced on a global basis. We are continuing to expand our products, services and distribution capabilities to this very important strategic market. Our architectural strategy in 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 more than twice the average growth rate of the other four theaters if we execute effectively. Our balanced product momentum across our core technologies and advanced technologies continues to be the best I have seen in a number of quarters. But again, it is this loosely and then tightly coupled product strategy for these technologies that dramatically differentiates Cisco from our peers. Our pipeline of potential new core routing and switching products looks very good. Our continued evolution of the first wave of advanced technologies and the emergence of a second wave of advanced technologies is evolving as we expected. At the same time, we are beginning to plan a potential third wave with our early stages of emerging technologies. In summary, our product pipeline is in excellent shape and looks really exciting. Having said that, obviously the proof continues to be in the results. On a global and U.S. basis, we see the same challenges and uncertainties from an economic, political and capital spending concern that many of you continue to witness. Again, at the risk of stating the obvious, Cisco will always be affected by major economic changes, capital spending patterns, new and existing competitors and our ability to execute or not on our strategy. However, for four straight years, our average growth per quarter has been in the mid-teens for orders and over 22% from an earnings per share basis. Once again, with the usual caveats, our Q1 fiscal 2008 guidance is for Q1 revenue of $9.45 billion to $9.55 billion, or approximately 16% year-over-year growth, which is slightly above the middle of our new long-range goals for growth in the 12% to 17% in the long range. This aggressive guidance obviously indicates a solid degree of confidence in our vision, strategy and execution capabilities, as well as business momentum; once again with the usual caveats regarding macroeconomic conditions, capital spending, et cetera. We will focus on what we can control or influence and attempt to position Cisco to gain momentum in market transitions, whether they are in industry consolidation, product transitions or economics. In summary, for those areas that we can control, we believe that our vision, strategy and execution are in great shape and producing 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 challenging economic times. Now Blair, I would like to turn it over to you to run the Q&A session.

Thank you, John. We will now open the floor to Q&A. We still request that you please ask only one question. So can we please open the floor?

Your first question comes from Nikos Theodosopoulos - UBS. Nikos Theodosopoulos - UBS: Thank you. Good to see the increase in the new long-term guidance for fiscal '08. So congratulations on that.

You all have been giving us a nudge on that for a while. Nikos Theodosopoulos - UBS: I guess the question I would just ask there is, given the recent volatility in the market and some concern about macro factors in your commentary and your guidance it doesn't sound like you're really seeing anything in your business to suggest any of that is impacting spending with Cisco. Can you comment on that? And then maybe specifically within the financial vertical, given what we have seen with companies in the mortgage market and the Bear Stearns situation, there has been some concern that perhaps that vertical would be the first to show signs. It doesn't sound like you're seeing anything, but if you can give any commentary, that would be great.

Let me approach it from a broad perspective. First is what we are seeing is the importance of balance on a global basis. I have been in this business for 30 years -- Jim, I think you have been there that long or maybe a hair longer. It's the strongest global economy I have been a part of. Secondly, our U.S. business is very strong and very well balanced. If you look at it on a country basis globally, just to give you some data, 26 of our top 30 countries grew in double-digits, and that represents 88% of our business. 23 grew 15% or above. In terms of the U.S., you are talking about infrastructure buildout in service providers, which has had great growth rates. Our commercial business has been remarkably stable. It is almost any question you can ask on a global basis in commercial or otherwise: high teens, low 20s. The U.S. has been very solid there, good balance. In terms of the global enterprise with growth in the high teens on a global basis, that was very solid as well. If you look at our movement into new emerging markets, I think all of you understand the leverage that we are achieving there. U.S. enterprise, as we have stated before, is about 13% of our business. Obviously, industries that you talked about were a segment of that. If you look at our total U.S. enterprise, it was lumpy. West, central, south, northeast doing fine; north central and Atlantic region, a little bit more challenging. Most all industries are doing well. We have seen softness throughout the year in automotive, as you would expect, and financial services, which we signaled during Q2 and Q3, and a little bit in retail. So again, I expect the U.S. to be a little bit lumpy. I think based upon our customers advice, we will obviously be hit by economic issues, but most of our customers are projecting a solid economy in the U.S. and a very good economy outside the world, and that is what they tend to be spending at this time.

