Last Earnings Release 11/16/2017. Last Qtr. Actual vs. Est. $0.61 / $0.60. Next Release 02/14/2018 $0.60. Year Ending 07/31/2017 $2.

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1 Grade Earnings Last Earnings Release 11/16/2017 Last Qtr. Actual vs. Est. $0.61 / $0.60 Next Release 02/14/2018 $0.60 Year Ending 07/31/2017 $2.37 Quick Facts Dividend Yield 2.94% 52 Wk High $ Wk Low $29.98 Short Interest 0% of float $ /26/2017 Rated 'HOLD' since Sep 16th, 2017, when it was downgraded from 'HOLD' Year Ending 07/31/2018 $2.49 Market Cap $190.2B Overview Company Performs Well In Fundamental Analysis MarketGrader currently has a BUY rating on Cisco Systems, Inc. (CSCO), based on a final overall grade of scored by the company's fundamental analysis. scores at the 89th percentile among all 5761 North American equities currently followed by MarketGrader. Our present rating dates to September 16, 2017, when it was N/A from a BUY. Relative to the Computer Communications sub-industry, which is comprised of 24 companies, 's grade of ranks fourth. The industry grade leader is Arista Networks, Inc. (ANET) with an overall grade of The stock, up 22.73% in the last six months, has outperformed both the Computer Communications group, up 14.52% and the S&P 500 Index, which has returned 10.9% in the same period. Please go to pages two and three of this report for a complete breakdown of CSCO's fundamental analysis. Price, Rating and Sentiment History - 2 Years 1

2 Growth B Mixed Growth Record Based on Company's Recent Reports Suggest Investors Use Caution in Buying the Stock Cisco Systems, has been struggling with anemic sales growth for some Market Growth LT D time and now, based on its latest quarterly report, it has dipped into negative territory. The company had total revenue of $47.79 billion in the Market Growth ST C 12 months ended last quarter, only a modest 1.03% gain from three years EPS Growth A+ earlier, when total revenue in the equivalent 12 month period was $47.30 billion. And now sales have started to decline as evidenced by the 1.75% Growth Potential D year-over-year decline recently reported by the company. It said in its latest announcement that last quarter's total sales were $12.14 billion Earnings Momentum A- compared to $12.35 billion a year earlier. These results underscore a very worrisome trend marked not only by a recent downturn in Cisco Earnings Surprise B- Systems,'s business but also an inability to show sustainable long term growth that could lead to higher profits. It is also clear from its latest announcement that the company's profit growth is very weak both on a year-over-year basis and over a three year period. The three year comparison is based on full year results (rolling four quarters), including the quarter just ended, to the equivalent period three years earlier. Its net income rose 3.10% to $2.39 billion in its most recent quarter from $2.32 billion (excluding extraordinary items) in the year earlier period, while full year profit for the 12 months ended on October 31, 2017 of $9.68 billion was 25.97% higher than full year net of $7.68 billion reported three years earlier. The company's ongoing margin contraction worsened during its latest quarter, in which its EBITDA, operating and net margins fell by an average 3.93% compared to the same period a year ago. The company's stock jumped 5.25% after it reported earnings on November 16, 2017 that were 1.67% above the analysts' consensus estimate. After this report Cisco Systems, maintained a positive earnings surprise record over its last six quarters; it has beaten analysts' estimates by 2.55%, on average, over that period, a favorable catalyst for the stock. Revenue Qtrly. 10/31/2017 $12.1B Revenue Qtrly. Year Ago $12.4B Revenue 1 Yr. Chg. (1.75%) Revenue 12 Mo. Tr. Latest $47.8B Revenue 12 Mo. Tr. 3Y Ago $47.3B Revenue 12 Mo. Tr. 3Y Chg. 1.03% Net Income Qtrly. 