Cisco Systems Reports First Quarter Earnings - 1st qtr 2000 - Company Financial Information

Cambridge Telcom Report, Nov 15, 1999

Cisco Systems, Inc., the worldwide leader in networking for the Internet, Tuesday reported its first quarter results for the period ending October 30, 1999.

Net sales for the first quarter were $3.88 billion, compared with $2.60 billion for the same period last year, an increase of 49%. Pro forma net income, which excludes the write-off of purchased in-process R&D and the amortization of goodwill and purchased intangible assets, was $837 million or $0.24 per share, compared with pro forma net income of $561 million or $0.17 per share for the first quarter of 1999, increases of 49% and 41%, respectively.

During the first quarter of fiscal 2000, Cisco completed the acquisitions of Monterey Networks, Inc. and MaxComm Technologies, Inc. for a combined purchase price, including assumed liabilities, of approximately $590 million and took a one-time charge of $381 million, or approximately $0.11 per share on an after-tax basis, as a write-off of purchased in-process R&D. Additionally, Cisco completed the acquisitions of StratumOne Communications, Inc., TransMedia Communications, Inc. and Cocom A/S, which were accounted for as pooling of interests. All historical financial information contained herein has been restated to reflect the acquisitions of StratumOne Communications, Inc. and TransMedia Communications, Inc.

Actual net income for the first quarter, including the above-mentioned write-off of purchased in-process R&D and the amortization of goodwill and purchased intangibles, was $438 million or $0.13 per share, compared with $512 million or $0.15 per share in the same period last year.

"The Internet continues to be a powerful force fueling the global economy," said John Chambers, president and CEO of Cisco Systems. "In the U.S. for example, the Internet economy grew 68% from the first quarter of 1998 to the first quarter of 1999, according to a recent study by the University of Texas. This strong economic growth coupled with Cisco's role and expertise in the Internet economy positions Cisco to be the company that will lead the Internet Revolution."

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

In the service provider marketplace, Cisco continued to gain acceptance for its New World strategy of integrated data, voice, and video and made significant progress in its key areas of broadband access and optical networking. In the broadband area, Cisco strengthened its strategy to deploy fixed wireless solutions by forming partnerships with 10 leading companies to create standards for wireless Internet technology. At the center of this activity is a new wireless technology that should provide affordable Internet access to a broader segment of the population that may otherwise not have access.

In the access space, customers are increasingly adopting Cisco's cable and DSL solutions. This demand spurred two acquisitions in the access area, Cocom A/S and MaxComm Technologies. Cocom's technology will enhance Cisco's cable product portfolio to support international standards and MaxComm addresses the growing demand for xDSL services in the home.

Cisco entered the optical transport market with the acquisitions of Cerent Corporation and Monterey Networks, Inc., which were completed in November and October 1999, respectively. These acquisitions complement the strength of Cisco's optical switching solutions and give service providers an accelerated migration from old world circuit-based equipment to the New World of the Internet.

In the enterprise market, Cisco furthered its New World vision by launching Cisco AVVID (Architecture for Voice, Video and Integrated Data) and announced its intent to acquire Calista, Inc. Cisco introduced six voice-capable products based on the Cisco AVVID architecture. Calista's technology enhances the Cisco AVVID architecture by allowing traditional phones to work over an open Internet-based infrastructure for the first time.

Expanding its offering in the data center, Cisco introduced delivery of its Content Networking framework to enable broad deployment of Web-based server solutions. Cisco also announced the acquisition of Tasmania Network Systems, Inc. whose network caching software technology will enable Cisco to offer its customers leading-edge content networking services. In the application technology space, Cisco's acquisition of WebLine Communications Corp. provides customers with Internet-based technology for their customer support center environments. Finally, Cisco and IBM formed an alliance to deliver networking technologies and services to service providers worldwide. As part of this agreement, Cisco has agreed to acquire portions of IBM's networking intellectual property.

In the small and medium-sized business market, Cisco joined with IBM and Microsoft to expand its ecosystem of partners to accelerate the delivery of Internet applications and services to businesses of all sizes. Cisco's hosted application initiative allows businesses to deploy applications such as e-commerce and unified messaging cost-effectively, reliably, and with minimal IT resources. Cisco also announced the intent to acquire Aironet Wireless Communications, Inc., a leader in high-speed wireless LAN technology.