Your next question comes from Brant Thompson - Goldman Sachs. Brant Thompson - Goldman Sachs: Dennis, if you could talk a little bit about how we should think about the OpEx trending and the investments needed in the business over the next couple of years to fuel this type of growth? Sorry to see you leaving, and congratulations on such a job well done.

Thanks, Brant. I think that the way we should be thinking about operating expenses is in the context of our total P&L, and our objective is to manage both the gross margin along with the operating expense to drive to operating income that we've given a range that we want to be within the band of 29% to 31%. We think we can continue to do that, at the same time making the investments that we need in the operating expenses to be able to fuel the growth that we expect to see for the next three to five years. So that is the role that we need to play, is to continue to balance the growth opportunities that we see and yet not stifle the growth opportunities that we see ahead of us. So that is the reason that we are seeing 36%. I think that you'll see that move a little bit based upon what we see the revenue growth being. You're seeing it go up a little bit in Q1 simply because there is a level of seasonality. When you think about our expenses, they come in very ratably throughout the year. As we know, Q4 is our strongest quarter and then Q1 is a little bit weaker on a seasonality basis and so you would expect as a percentage that the operating expense would go up a little bit as a percentage of revenue. So this is the normal course that we would expect to see. I think that what we should think of is that we will see some volatility quarter to quarter, but the main thing to remember is that we will continue to make the investments that we need for future growth.

So if you really think about it, Brant, one of the things we went through very quickly is our gross margin improvement. The team has done an amazing job between engineering, manufacturing, finance and sales, and actually this is one of the first quarters; I remember forecasting the next quarter pretty flat in terms of gross margins. However, we are going to spend to grow. And as we've said in prior conference calls, our issue is not growth. Our issue is prioritizing it and investing for the long run. And when you are putting in waves of advanced technology in emerging markets, we will spend. If we weren't optimistic about the future, we might be wanting to experience more leverage, which candidly we could probably do at about any time we wanted but it would not be the right decision for the long run.

Your next question comes from Inder Singh - Lehman Brothers. Inder Singh - Lehman Brothers: In your raised guidance for the next few years, I assume that you're seeing strength across the board. Emerging markets undoubtedly probably is one of those key drivers, John. One of the things I think that when people think of emerging markets is the impact that could have on gross margins. So far, it looks like those are actually coming in perhaps right around your corporate average. What can you tell us about what you see happening in emerging markets and the impact that might have on your gross margins? Is it going to stay as strong as it has been? Or do you see that becoming an issue for you somewhere down the road?

I think the team is executing extremely well with a replicable process, both on profit contribution, gross margins, focus on earning the premium that our products I think can bear within a market, and candidly, great relationships with everyone from the government leaders down through the key industries to the citizens in the countries, often being the best place to work in the countries, as well as a company that gives back very well. So we are seeing very little gross margin pressure within that. We will do the classic approach, and if the emerging markets team is listening, I will obviously periodically squeeze you on expenses to get you to reallocate resources and have the typical Frank-and-Dennis Cisco frugality. But we absolutely will fund that growth, and we feel good about it for the future. So far they have been executing with remarkably consistent margins, not just in total, but literally across the operations and in the areas. So I'm very pleased with that. At this point in time, I am cautiously optimistic that that will not change. Thank you very much, Inder. Inder Singh - Lehman Brothers: Thanks. Good quarter.