10/31/2017 $2.4B Net Income Qtrly. Year Ago $2.3B Net Income 1 Yr. Chg. 3.1% Net Income 12 Mo. Tr. Latest $9.7B Net Income 12 Mo. Tr. 3Y Ago $7.7B Net Income 12 Mo. Tr. 3Y Chg % Value B Assuming the Company's Fundamentals Don't Deteriorate in Coming Quarters, the Stock's Valuation is Acceptable at this Level Cisco Systems,'s stock, currently priced at times 12-month' Capital Structure B earnings per share, trades 19.49% higher than our "optimum" P/E ratio of This ratio, calculated by MarketGrader, is determined by the P/E Analysis B- growth in the company's earnings in the last five years, measured over Price/Book Ratio D 12-month rolling periods. Based on this formula Cisco Systems, has grown earnings per share at a 4.48% annualized rate during the last five Price/Cash Flow Ratio A years. This rate of growth could decelerate soon given the company's recent margin contraction, despite such good Profitability grades. This Price/Sales Ratio B could in turn put pressure on the stock price. The stock's forward P/E of 15.47, based on its earnings estimate for the next four quarters, Market Value A- represents a premium to the S&P 500 index's forward P/E of but is lower than its trailing P/E of Therefore value could apparently be found in the company's future earnings growth even though relative to the market the stock might not seem cheap (the fundamentals may already be factored into the price). But assuming the company remains fundamentally strong, the stock might have further room to run, or at least be a relatively safe place to be if earnings estimates materialize into actual reported results. Cisco Systems,'s price to book ratio varies significantly depending whether intangible assets (which make up an astounding 97.09% of total stockholders' equity) are included into total assets. If they are, the stock's price to book ratio is a moderate 2.93, while removing intangible assets such as goodwill results in a much richer price to book ratio of , attaching very high expectations to the company's future earnings power. Relative to the $2.85 in cash flow per share generated by the company in the last twelve months, the stock is attractively priced at times cash flow per share considering its strengths across our fundamental indicators. Its shares also trade at 3.99 times its trailing 12-month sales, a small 19.73% discount to the Computer Communications industry average price to sales ratio of Finally, from a value perspective, we look at how much bigger the company's market capitalization is than its latest operating profits after subtracting taxes. According to this indicator Cisco Systems,'s $ billion valuation is reasonable at times its most recent quarterly net income plus depreciation. P/E Ratio 12 Mo. Tr. 10/31/ Optimum P/E Ratio Forward P/E Ratio S&P 500 Forward P/E Ratio Price to (Tangible) Book Ratio Price-to-Cash Flow Ratio Price/Sales Ratio

3 Profitability B+ Profitability Grades Are Solid, Indicating the Company's Business Is Strong and Healthy While most of Cisco Systems,'s profitability indicators are positive, the Asset Utilization B+ returns on shareholder equity recently posted by the company--an important MarketGrader indicator--are weak and a cause for caution. This Capital Utilization C is despite operating margins that exceed its industry average and the Operating Margins A $9.68 billion of net profit booked by the company in the last 12 months, equivalent to 20.26% of total revenue for the period, an outstanding net Relative Margins A+ profit margin. Operating income during that same period accounted for 25.84% of sales, % higher than the average operating margin for Return on Equity C the Computer Communications industry, which was 10.84%. Cisco Systems,'s return on equity deteriorated significantly during the last Quality of Revenues B- twelve months to 14.77% from the year earlier period's 16.77%. Although the most recent value is still acceptable, it underscores a worrisome trend in an indicator MarketGrader considers very important in measuring the company's management's efficiency. This mild slowdown doesn't pose any immediate threats to the health of the company's capital structure, which is very conservatively managed. Its total debt is equal to less than three quarters of its total equity, including long term debt that accounts for 28.15% of total capital. Cisco Systems,'s core operations, as measured by the company's EBITDA, have generated $15.94 billion in earnings over the last twelve months, a modest -3.36% decline from the $16.50 billion earned in the equivalent period ended a year ago. EBITDA is used as a way of measuring core earnings since it includes money earned in its operations such as interest expense, income taxes paid and depreciation and amortization, both of which are non-cash charges. Cash Flow A- Company's Cash Flow Indicators Are Solid Across the Board but Offer Some Room for Improvement Cisco Systems, made $3.08 billion in cash flow last quarter, 12.82% Cash Flow Growth B- better than the $2.73 billion reported last year