San Jose, Calif., Dec. 8, 1994 -- Cisco Systems, Inc., today announced that it has signed an agreement with LightStream Corporation (Billerica, Mass.) to purchase LightStream's industry leading enterprise-class ATM switching assets and technology in exchange for $120M (US). The newly created Cisco ATM Enterprise Business Unit will be based in Billerica. The agreement is subject to receipt of certain government approvals and is expected to be consummated in January 1995. Cisco expects that the agreement will result in a one-time charge against after-tax earnings of between 20 and 25 cents per share in the company's second fiscal quarter of 1995 as a write off of in-process LightStream R&D.

LightStream, formed in 1993 as a joint venture between Bolt Beranek and Newman (BBN) and Ungermann-Bass (now UB Networks), has developed one of the most advanced enterprise-level ATM switches on the market, the LightStream 2020. DataQuest estimates that the market for this class of ATM switch will exceed $1B in calendar 1998. Another industry analyst firm, the Yankee Group, predicts an average annual growth rate of 182 percent for this market over the next three years.

In addition to the LightStream agreement, Cisco has also signed a comprehensive business agreement with BBN that includes the formation of a strategic alliance that involves the joint marketing of BBN's capabilities in the area of internet services and the use of Cisco products in these services.

"Upon completion of the acquisition, Cisco will be the only networking company able to offer its customers a choice of all the key technologies needed for the switched internetworks of tomorrow -- enterprise ATM switching, workgroup ATM switching, LAN switching, and routing," said John Chambers, executive vice president of Cisco.

"We are particularly pleased with this agreement," Chambers continued, "because LightStream's industry-leading ATM technologists share our vision of a customer migration to ATM that will be enabled on the strength of value-added software. This is much akin to our own CiscoFusion blueprint for scalable ATM-based networks.

"Cisco's experience in designing, building, and supporting complex, global computer networks should also work to speed market acceptance of current and future LightStream technology," said Chambers.

LightStream and the Four Types of ATM Switches

The current generation ATM technology that Cisco will acquire from LightStream is generally considered to be that of an enterprise-class ATM switch. An enterprise switch is usually located on a customer's premises and provides multimedia transport services, including data, voice, and video, for private ATM networks. Unlike a basic ATM service multiplexor, an enterprise ATM switch has the capacity for local switching and intelligent services. The allocation of bandwidth, management of the entire network, and the provision of value-added services, such as routing, virtual LANs, and circuit emulation, are key attributes of enterprise ATM switches. With the LightStream 2020, Cisco will be the only major internetworking vendor to offer an enterprise ATM switch.

Workgroup-class ATM switches, such as Cisco's current HyperSwitch A100, as well as ATM switches from companies such as 3COM, Bay Networks, and Fore Systems, play a different role in switched internetworks. Workgroup ATM switches are largely used to connect power users and create departmental local area networks inside a single large building or a small campus. In independent testing from LANQuest Laboratories earlier this year, Cisco's HyperSwitch A100 proved to be the only available workgroup ATM switch that could be relied upon not to lose data in a high-performance, client/server network architecture.

There are also two types of larger ATM switches on the market today that are typically used for public ATM networks. The first, described as WAN access ATM switches, are typically located within a central office or exchange of a PTT or service provider. WAN access ATM switches typically provide either frame relay or SMDS services in addition to ATM. These switches, in turn, provide low-cost access to very large, central office switches, which comprise the core of a service provider's ATM network.

Earlier this year, Cisco demonstrated complete interoperability among the LightStream 2020 enterprise ATM switch and Cisco 7000 router at Interop 94 in Atlanta. The data and video demonstration showed how switched internetworking could integrate multimedia applications in a financial trading environment.

Agreement Details

Upon final approval of the agreement to purchase LightStream's ATM assets and liabilities for $120M, LightStream's current-generation product, the LightStream 2020, will be immediately sold through Cisco's global sales channels, including the company's direct sales organization in the United States as well as selected channel partners.

LightStream employees, including over 60 engineers, will remain based in Billerica, Mass., and will operate as an independent business unit, called the ATM Enterprise Business Unit.

Cisco Systems, Inc. is the leading global supplier of enterprise networks, including routers, LAN and ATM switches, dial-up access servers, and network management software. These products, integrated by Cisco's Internetwork Operating System (IOS) link geographically dispersed LANs,WANs and IBM networks. Cisco is headquartered in San Jose, California and in the U.S. is traded under the NASDAQ symbol CSCO.