Your next question comes from Ehud Gelblum – JP Morgan. Ehud Gelblum – JP Morgan: Dennis, I am also sorry to see you go, so good luck in retirement. Dennis, it is sort of a question for you and for John as well. $22 billion in cash on the balance sheet, same place it was last quarter. I know in London you said that you'd like to keep a minimum net cash balance of between $10 billion and $15 billion. That has always sounded on the high side to me, $10 billion just in walking change. It sounds like not totally necessary, although I understand the reasons for it. What are the plans, aside from buybacks, if you can give us a sense as to how much of that cash, first of all, is still in the U.S.? I think it is relatively small. So what is the plan of bringing that $22 billion in cash down? Is it through more acquisitions? The acquisitions you have made haven't made a dent in your cash balance because you have been earning that much back through the options and through your cash from operations. You just raised the amount that you believe you are going to get in cash from operations on a monthly basis as well. So what are your intentions on doing with that? And if you can dovetail with that, you did make a $150 million investment in VMware. Are we going to see more investments like that, create some sort of an investment portfolio where you take significant stakes in companies? Is that something that you could be doing in lieu of full acquisitions? Just give us a sense as to that and what we can look at happening to the cash balance in the next couple of years.

We are very fortunate to see the growth that we're seeing in our cash from operations. I think this really does give us the opportunity to be able to spend to grow for the future, whether that is acquisitions, whether it is supporting our salesforce through our leasing program, or whether it is returning our excess cash to our shareholders and stock buyback; which we, by the way, will continue to do. But I think that we are seeing a significant amount of activity from us on acquisitions. The acquisitions have a tendency to be a little bit larger today, they could be. So I think that is something you are going to see. But we have been very consistent on our expectations as far as our net cash position, which is, on a net basis, will be between $10 billion and $15 billion; that is taking out the debt that we currently have and the expected tax to bring that cash back if we needed to do that. We are within that range today, certainly. And, to have our domestic cash balance between $2 billion to $5 billion and we are at the higher end of that range right now as well. So I think that you'll see us continue to be aggressive on our buyback program and we will continue to make the investments that we need to fuel the growth for the future.

Ehud, I would leave you with two thoughts. First is that we are going to be very aggressive both in our acquisition strategy where appropriate, using cash, and also investments. And our investment strategy is both to understand markets, to understand companies, to work together, tighter, et cetera. And maybe at a future time, one of the reasons we had Ned on this session was really to talk in the future about our investments or even our acquisition strategy, which we will have you do. The second thought is cash is king again. We are in a position to be very, very effective on it. I think this is something that Cisco over the years has been very good at. There's probably no better time to have a net $15 billion of cash available to you than at the present time.

Your next question comes from Tal Liani - Merrill Lynch. Tal Liani - Merrill Lynch: First, congratulations but I think you didn't increase the guidance enough. If I do the math right, WebEx added 1% and then you have switching going from 13% year-over-year growth to 18% and it is 40% of your revenue, so that is adding another almost 2%. That is ignoring everything else. So great execution, but I think your guidance could be even higher, but that is as a side note. My question is about switches.

Tal, you should have given us at least a honeymoon of a couple quarters. Be gentle for a while. It took us a while to get here. But go ahead, what is your question? Tal Liani - Merrill Lynch: The question is about switching. I want to focus on this because it is 40% of your revenues and it's showing momentum. The first question is, what is driving the momentum? Then Charlie a few quarters ago alluded to a new platform coming on the switching side on the conference call. Do you expect to have a product cycle in this space? I see that the growth is both modular as well as stackable. So the question is what is going to happen once you introduce a new product? Do you think there's going to be a product cycle upgrade or a product upgrade as much as you had on the routing side?

Tal, we are going to take one of your questions. Tal Liani - Merrill Lynch: Switching, let's call it switching.

Tal, you're absolutely right, switching has consistently exceeded our expectations at the beginning of the year.

And your team's forecast.

