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Cisco to Pay Up

8:50 AM -- Exciting accounting news: Cisco Systems Inc. (Nasdaq: CSCO) expects to pay a one-time tax charge of $130 million to $150 million thanks to a ruling in a Xilinx Inc. (Nasdaq: XLNX) case, according to a Cisco Securities and Exchange Commission (SEC) filing on Friday.

That's going to dock Cisco's net earnings per share, per generally accepted accounting principles (GAAP), by 2 to 3 cents for its fourth quarter, which ends in July.

Analysts polled by Thomson Reuters expect Cisco to report 28 cents EPS. That's a non-GAAP figure, which doesn't include items like that tax hit or stock-option expenses.

The Xilinx case, which pitted the chip maker against the Internal Revenue Service (IRS), had to do with whether companies in an R&D cost-sharing agreement have to share stock options costs as well. The sharing company in this case was Xilinx Ireland, and in 2005, the U.S. Tax Court said the answer was "no."

But that was 2005. Last week, the decision got overturned by the U.S. Court of Appeals for the Ninth Circuit, so the answer's been flipped to a "yes." Cisco wasn't involved in the Xilinx case but has some options that get affected by that ruling.

Aside from the 2- to 3-cent earnings drop, Cisco will have to reduce additional paid-in capital by $310 million to $320 million. None of these changes affects cashflow or non-GAAP earnings results, Cisco stresses in the SEC filing.

— Craig Matsumoto, West Coast Editor, Light Reading

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