cisco-annual-report-2021

Service Revenue by Segment
The following table presents the breakdown of service revenue by segment (in millions, except percentages):
July 31,
2021
Years Ended 2021 vs. 2020
July 25,
2020
July 27,
2019
Variance
in Dollars
Variance
in Percent
Service revenue:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,472 $ 8,285 $ 8,173 $ 187 2%
Percentage of service revenue. . . . . . . . . . . . . . . . 61.4% 62.2% 63.4%
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,146 3,012 2,854 134 4%
Percentage of service revenue. . . . . . . . . . . . . . . . 22.8% 22.6% 22.1%
APJC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,186 2,026 1,872 160 8%
Percentage of service revenue. . . . . . . . . . . . . . . . 15.8% 15.2% 14.5%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,804 $ 13,323 $ 12,899 $ 481 4%
Amounts may not sum and percentages may not recalculate due to rounding.
Service revenue increased 4%, driven by growth in our maintenance business and solution support offerings. Service revenue
increased across all geographic segments. Service revenue benefited from the extra week in fiscal 2021.
Gross Margin
The following table presents the gross margin for products and services (in millions, except percentages):
AMOUNT
PERCENTAGE
Years Ended July 31, 2021 July 25, 2020 July 27, 2019 July 31, 2021 July 25, 2020 July 27, 2019
Gross margin:
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,714 $ 22,779 $ 24,142 63.1% 63.3% 61.9%
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,180 8,904 8,524 66.5% 66.8% 66.1%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,894 $ 31,683 $ 32,666 64.0% 64.3% 62.9%
Product Gross Margin
The following table summarizes the key factors that contributed to the change in product gross margin percentage from fiscal
2020 to fiscal 2021:
Product
Gross Margin
Percentage
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.3%
Productivity (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8%
Product pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.2)%
Mix of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6%
Legal and indemnification charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1)%
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.3)%
Fiscal 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.1%
(1)
Productivity includes overall manufacturing-related costs, such as component costs, warranty expense, provision for inventory, freight,
logistics, shipment volume, and other items not categorized elsewhere.
Product gross margin decreased by 0.2 percentage points driven by pricing erosion, partially offset by favorable product mix
and lower productivity benefits. The effect of pricing erosion was moderate driven by typical market factors and impacted each
of our geographic segments. Productivity improvements were adversely impacted by ongoing costs related to supply chain
constraints. The favorable mix was driven by changes in the proportion of products sold from each of our product categories.
During fiscal 2021, we continued to manage through supply chain challenges seen industry wide due to component shortages,
caused in part by the COVID-19 pandemic. These challenges resulted in increased costs (i.e. component costs, broker fees,
expedited freight and overtime) which had a negative impact on product gross margin, and extended lead times to us and
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