And my team's forecast. I think it reflects that we're back in a capital investment cycle by mainstream business across the world. It also reflects partially, because a number of these switches are also sold into the service provider environment, the demand by service providers to go more into Ethernet in particular, both in their central offices as well as in their access networks. I think we are going to continue to see that buildout of Ethernet. But it has been above our expectations. As you mentioned, we will be introducing some new platforms in the near future. We expect those platforms to actually expand our market somewhat in some new areas that today is not as well served by switches. But we also expect the normal upgrades and product evolution that we tend to have in our product line. So I think some of it will be market expanding. Some of it will be adding value to our existing product lines as we typically do and is a hallmark, frankly, of our market leadership, to constantly expand the capabilities of our products.

Your next question comes from Jason Ader - Thomas Weisel Partners. Jason Ader - Thomas Weisel Partners: First, just a clarification, where do you slot the WebEx revenues? Secondly, I wonder if Jim McDonald could comment on the outlook for Scientific-Atlanta in terms of maybe some numbers. Growth was extremely strong in fiscal 2007. What kind of growth do you expect for fiscal 2008 for Scientific-Atlanta?

To the first part of the question and then I will give it to Jim, we slot the WebEx in unified communications. To give you a feeling just on orders numbers, because I know where you're headed with this, our orders without WebEx, if I remember right, breaking it out, I think were 40% year over year for Q4 without WebEx; obviously about 60% including WebEx. We do see lumpiness in orders and revenue cycles, so the revenue leverage was not quite as large. Jim, in regards to Scientific-Atlanta and the question about growth.

If you look at our business, we had a very strong quarter. Our sales were up 36% year over year. If you look at where the balance was, one of the things is our transmission business had a very good year this year. It grew very well. In fact, it grew faster than our subscriber business. I think if you look at the other driver of our business, our international business has outgrown our U.S. business. That is, of course, European growth as well as Latin America growth was quite a bit above our total growth area. So we got pretty good growth out of our business this year from a pretty balanced approach to it. Obviously, there was a little impact from the 707 part of it, so we did move a little bit of growth out. You can see in some of our competitors' announcements as well as some of the customer announcements, you can kind of judge the fact of where that is. It was probably somewhere in the range of 3% to 4% of our gross sales for the whole year. So our business still has a lot a momentum. It's driven off of the service providers. Obviously there's competition among service providers for revenue growth and for market share. The international thing is expanding, both on the MSO front as well as on the IPTV. So I'm not sure that I would forecast growth at the range we had this year, because we had an awful lot of factors going, but our business still has good momentum.

Your next question comes from Paul Silverstein - Credit Suisse. Paul Silverstein - Credit Suisse: John, I hear you talking about strength across pretty much all of your businesses, customers, geographies, products. But in your guidance, in the increase, can you give us some more insight in terms of how you're thinking about that increase? Is that related to particular products or geographic regions, or consistent with your commentary, it's really across the board? Also a clarification. The guidance you gave us for the year, that is including WebEx, that's not organic growth? That is with the WebEx and IronPort numbers?

In terms of a clarification, which is in part a question, we are basing each year's numbers on acquisitions as we go forward and by the way, the last year's growth which we are measuring off of much larger acquisitions. So I think that is something you are going to see as part of an ongoing phenomenon. Secondly, I wish I could tell you Paul that we are very accurate in our forecasting by products and by segments and by geographies. In total, and Rick, you have been very accurate, plus or minus 1% or 2% in terms of the forecast, but we regularly miss our mix. So we will give you ranges in each category, and we've found in total they are pretty good. But if I were to do the mix and using service provider in the U.S. in this last quarter, our team was forecasting Nick, if you are on the line, about 20% or high teens, and they did almost 30%. So in total, the numbers are pretty accurate, but in terms of breaking it out by segment, not near as accurate. Secondly, I want to be very upfront. Sales teams, and we have a great one, never forecast turns either way, upturns or downturns and so literally as things start to emerge in a new area, usually the forecast lags issues. If there is a surprise, usually there's a lag the other way. So Paul, the way I would answer your question, it is the balance that is so unique to us across all customer segments. I wish I could forecast more accurately by groups. We don't, but in total, we do pretty well. Rick, would you want to add anything to that?