for the comparable period. This growth seems to be accelerating considering that in the last twelve EBIDTA Margin A- months the company's cash flow was 5.11% higher than the twelve Debt/Cash Flow Ratio A+ months ended a year ago, a nice increase but quite lower than the current pace. This upward trend should boost its margins and overall profitability Interest Cov. Capacity A+ in the next few quarters. Even though the company has $35.92 billion in total debt, its net debt is virtually zero since it has $71.59 billion in cash on Economic Value B hand; and since it generated $3.88 billion in earnings before interest, taxes, depreciation and amortization last quarter, it's safe to say its Retention Rate A+ liquidity is remarkable. Therefore the company's debt is not only very manageable with its own cash flow but could be increased if it wanted to pursue strategic growth opportunities. The company also has the ability to enhance shareholder returns through dividends or by repurchasing its own shares, boosting the future value of its earnings. Even more positive is the fact that during the last 12 months while the company's cash on hand increased 0.87% from last year's $70.97 billion, its leverage actually fell, with total debt as a percentage of total capital now at 35.40% compared to 35.43% a year ago. MarketGrader's Economic Value indicator looks at the company's returns on invested capital after measuring the cost of obtaining it and of keeping investors' capital tied up in its business. In this case, Cisco Systems, had $91.23 billion in invested capital as of its most recently reported quarter, on which it generated a 13.54% return based on 12-month trailing operating income. Its total after tax cost of capital was 7.83% during the same period, most of it associated with its weighted cost of equity, which was 7.28% vs. its 0.55% weighted cost of debt. Deducting these costs from the total return on investment translates into Cisco Systems,'s economic value added (EVA) of 5.71%. While not outstanding, this represents and acceptable true economic profit after accounting for both operating and capital costs. The company increased its quarterly common dividend on October 31, 2017 by 11.54%, to $0.290 cents a share from $0.260 cents. It has paid a dividend for at least 6 years and, based on this latest payout, the stock is currently yielding 2.94%. Cisco Systems,, which recently increased its payout ratio, has spent $5.64 billion in common dividend payments during the last 12 months. This represents 39.64% of total cash flow and 58.25% of after-tax earnings, a modest increase from the 57.35% of earnings it paid out in the year ended a quarter earlier. The increasing trend of an already elevated payout is worth monitoring for signs fo liquidity problems even though the company's fundamentals are generally healthy. Cash Flow Qtrly. 10/31/2017 $3.1B Cash Flow Qtrly Year Ago $2.7B Cash Flow 1 Yr. Chg % Cash Flow 12 Mo. Tr. Latest $14.2B Cash Flow 12 Mo. Tr. 3Y Ago $12.2B Cash Flow 12 Mo. Tr. 3Y Chg % Free Cash Flow Last Qtr. $2.9B Economic Value Total Invested Capital $101.5B Return on Inv. Capital 13.54% Weighted Cost of Equity 7.28% Weighted Cost of Debt 0.55% Total Cost of Capital 7.83% Economic Value Added 5.71% 3

4 Profile designs, manufactures, and sells Internet Protocol-based networking and other products related to the communications and information technology industry and provides services associated with these products. It provides a broad line of products for transporting data, voice, and video within buildings and across campuses. Cisco's current offerings comprises of the following categories: Routing, Switching, New Products, and Others. Routing technology is fundamental to the Internet, and this technology interconnects public and private IP networks for mobile, data, voice, and video applications. Its routing products are designed to enhance the intelligence, security, reliability, scalability, and level of performance in the transmission of information and media-rich applications. Switching is another integral networking technology used in campuses, branch offices, and data centers. The company's Switching products offer many forms of connectivity to end users, workstations, IP phones, access points, and servers, and also function as aggregators on local-area networks and wide-area networks. The company's New Products include Video Connected Home, Collaboration, Security, Wireless and Data