<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>f72390ex99-1.txt
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
<PAGE> 1
EXHIBIT 99.1
INVESTOR CONTACT: PRESS CONTACT:
Blair Christie Abby Smith
(408) 525-4856 (408) 525-8548
blchrist@cisco.com absmith@cisco.com
CISCO SYSTEMS REPORTS THIRD QUARTER EARNINGS
SAN JOSE, California -- May 8, 2001 -- Cisco Systems, Inc., the
worldwide leader in networking for the Internet, today reported its third
quarter results for the period ending April 28, 2001.
Net sales for the third quarter of fiscal 2001 were $4.73 billion,
compared with $4.93 billion for the same period last year, a decrease of 4%. Pro
forma net income, which excludes the effects of acquisition charges, payroll tax
on stock option exercises, restructuring costs and other special charges, an
excess inventory charge, and net gains realized on minority investments, was
$230 million or $0.03 per share for the third quarter of fiscal 2001, compared
with pro forma net income of $1.0 billion or $0.13 per share for the third
quarter of fiscal 2000, decreases of 77% and 77%, respectively.
During the third quarter of fiscal 2001, Cisco completed the
acquisitions of Active Voice Corporation, Radiata, Inc., and ExiO
Communications, Inc. for a combined purchase price, including assumed
liabilities, of approximately $621 million and took a one-time charge of $109
million, or approximately $0.01 per share on an after-tax basis, as a write-off
of in-process R&D. In addition, the Company announced a program to reduce its
workforce, consolidate excess facilities, and restructure certain business
functions. As a result of the restructuring program and a decline in forecasted
revenue, the Company recorded restructuring costs and other special charges of
$1.17 billion and an excess inventory charge of $2.2 billion.
Actual net loss for the third quarter of fiscal 2001 was $2.69 billion
or $0.37 per share, compared with actual net income of $641 million or $0.08 per
share for the same period last year.
Net sales for the first nine months of fiscal 2001 were $17.99 billion,
compared with $13.21 billion for the first nine months of fiscal 2000, an
increase of 36%. Pro forma net income was $2.92 billion or $0.39 per share for
the first nine months of fiscal 2001, compared with pro forma net income of
$2.72 billion or $0.37 per share for the first nine months of fiscal 2000,
increases of 8% and 5%, respectively.
<PAGE> 2
Actual net loss for the first nine months of fiscal 2001 was $1.02
billion or $0.14 per share, compared with actual net income of $1.87 billion or
$0.25 per share for the first nine months of fiscal 2000.
"The first four months of 2001 were extremely challenging as we went
from year-over-year bookings in excess of 70% in November, to 30% negative
growth within a span of several months. This may be the fastest deceleration any
company of our size has ever experienced," said John Chambers, president and CEO
of Cisco Systems. "We believe that the challenges we face are primarily based on
macro-economic and capital spending issues, although there is always room for
improvement in our own operations. We believe the strong will get stronger while
the economy rapidly goes through peaks and valleys of change. All of this better
positions Cisco to lead, if we execute effectively, as the Internet and the
associated applications continue to drive the Internet economy."
Cisco continues to deliver best of breed products across an end-to-end
architecture in each of its key markets to make its customers successful.
In the service provider marketplace, Cisco continued to advance its IP
leadership and expertise by delivering best in breed products and acting as
preferred partner to service provider customers, enabling them to build data
services that drive new revenue opportunities. Demonstrating continued optical
momentum in the service provider market, Cisco gained the number one market
share position in the OC-48 SONET equipment segment and extended its leadership
in the IP+Optical market with the introduction of the Cisco7600 Optical Services
Router and the Cisco ONG 15200 Metro DWDM Solution. On the IP side, Cisco added
scalable virtual private network (VPN) capabilities to the Cisco 10000 Edge
Routing platform and shipped 10,000 ports of dynamic packet transport technology
to over 150 customers. Cisco was also selected to provide the core IP technology
for Global Crossing, El Paso Global Networks, China Net, and Telia. The company
was also chosen to provide optical networking technology to Cogent, Touch
America and Avista and content networking solutions to Qwest.