No, I agree, John. I think there are times when you just have a shift into high gear. I think Nick is experiencing that in the U.S. with all the activity that is going on with the cable and the telcos and the emerging. But generally, I think we have a pretty good handle on what we do by geography. I think breaking it down by product, as we discussed, Charlie, that is a little bit more challenging. We have a lot of products. But the geographies, they are pretty accurate in total.

Your next question comes from Tim Daubenspeck - Pacific Crest Securities. Tim Daubenspeck - Pacific Crest Securities: You've put out some pretty strong numbers around routing and switching, specifically on the service provider side. Can you talk a little bit about some of the applications driving that? Is it wireless backhaul? Is it business traffic? Are we starting to see some of the video driving on the high-end routing side?

Tim, I would say it was all the above. Routers actually grew comfortably faster in terms of orders versus revenues. Switching was about the same in terms of high teens. It is the mix of all of the above. But if there is one area that I track closely, it is video. The reason for that is that it really adds leverage. It gets the discussion from are you going to grow 50% or 75% a year to are you going to grow 75% a year or 200%.Using Cisco as an example that we hope will be the example for others in the business world, video sure adds to loads. The neat thing is it looks like very good cost justification. The broadband buildout that is benefiting Jim's business as well as, Charlie, many of our other service provider products is clearly often video driven, whether it is user-created videos or entertainment, time shifted, et cetera. So it is a combination of all of the above.

Your next question comes from Jeff Evenson - Sanford Bernstein. Jeff Evenson - Sanford Bernstein: Wondering if you could give us some color on the role of software in your business as Web 2.0 grows?

Charlie, that is one we have been debating on. Obviously, I think our position , and I may have Charlie answer most of this question, is much more effective if we combine hardware, software and ASIC in our architectural play, not just for a product, but the whole call centers type of approach, collaborative applications in total. And I think TelePresence actually is a combination of all of the above; software and unique architectural designs as well as hardware. So Charlie, a little bit of your thoughts?

Certainly. As you know, Jeff, we're very much a systems business combining hardware, software, systems and support to be able to deliver solutions to our customer. Generally, somewhere in the 65% range of all of our engineers are in fact software engineers. We have a heavy software investment. But not to evade your point; your point is more and more a lot of the Web 2.0 technologies that we talk about are going to be based upon greater levels of software expertise and that will certainly be the case. I think our first foray into this is the platform that we acquired with WebEx that is really focused around collaboration and developing a tool that allows our customers to be able to integrate their software, their processes into a more collaborative model with their suppliers, with their partners, et cetera. We are going to be building off of that. It is a very different model than the packaged software business that is a well-established industry, one that many of our partners are involved in and probably one that the packaged software industry, one we couldn't add a lot of value to. In the networked environment, though, we think we can add a lot of value and a lot of insight, and that is where we are going to focus our attention.

Your next question comes from Bill Choi - Jefferies. Bill Choi - Jefferies: So John, of all the things you could have highlighted, you talked about TelePresence here. Maybe you could expand on that and talk about the related benefits you might be seeing in the enterprise switches or router business or even talk about the kind of bandwidth growth that is generating within the business? I don't know if you could actually provide a little more color on the numbers around the units or revenue. That would be also helpful. Just one clarification, the $180 million that you anticipate in interest and other income, you have been running over $200 million for over two quarters. Why would we be looking for that to decline?

So Bill, which one do you want? Bill Choi - Jefferies: The first.

We will call you back on the second one.

