Financial: Cisco Systems Q4 and Year-End Earnings and Three-for-Two Stock Split

EDGE, On & About AT&T, August 10, 1998

                      Cisco Systems, Inc.

               PRO FORMA STATEMENTS OF OPERATIONS

           Excluding Purchased R&D and Realized Gain

           (In thousands, except per-share amounts)

                         Quarters Ended          Years Ended

                     July 25,    July 26,    July 25,    July 26,

                       1998        1997        1998        1997

                    (Unaudited) (Unaudited) (Unaudited)

Net sales           $2,389,989  $1,765,097  $8,458,777  $6,440,171

Cost of sales          818,935     616,040   2,917,617   2,241,378

  Gross margin       1,571,054   1,149,057   5,541,160   4,198,793

Operating expenses:

  Research and

  development         294,375     202,095   1,020,446     698,172

  Sales and marketing  455,353     313,479   1,564,419   1,160,269

  General and

  administrative       76,835      56,425     258,246     204,661

   Total operating

     expenses          826,563     571,999   2,843,111   2,063,102

Operating income       744,491     577,058   2,698,049   2,135,691

Interest and other

income, net            59,780      31,254     192,701     108,889

Income before provision

for income taxes      804,271     608,312   2,890,750   2,244,580

Provision for income

taxes                 281,494     225,075   1,011,762     830,687

Net income          $  522,777  $  383,237  $1,878,988  $1,413,893

Net income per

share -- basic(a)  $      .50  $      .38  $     1.84  $     1.43

Net income per

share -- diluted(a)$      .48  $      .37  $     1.75  $     1.37

Shares used in

per-share calculation

-- basic(a)         1,038,669     999,943   1,022,580     990,657

Shares used in

per-share calculation

-- diluted(a)       1,093,150   1,043,214   1,072,115   1,034,026






                      Cisco Systems, Inc.

        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

           (In thousands, except per-share amounts)

                         Quarters Ended          Years Ended

                     July 25,    July 26,    July 25,    July 26,

                       1998        1997        1998        1997

                   (Unaudited) (Unaudited) (Unaudited)

Net sales           $2,389,989  $1,765,097  $8,458,777  $6,440,171

Cost of sales          818,935     616,040   2,917,617   2,241,378

 Gross margin       1,571,054   1,149,057   5,541,160   4,198,793

Operating expenses:

  Research and

  development         294,375     202,095   1,020,446     698,172

  Sales and marketing  455,353     313,479   1,564,419   1,160,269

  General and

  administrative       76,835      56,425     258,246     204,661

 Purchased R&D         47,845     290,605     593,695     508,397

    Total operating

     expenses          874,408     862,604   3,436,806   2,571,499

Operating income       696,646     286,453   2,104,354   1,627,294

Realized gain on sale

of investment                      17,994       5,411     152,689

Interest and other

income, net            59,780      31,254     192,701     108,889

Income before provision

for income taxes      756,426     335,701   2,302,466   1,888,872

Provision for income

taxes                 264,749     184,744     952,394     840,193

Net income          $  491,677  $  150,957  $1,350,072  $1,048,679

Net income per

share -- basic(a)  $      .47  $      .15  $     1.32  $     1.06

Net income per

share -- diluted(a)$      .45  $      .14  $     1.26  $     1.01

Shares used in

per-share calculation

-- basic(a)         1,038,669     999,943   1,022,580     990,657

Shares used in

per-share calculation

-- diluted(a)       1,093,150   1,043,214   1,072,115   1,034,026






                          Cisco Systems, Inc.

                 CONDENSED CONSOLIDATED BALANCE SHEETS

                            (In thousands)

                                      July 25, 1998  July 26, 1997

                                       (Unaudited)

Assets

Current Assets:

Cash and equivalents                   $  534,652    $  269,608

Short-term investments                  1,156,849     1,005,977

Accounts receivable, net                1,297,867     1,170,401

Inventories, net                          361,986       254,677

Deferred income taxes                     344,905       312,132

Other current assets                       65,665        88,471

 Total current assets                   3,761,924     3,101,266

Investments                              3,463,279     1,267,174

Restricted investments                     553,780       363,216

Property and equipment, net                595,349       466,352

Other assets                               542,373       253,976

 Total assets                          $8,916,705    $5,451,984

Liabilities and Shareholders' Equity

Current Liabilities:

Accounts payable and other accrued

  expenses                              $1,356,617    $  863,885

Income taxes payable                      410,363       256,224

 Total current liabilities              1,766,980     1,120,109

Minority interest                           43,107        42,253

Shareholders' equity                     7,106,618     4,289,622

 Total liabilities and

  shareholders' equity                 $8,916,705    $5,451,984