In the enterprise market, Cisco continued to gain momentum with Cisco
AVVID (Architecture for Voice, Video and Integrated Data), which provides the
intelligent technology foundation for today's Internet business solutions.
Further delivering on the promise of this standards-based architectural
approach, the company announced the Cisco AVVID Partner Program, with 128
partners delivering security and VPN, network management, IP telephony, and
storage services on the Cisco AVVID infrastructure. The company also introduced
the Cisco ONS 15540 Extended Services Platform, a
<PAGE> 3
metropolitan dense wave division multiplexing (DWDM) product designed for
high-end networking applications in both enterprise and service provider
environments. Backed by a full initiative comprising key storage industry
partners, Cisco entered the storage networking market with the introduction of
the world's first available small computer systems interface over IP (iSCSI)
networking platform, the Cisco SN 5420 Storage Router. Further demonstrating the
company's leadership and commitment to innovation in the Voice over IP (VoIP)
market, seven new IP telephony products were unveiled. These VoIP products
provide increased personal productivity, reduced operational costs and business
flexibility for corporate and branch office locations. Cisco continues to see
new customer adoption of its IP telephony solution, including an 11,000 seat
contract with Swinburne University in Australia, as well as deals with the State
of Connecticut and the University of Arkansas at Pinebluff.
In the commercial space, Cisco continued its commitment to helping
small and medium-sized businesses achieve their full potential through the use
of the Internet. Cisco launched its Long-Reach Ethernet (LRE) technology, a
high-performance broadband solution for multi unit buildings unable to deploy
structured cabling. Cisco also announced a strategic relationship with Starwood
Hotels & Resorts Worldwide, Inc. to deliver secure, high-speed Internet access
and next-generation services to hotel guests and employees through its LRE
technology over their hotel's existing telephone wires. Cisco announced its
collaboration with Microsoft to develop and deploy the first enterprise
authentication and security architecture on its 802.11 wireless LAN
infrastructure. Cisco also demonstrated the scalability of its Cisco Aironet(R)
Wireless Networking Solution through its largest wireless LAN deployment at
Microsoft, a key strategic partner. Microsoft now has about 3,000 access points
throughout its campuses with approximately 7,000 employees using wireless LAN
cards in their laptops. The Cisco Aironet Wireless LAN Solution won several
awards, including Network World's World Class Award. Several Cisco customers
moved to wireless LAN technology including many in the higher education market
such as Harvard University, Dartmouth College, and Howard University, and also
in the health care market such as Children's Hospital in Milwaukee and Ochsner
Medical Institute and Ochsner Clinic and Hospital in New Orleans.
"What we have clearly seen over the last several years is the speed at
which this new economy can move in both directions. Changes that used to take
place over multiple quarters, or even over years, now take place within months.
It is also now clear to us that the peaks in this new economy will be much
higher and the valleys will be much lower, and the movement between these peaks
and valleys will be much faster. We are now in a valley much deeper than any of
us anticipated and we believe the
<PAGE> 4
basic issues are macro-economic and capital spending related. We also believe
that the long-term outlook for this new economy and the role that the Internet
and Cisco play in this new economy has not changed, " concluded Chambers.
Cisco will be discussing its third quarter results, along with its
outlook for the remainder of fiscal 2001, on a conference call today, beginning
at 1:45 p.m. PST. A Web cast of the conference call will be available to all
interested parties on the Cisco Web site at www.cisco.com under the "Investor
Relations" section.
ABOUT CISCO SYSTEMS
Cisco Systems, Inc., (NASDAQ: CSCO) is the worldwide leader in
networking for the Internet. News and information are available at
www.cisco.com.