So as it relates to TelePresence Bill, you are right. I would have to look at the data, but I think it is between 60% and 75% of the locations we've put TelePresence in we have to upgrade the routing and switching and other technologies, so clearly video is a killer application here. The more it goes, the better off we are. Secondly, it is absolutely Metcalfe's Law. I did not grasp it until I got to almost 50 systems, and then when you could suddenly literally have a session in India combined with Japan, and then to go to Europe, it just offered efficiencies that I'm now beginning to understand why that law was invented and squared capability is true. The third element with it is in Cisco, TelePresence alone will probably, and this is our best estimate with the appropriate caveats, probably add 200% growth per year for the next several years just around network load, which has already grown more rapidly. It is obviously in early innings, so I think very few of our customers are even getting a rounding error in terms of the TelePresence applications. But you hit the right issue. We believe that collaboration will be the next major productivity driver and it will change organization structures. So the way that we run our company isn't the top four or five people anymore. It is through our boards and our councils. It allows you, instead of doing one or two major aggressive moves a year, we're going to try 20. I don't know if 12 is right or 25 is right. We will find out. 20 is right in the middle of it. We wouldn't have even dreamed of doing that. We will spend to go after that. But without TelePresence, you wouldn't see our service model evolving, both to Bangalore, but more importantly the majority of our service contacts, and I think over time, Rick, even our SE and sales contacts will be through technologies like TelePresence. So it is the second phase of the Internet if we are right on this, and I think it has the potential to be even bigger than the first phase. But we are way out in front on this if we're right, and we are going to do it ourselves first as opposed to saying we just think this is a theory. So that is how we are going to go after it, Bill. Bill Choi - Jefferies: Would you expand on the videoconferencing downstream, just to get more video loading overall, so maybe not TelePresence, but HD videoconferencing? How would you look at just driving video beyond TelePresence?

Blair gave me the okay to answer it, but she said it is the last time I can. The video applications will go way beyond TelePresence. It will be a form of unified communications. TelePresence spoils you. Once you do that, you're not going to do traditional videoconferencing ever again, or even audio. Having said that, there are many applications that will take place in the network on Unified Communications. However, I don't want to mislead anyone: we really believe TelePresence, those concepts will go all the way to the home. This is where your relevance to service providers on network generation, loads that they anticipate, but also how they are going to charge for value more than just transport starts to become very interesting, all the way to the consumer, Bill.

Thanks, Bill. We will get back to you on your other question as well.

Your next question comes from Tim Long - Banc of America. Tim Long - Banc of America: Just a question on the routing side. You alluded to a good pipeline for core products. Could you just talk to us a little bit about the timing and what we could expect there? I think you have been making some changes and coming up with some new products at the edge, if you could just highlight what to look out for in the edge, which has been more competitive, over the next few quarters here.

I got your question on the edge, Tim. I did not get your question on the first part. You were breaking up. Could you repeat that? Tim Long - Banc of America: I'm sorry. You talked a little bit on the call about some pipeline for some new core routing products. If you can just talk a little about the timing and what to expect there.

Sure. One of the things, I'm going to save Charlie from this one, because we do not want to announce products on the conference call and a smooth transition is in our customers' best interest, but also in revenue continuation. If you watch our strategy on the edge, we have been very upfront. We have evolved our current edge products and we have pretty good functionality, and actually I think gaining market share on the edge. We obviously will have in the future a next-generation edge products, but I don't want to tie it down tighter than that. We will do both: we will protect the investment customers are currently are making, as well as evolve to this next-generation one. If you watch what Tony and Pankaj are doing, their pipeline looks really good, Charlie.

I would agree, John. The pipeline is very good, but I think you are right, we don't want to be making announcements until we actually make them. Tim Long - Banc of America: Does it imply something about the CRS-1, since that is still a fairly new product? I know I shouldn't follow up, but…

Well, since you brought it up, the CRS-1 is a mainstream product for us. We believe that is a product that has decades of life in it; not merely one decade, but decades of life in it. It is our mainstream core routing product, and we will continue to evolve and gain lots of functionality over the next decade or two.

