Cisco Systems Q4 and Year-end Earnings - Company Financial Information

Cambridge Telcom Report, August 16, 1999

Cisco Systems, Inc., the worldwide leader in networking for the Internet, Tuesday reported its fourth quarter and annual results for the period which ended on July 31, 1999. Cisco closed its fiscal year with revenue of $12.15 billion, an increase of 43% over the previous year.

Net sales for the fourth quarter were $3.55 billion, compared with $2.40 billion for the same period last year, an increase of 48%. Pro forma net income, which excludes the write-off of purchased in-process R&D and acquisition-related costs discussed below, was $727 million or $0.21 per share, compared with pro forma net income of $525 million or $0.16 per share for the fourth quarter of 1998, increases of 38% and 31% respectively.

During the fourth quarter of fiscal 1999, Cisco completed the acquisition of Amteva Technologies, Inc., for approximately $159 million and took a one-time charge of $81 million as a write-off of purchased in-process R&D. Additionally, Cisco completed the acquisition of GeoTel Communications Corporation in a transaction accounted for as a pooling of interests and incurred acquisition-related costs of approximately $16 million. All historical financial information contained herein has been restated to reflect this acquisition(1). Other pooling transactions completed this quarter include Fibex Systems and Sentient Networks.

Actual net income for the fourth quarter, including the above-mentioned write-off of purchased in-process R&D and acquisition-related costs, was $635 million or $0.18 per share, compared with $493 million or $0.15 per share in the same period last year.

Net sales for fiscal 1999 were $12.15 billion, compared with $8.49 billion for the same period last year, an increase of 43%. Pro forma net income was $2.55 billion or $0.75 per share, compared with pro forma net income of $1.88 billion or $0.58 per share during fiscal 1998, increases of 35% and 29% respectively. Actual net income for fiscal 1999 was $2.10 billion or $0.62 per share, versus actual net income of $1.35 billion or $0.42 per share for the same period last year.

The net income per share and number of shares used in the per-share calculation for all periods presented reflect the two-for-one stock split that was effective June 21, 1999.

"The Internet is emerging as a major force behind the strongest U.S. economy in history," said John Chambers, president and CEO of Cisco Systems. "By providing the systems that make the Internet work, Cisco is playing a major role in helping customers thrive in the explosive Internet economy. As a result, we are growing faster than all of our key competitors and have been the fastest growing and most profitable company in the history of the computer industry."

Cisco continues to advance its end-to-end Internet solutions for each of its key markets.

In the service provider marketplace, Cisco is delivering New World Internet communication solutions based on a single integrated data, voice, and video network. Leading international and U.S. service providers are beginning to deploy integrated networks based on Internet Protocol (IP) services. For example, Qwest and Cisco extended their strategic alliance to include the build-out of the first end-to-end, all-Internet-based network.

To enable service providers to migrate their data networks to New World networks, Cisco broadened its portfolio of voice solutions by introducing five new multiservice products. It also extended its reach to the consumer with 11 new broadband access products that allow service providers to deploy high-speed networks to the home.

Cisco also announced two acquisitions in the service provider space. TransMedia Communications, a developer of gateway technology that migrates traditional voice traffic from circuit-based networks onto packet networks, and StratumOne Communications, whose optical internetworking brings silicon technology capable of transporting data at 10 Gbps for the next-generation public networks.

In the alliance space, yesterday Cisco announced plans to invest $1 billion in KPMG Consulting's Internet services business to deliver Internet-based services for telecommunication and enterprise markets. This announcement underscores the trend toward a new business model where solutions are provided through an Internet ecosystem of partners. This ecosystem is based on open standards and allows hundreds of companies to participate in bringing best-of-breed solutions to customers.

In addition, Cisco, Hewlett-Packard Company, and KPMG announced an alliance to deliver integrated operational and business support solutions to help service providers deploy new services such as voice over IP (VoIP) and virtual private networks (VPNs).

In a joint venture, Cisco and Motorola strengthened their strategic relationship through an agreement to purchase the fixed wireless assets of Bosch Telecom, forming a jointly owned company called SpectraPoint Wireless, to deliver fixed wireless solutions. The creation of SpectraPoint brings the New World Internet to the wireless industry.