Cisco Statement on Recent Network World Blog Post
On Thursday May 8 a blog entry posted on Network World accused Cisco of a practice known as "channel stuffing" based on the financial information we presented in our Q3 FY ’08 earnings call. Given this serious and inaccurate claim, Cisco felt it was important to present some detailed facts that refute these allegations.
First, Cisco employs conservative policies regarding revenue recognition. For example, in our distribution channel, Cisco does not recognize revenue until product leaves our channel partner, effectually removing any possibility of recognizing revenue before it’s sold to the end customer.
Second, as we said on our quarterly call, "...Q2 and Q3 include the effect of several large multi-year service agreements, which has increased the DSO (days sales outstanding) in each quarter by three to four days." This would be sufficient to increase accounts receivable if recorded at the end of the quarter and is not related to inventory or channel partners.
Finally, it’s important to put the scope of the amount in question in proper context. From a financial perspective, $20 million represents 0.2% of our Q3 FY ’08 sales, which were $9.8 billion.
Cisco has always acted openly and transparently in disclosing financial information, a fact consistently recognized by the investment community.
Post by Terry Alberstein, Director, Corporate Communications
Posted by Cisco PR at 05:38PM PST
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