Customer acceptance has been off the charts on the CRS-1. In fact, Charlie, your team was kind enough to build a four-slot chassis just for me in terms of that.

Keeping your house warm, isn't it, John?

Touché. But that looks very good. But again, this goes back to volumes. We had customers that never thought they would use the multi-chassis capability on the CRS-1. Now we're getting pushed very hard on that. So it speaks to, again, how networks -- at least at the present time -- are being loaded and in my own opinion will continue to actually increase.

Your next question comes from Mark Sue - RBC Capital Markets. Mark Sue - RBC Capital Markets: John, were you thinking 30% to 50% growth, and did Dennis tone it down to 12% to 17%, which means the real number is somewhere in between?

Mark, actually Dennis has been the most optimistic over the last six months and going into this call that I have seen him in a while. I said, I like this, Dennis. But no actually, I think we're very well balanced, both of us. We are pleased with where we are executing and the good balance. But thank you for the compliment. We are actually balanced. Mark Sue - RBC Capital Markets: John, the question is you had the balance before. I guess what we're all trying to put our fingers on is the new layer that is really accelerating the top line, or is it just more of what is going well, which means the sustainability should be there for quite some time?

Well, I think it is all three. If I would categorize one thing, it is the balance. You've got product balance, you've got geographic balance, customer segment balance. The second thing that I would categorize is customers are making preferred vendor and architectural plays within it. Then the next area is, I think from a market transition, the concept of the network becoming the platform is absolutely happening. Therefore, our role has moved from a plumber to really adding dramatic value, whether it is to the home or in business. That gives us lots of new markets to move into. The network of networks, which by definition means you've got to play across service provider and enterprise and commercial and the home to do, appears to also be coming together, as we anticipated. You can't do that if you aren't already in each of those segments as that evolves. But the most exciting thing is this Web 2.0. We believe that we are going to do with Web 2.0 exactly what we did with the Internet. The Internet had been around for 30 years, and yet we took it, used it ourselves and then took it to our customers, sold a lot of equipment on doing that, and brought a lot of differentiated value to all segments of our customer base. We think the potential for collaboration on Web 2.0 in terms of business process change is actually higher and the network loads and equipment, by definition, will be a little bit higher. The last element is we have been able to move into new market adjacencies, whether those are new emerging technologies, Charlie, or advanced technologies, or new geographies, Rick, or Ned, new segments of the business that we haven't looked at before and the adjacencies. We have been remarkably successful in those. So I'm actually pushing the team to be much more aggressive in this, and I intend to spend to go after those opportunities that are in front of us. But again, repeating the key theme that you have heard before: while we are aware of the global economic issues, and we are always watching on that carefully, our issues appear to be more prioritization, resource realignment and teaching our own team that it isn't about incremental growth, it is about how do you realign resources to achieve a large part of it. Which is a nice way of saying, Mark, it is five or six things added together, everything from business process change to market transitions to an ability to move into new markets.

Your next question comes from Ittai Kidron - CIBC World Markets. Ittai Kidron - CIBC World Markets: Thank you and congratulations. Dennis, please have fun on your retirement. I had one clarification and one question on the clarification. The tax rate at 24%, is that something we should assume for the full year? John, it seems like you're still adding headcount at a very fast pace. Could you tell us about the challenges of that? Where do you find this to be more difficult to do? Is it tough to find good, qualified people to add? If you could add the regional color around that to the extent there is any.

Dennis?

First of all, 24% is for the year.