# # #
This release contains projections and other forward-looking statements regarding
future events and the future financial performance of Cisco that involve risks
and uncertainties. Readers are cautioned that these forward-looking statements
are only predictions and may differ materially from actual future events or
results. Readers are referred to the documents filed by Cisco with the SEC,
specifically the most recent reports on Form 10-K, 8-K, and 10-Q, each as it may
be amended from time to time, which identify important risk factors that could
cause actual results to differ from those contained in the forward-looking
statements, including risks associated with business and economic conditions and
growth in the networking industry in various geographic regions; global economic
conditions; overall information technology spending, especially service provider
capital spending in the data or IP segments; variations in customer demand for
products and services; the ability to successfully restructure existing
businesses; the timing of orders and manufacturing lead times; changes in
customer order patterns; insufficient, excess or obsolete inventory; variations
in sales channels, product costs, or mix of products sold; the ability to
successfully reduce overhead and manage expenses; the ability to successfully
integrate and operate acquired businesses and technologies; increased
competition in the networking industry; dependence on the introduction and
market acceptance of new product offerings and standards; rapid technological
and market change; the trend towards sales of integrated network solutions;
manufacturing and sourcing risks; Internet infrastructure and regulation;
international operations, the timing and amount of employer payroll tax to be
paid on employees' gains on stock options exercised; litigation involving
patents, intellectual property, antitrust and other matters; stock price
volatility; financial risk management; and potential volatility in operating
results, among others. The financial information contained in this release
should be read in conjunction with the consolidated financial statements and
notes thereto included in Cisco's most recent reports on Form 10-K and Form
10-Q, each as it may be amended from time to time. Cisco's results of operations
for the three and nine months ended April 28, 2001 are not necessarily
indicative of Cisco's operating results for the full fiscal year or any future
periods.
Cisco, Cisco Systems, Aironet, and the Cisco Systems logo are registered
trademarks of Cisco Systems, Inc. or its affiliates in the U.S. and certain
other countries. All other brands, names, or trademarks mentioned in this
document or Web site are the property of their respective owners. Copyright 2001
Cisco Systems, Inc. All rights reserved.
<PAGE> 5
Cisco Systems, Inc.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(SEE PRO FORMA ADJUSTMENTS LISTED IN TABLE BELOW)
(In millions, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------------------------
April 28, April 29, April 28, April 29,
2001 2000 2001 2000
--------- -------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 4,728 $ 4,933 $ 17,995 $ 13,208
Cost of sales 2,151 1,761 7,110 4,688
------- ------- -------- --------
GROSS MARGIN 2,577 3,172 10,885 8,520
Operating expenses:
Research and development 970 717 2,885 1,860
Sales and marketing 1,333 1,024 4,102 2,775
General and administrative 191 154 578 388
------- ------- -------- --------
Total operating expenses 2,494 1,895 7,565 5,023
------- ------- -------- --------
OPERATING INCOME 83 1,277 3,320 3,497
Interest and other income, net 236 158 741 380
------- ------- -------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES 319 1,435 4,061 3,877
Provision for income taxes 89 430 1,138 1,161
------- ------- -------- --------
NET INCOME $ 230 $ 1,005 $ 2,923 $ 2,716
======= ======= ======== ========
Net income per share--basic $ 0.03 $ 0.14 $ 0.41 $ 0.39
======= ======= ======== ========
Net income per share--diluted $ 0.03 $ 0.13 $ 0.39 $ 0.37
======= ======= ======== ========
