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

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

In the small and medium business market, Cisco introduced an alliance with IBM to deliver electronic commerce solutions to small businesses. The pact will help small and growing businesses improve their internal networks and deliver faster access to the Internet. With more than $1 billion in channel revenue, Cisco also became the market leader in two-tier distribution of network systems.

In the service provider space, Cisco continues to see increasing market acceptance that public voice networks will convert into data networks in the future. Sprint's decision to align with Cisco to build out its future data, voice and video networks signaled a key shift away from Old World, circuit-based networks toward a packet-based infrastructure. Other milestones in the quarter include Cisco's delivery of New World technologies such as broadband access to the home in the form of comprehensive xDSL solutions, cable, voice-over-IP switching, carrier-class provisioning systems and new, open standards-based network management solutions.

"Over the past 12 months, we have seen a dramatic shift in how the Internet is viewed. Once seen as a tool used primarily by technologists, the Internet is now the catalyst driving change in the new economy. The Internet is being recognized among business, government and individuals worldwide as the strategic element for competitive advantage. Cisco is well positioned to play a key role in the new Internet Economy. I want to thank our employees, shareholders and partners for their support throughout Q4 and fiscal '98. And I'd especially like to thank our customers for their continued commitment and confidence," concluded Chambers. FMI: http://www.cisco.com.

PRO FORMA ONLY The above pro-forma amounts for the quarter and twelve months ended 7/25/98 have been adjusted to eliminate the Q4 $47.8 million and the fiscal 1998 $593.7 million charges for the write-off of purchased in-process R&D, and the fiscal 1998 $5.4 million gain from the sale of a minority stock investment, net of income tax benefit of $16.7 million and $59.4 million for Q4 and fiscal 1998, respectively.

The above pro-forma amounts for the quarter and twelve months ended 7/26/97 have been adjusted to eliminate the Q4 $290.6 million and the fiscal 1997 $508.4 million charges for the write-off of purchased in-process R&D, and the Q4 $18.0 million and the fiscal 1997 $152.7 million gain from the sale of a minority stock investment, net of income tax benefit (expense) of $40.3 million and ($9.5) million for Q4 and fiscal 1997, respectively.

Cisco is now required under FAS 128 to report two separate earnings per share numbers, basic EPS and diluted EPS. Diluted EPS approximates the amount Cisco has previously been reporting as earnings per share and includes the dilutive impact of employee stock options.

(a) Does not reflect the effect of the three-for-two stock split to be effective September 15, 1998.

Cisco is now required under FAS 128 to report two separate earnings per share numbers, basic EPS and diluted EPS. Diluted EPS approximates the amount Cisco has previously been reporting as earnings per share and includes the dilutive impact of employee stock options.