And by the way, nice job on the tax rates over the years. You have done amazing. In terms of the people issues, we clearly all understand the problem in the U.S. with only 60,000 engineers graduating a year, and we are all trying to get the top 10%. That is not many to go around. India graduating 350,000; China graduating 600,000; clearly, we are going to be in both locations. The second part, we have actually been pretty good about adding resources. Rick, I have watched our sales teams be able to add quality resources; Charlie, our engineering teams; Ned, our ability to do acquisitions; Jim, your engine is going well. Most of the growth this last quarter, actually a large part of it was actually out of Juarez in terms of manufacturing. I think maybe Blair is going to attack the resources we added. Don't misinterpret that; I'm clearly squeezing the team a little bit to force some of the realignment of resources and not an incrementalism approach, but I intend to grow headcount in the future. The one area I would be a little bit critical of ourselves is we haven't added, in my opinion, as many to the executive ranks from outside the company as we need to. We do a great job of developing internally, but I think everyone, myself included, probably need to add a little bit more in terms of our groups, of outside talent and outside experience other than just through acquisitions. So that is how I would answer the question.

Your final question comes from Aaron Rakers - AG Edwards. Aaron Rakers - AG Edwards: One clarification and then one quick question. On the clarification, just going back to the Scientific-Atlanta business, it sounds like you guys assume that you can continue to grow that business north of 20%. The question is on the gross margin side. I would really like to understand in better detail in this last quarter what were the drivers of the gross margin above your expected guidance, of your original guidance for the July quarter?

I will take both of them, and Dennis, if you want to add any color to the last one. In terms of Scientific-Atlanta, Jim and I have probably a little bit of healthy give-and-take here, because he is forecasting one number to me and saying the impact was 3% or 4% for 707. I personally think the impact for 707 was a little bit heavier than that. But we honestly won't know until we get almost into Q3 of next year and Q4, where the tough comps come into play, is the growth rate more in the 12% to 15% range, which is when we originally acquired Scientific-Atlanta, saying that would be a great growth rate to have, or is it more in the 15% to 25% range? My instincts are it is in the second category and it will take us a little while to shake out which one it is. But if you do the mathematical numbers, even if you were to take approximately 30% and take 10% off, it was 20% growth this last year, calmly. So our ability on growth really relates to our global market rollouts and how some of the real big players such as AT&T and Verizon do within that. To the second part on gross margins, Dennis will give you the analytical answer, but the real issue is our team really focused on it. We saw the gross margins were sliding a little bit faster than we wanted by quarter. I think Randy Pond took the lead, along with Rebecca from the systems side, and Charlie, you anted up the key resources. Frank, I think you took the lead as well with Randy on doing this. This was just a focused and good execution. Dennis, anything else you would like to add? Maybe a last comment from you before we end the call?

Yes, it is a tremendous effort by the manufacturing team on continuing to drive costs out of the process, whether it is materials costs or the transformation costs. We were helped again this quarter by the higher volume, and the volume always helps us. That was the biggest impact we had. We also saw that we held prices a little bit more, which helped us in not having the normal Moore's Law that we see from quarter to quarter. So that was a very positive thing as well.

Dennis is being modest in terms of comments. We will work on him on that a little bit later. But Dennis, I do want to close with three thoughts prior to turning it over to Blair. You have done a tremendous job, and it is a great partnership. I also like how smooth the transition is. Frank, we have had you in a number of assignments here, and you've already been a CFO multiple times. It is going to be fun working together for many years in the future with the senior team here. We're obviously pleased with the quarter. This is about as strong as we have seen and the balance is good. We all understand the caveats in today's market, but our customers are giving us pretty positive indications. And so, Blair, with that, let me turn it over to you.

Thanks, John. Just a couple things before we close. Our next quarterly conference call which will reflect our first quarter fiscal 2008 results will be on Wednesday, November 7, 2007, at 1:30 pm Pacific time, which is obviously 4:30 pm Eastern time. I would like to note that Cisco's fiscal year 2008 financial analyst conference will be held on September 5 here in San Jose, California. We will be posting more information as well as a live webcast on our investor relations website. Again, I would like to remind you that in light of Regulation FD, Cisco plans to retain its long-standing policy to not comment on its financial guidance during the quarter unless it is done through a public disclosure. Please call the investor relations department with any follow-up questions from the call. Thank you, as always, for your participation and continued support. This concludes our call.