CORPORATESISSUER COMMENT 3 SEPTEMBER 2015CISCO SYSTEMS, INC. (CISCO)Moodys Senior Unsecured Rating A1Moodys Outlook STABond-Implied Rating A1CDS-Implied Rating A1EDF-Implied Rating Baa2As of 9/1/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewCisco: Two Market-Implied Ratings Decline The bond- and CDS-implied ratings for Cisco were both down over the last three months.The bond-implied rating worsened by two notches from Aa2 90 days ago to its current level of A1 (Figure 1). This market-implied rating is currently at its lowest point since December 2014.FIGURE 1. CISCO: MOODYS AND MARKET-IMPLIED RATINGS, 90 DAYS (DAILY DATA)The companys CDS-implied rating is A1. It is down by two notches from its Aa2 level on June 1 and down by three notches from its apex of Aa1 since then.MOODY'S ANALYTICS CORPORATES2 3 SEPTEMBER 2015 MARKET SIGNALS REVIEW: CISCO: TWO MARKET-IMPLIED RATINGS DECLINECiscos EDF'-implied rating currently matches its Baa2 level observed 90 days ago. On several dates over the last three months it climbed to Baa1, but was unable to sustain that advance.According to our ratings gap-conditioned transition matrices, companies rated A1 with a bond-implied rating of A1 outperformed the broad market 24% of the time over the following 12 months, matched the markets performance 10% of the time, and underperformed the broad market 68% of the time.Readers will recall that when a market-implied rating falls the underlying securities have underperformed the broad market. 1Over the last three months, Ciscos bond- and CDS-implied ratings gaps deteriorated. The bond-implied ratings gap slipped down two notches from +2 notches to zero notches (Figure 2). The CDS-implied ratings gap is also now at...