Shares used in per-share calculation--basic 7,251 7,036 7,170 6,927
======= ======= ======== ========
Shares used in per-share calculation--diluted 7,486 7,548 7,552 7,408
======= ======= ======== ========
THE PRO FORMA AMOUNTS HAVE BEEN ADJUSTED TO ELIMINATE THE FOLLOWING:
In-process research and development $ 109 $ 488 $ 855 $ 912
Payroll tax on stock option exercises 10 25 50 25
Acquisition-related costs -- -- -- 25
Amortization of goodwill and
other acquisitions-related charges 346 51 863 122
Net gains realized on minority investments -- (156) (190) (187)
Restructuring costs and other special charges 1,170 -- 1,170 --
Excess inventory charge 2,249 -- 2,249 --
Income tax effect (961) (44) (1,053) (53)
------- ------- -------- --------
$ 2,923 $ 364 $ 3,944 $ 844
======= ======= ======== ========
</TABLE>
<PAGE> 6
Cisco Systems, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------------------
April 28, April 29, April 28, April 29,
2001 2000 2001 2000
--------- --------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 4,728 $4,933 $ 17,995 $13,208
Cost of sales 4,400 1,761 9,359 4,688
------- ------ -------- -------
GROSS MARGIN 328 3,172 8,636 8,520
Operating expenses:
Research and development 970 717 2,885 1,860
Sales and marketing 1,333 1,024 4,102 2,775
General and administrative 191 154 578 413
Restructuring costs and other special charges 1,170 -- 1,170 --
Payroll tax on stock option exercises 10 25 50 25
Amortization of goodwill and
other acquisition-related charges 346 51 863 122
In-process research and development 109 488 855 912
------- ------ -------- -------
Total operating expenses 4,129 2,459 10,503 6,107
------- ------ -------- -------
OPERATING INCOME (LOSS) (3,801) 713 (1,867) 2,413
Net gains realized on minority investments -- 156 190 187
Interest and other income, net 236 158 741 380
------- ------ -------- -------
INCOME (LOSS) BEFORE PROVISION
FOR (BENEFIT FROM) INCOME TAXES (3,565) 1,027 (936) 2,980
Provision for (benefit from) income taxes (872) 386 85 1,108
------- ------ -------- -------
NET INCOME (LOSS) $(2,693) $ 641 $ (1,021) $ 1,872
======= ====== ======== =======
Net income (loss) per share--basic $ (0.37) $ 0.09 $ (0.14) $ 0.27
======= ====== ======== =======
Net income (loss) per share--diluted $ (0.37) $ 0.08 $ (0.14) $ 0.25
======= ====== ======== =======
Shares used in per-share calculation--basic 7,251 7,036 7,170 6,927
======= ====== ======== =======
Shares used in per-share calculation--diluted (1) 7,251 7,548 7,170 7,408
======= ====== ======== =======
</TABLE>
Note 1: Net loss per share--diluted for the three and nine months ended April
28, 2001 is computed using the weighted-average number of common shares
outstanding during the period and excludes common-equivalent shares as they are
anti-dilutive.
<PAGE> 7
Cisco Systems, Inc.
CONSOLIDATED BALANCE SHEETS
(In millions)
<TABLE>
<CAPTION>
April 28, July 29,
2001 2000
--------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,102 $ 4,234
Short-term investments 1,098 1,291
Accounts receivable, net of allowance for doubtful accounts
of $150 at April 28, 2001 and $43 at July 29, 2000 1,983 2,299
Inventories, net 1,913 1,232
Deferred tax assets 950 1,091
Lease receivables 488 588
Prepaid expenses and other current assets 542 375
------- -------
Total current assets 12,076 11,110
Investments 9,936 13,688
Restricted investments 1,211 1,286
Property and equipment, net 2,410 1,426
Goodwill and purchased intangible assets, net 4,955 4,087
Lease receivables 403 527
Other assets 2,799 746
------- -------
TOTAL ASSETS $33,790 $32,870
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 664 $ 739
Income taxes payable 111 233
Accrued compensation 1,206 1,317
Deferred revenue 2,585 1,386
Other accrued liabilities 2,441 1,521
Restructuring liabilities 668 --
------- -------
Total current liabilities 7,675 5,196
Deferred tax liabilities -- 1,132
Minority interest 22 45
Shareholders' equity 26,093 26,497
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $33,790 $32,870
======= =======
</TABLE>
</TEXT>
</DOCUMENT>