Center. Cisco's end-to-end, digital video distribution systems and digital interactive set-top boxes enable service providers and content originators to deliver entertainment, information, and communication services to consumers and businesses. Cisco's Collaboration portfolio integrates voice, video, data and mobile applications on fixed and mobile networks across a wide range of devices and endpoints from mobile phones and tablets to desktops, Macs and laptops to desktop virtualization clients. Cisco's security solutions deliver network and content security systems that are designed to enable highly secure collaboration. Its Unified Wireless Network is designed to unify high-performance n wireless access across campus, branch, remote, and outdoor environments. Cisco's Data Center products include Cisco Unified Computing System and Server Virtualization. The company's Other Products category primarily consists of optical networking products, emerging techno Key Facts: 170 West Tasman Drive San Jose,CA Phone: Biggest Company in Sub-Industry (CSCO) Grade Market Cap:$ billion Smallest Company in Sub-Industry BOS Better Online Solutio Grade 38.5 Market Cap:$7.39 million MarketGrader Dilution Analysis Impact of Change in Shares on EPS - Q Dilution Summary *EPS Latest $0.48 *EPS Year Ago $0.46 EPS Change 1 Yr. 5% C. Shares - Latest(M) 4,994 C. Shares - Yr Ago(M) 5,066 C. Shares - 1Yr Chg. (1%) EPS if Yr. Ago Shares $0.47 EPS Chg. if Yr. Ago 3% EPS Loss from Dilution $0.01 *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Income Statement Last Qtr (10/2017) 12 Mo. Trailing Revenue $12.1B $47.8B Op. Income $2.9B $12.3B Net Income $2.4B $9.7B *EPS $ *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Balance Sheet Total Assets Total Debt Latest $130.5B $35.9B Stockholders Eq. $65.6B All numbers in millions except EPS Ratios Price/Earnings (12 mo. trailing) Price/Tangible Book Price/Cash Flow Price/Sales 3.99 Debt/Cash Flow Return on Equity 14.77% Gross Margin (12 mo. trailing) 61.89% Total Assets Intangible Assets Long Term Debt Total Debt Book Value Enterprise Value $130.5B $63.6B $25.7B $35.9B $65.6B ($35.7B) '13 '14 '15 '16 '17 Qtr Qtr Qtr Qtr Operating Margin (12 mo. trailing) 25.84% Net Profit Margin (12 mo. trailing) 20.26% 4

5 Top Down Analysis Technology Stocks in Sector: 779 Buys: 134 (17.20%) Holds: 103 (13.22%) Sells: 542 (69.58%) No. of stocks at: 52-Wk. High: Wk. Low: 18 Above 50 & 200-day MA: 312 Below 50 & 200-day MA: 238 Computer Communications Stocks in Sub-Industry: 24 Buys: 4 (16.67%) Holds: 4 (16.67%) Sells: 16 (66.67%) No. of stocks at: 52-Wk. High: 0 52-Wk. Low: 1 Above 50 & 200-day MA: 13 Below 50 & 200-day MA: 6 # Ticker Grade Sentiment Name Price Next EPS 1 MU P Micron Technology, Inc. $ /22/ AAOI N Applied Optoelectronics, Inc. $ /09/ YY P YY, Inc. Sponsored ADR Class A $ /08/ LRCX N Lam Research Corporation $ /25/ DAIO N Data I/O Corporation $ /01/ MKSI N MKS Instruments, Inc. $ /31/ TER P Teradyne, Inc. $ /24/ UCTT N Ultra Clean Holdings, Inc. $ /20/ LPTH N LightPath Technologies, Inc. Class A $ /15/ NVI.CA N Novra Technologies Inc. $ /11/ CSCO 0 N $ /14/2018 # Ticker Grade Sentiment Name Price Next EPS 1 ANET P Arista Networks, Inc. $ /09/ FFIV N F5 Networks, Inc. $ /01/ STC.CA N Sangoma Technologies Corporation $ /28/ CSCO 0 N $ /14/ FTNT N Fortinet, Inc. $ /31/ SILC N Silicom Ltd. $ /26/ FNSR N Finisar Corporation $ /08/ JNPR P Juniper Networks, Inc. $ /25/ NTGR N NETGEAR, Inc. $ /06/ SMCI N Super Micro Computer, Inc. $ /23/ Price Trend. A 2. Price Momentum. B 3. Earnings Guidance. B 4. Short Interest. N/A 6.3 Copyright 2010 MarketGrader.com Corp. All rights reserved. Any unauthorized use or disclosure is prohibited. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or any options, futures or other derivatives related to such securities ("related investments"). The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regards to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. MarketGrader does not make markets in any of the securities mentioned in this report. MarketGrader does not have any investment banking relationships. MarketGrader and its employees may have long/short positions or holdings in the securities or other related investments of companies mentioned herein. Officers or Directors of MarketGrader.com Corp. are not employees of covered companies. MarketGrader or any of its employees do not own shares equal to one percent or more of the company in this report. 5